2021 (7) TMI 582 - AT - Income Tax

Assessee's ALP Adjustment & Interest Disputes Resolved by Tribunal

GSS Infotech Ltd Hyderabad Versus Dy. C.I.T Circle 2 (2) Hyderabad

GSS Infotech Ltd Hyderabad Versus Dy. C.I.T Circle 2 (2) Hyderabad - TMI Issues:1. Rectification of alleged mistakes in the Tribunal's orders related to ITeS segment.2. Consideration of interest on advances for equity investment.3. Treatment of interest on outstanding receivables in ALP adjustment.Issue 1: Rectification of alleged mistakes in the Tribunal's orders related to ITeS segment:The assessee filed M.As seeking rectification of alleged mistakes in the Tribunal's orders related to the ITeS segment. The Tribunal directed the Assessing Officer to consider only the margin of international transactions with associated enterprises (AEs) and if the margin fell within a certain range, no adjustment would be required. The assessee argued that the Tribunal did not address the exclusion and inclusion of companies raised in specific grounds of appeal, which was a mistake. The Tribunal, after considering contentions, found no mistake in the order regarding the ALP adjustment for ITeS services. It was noted that the assessee's margin was higher than the comparables, making the consideration of functional dissimilarities unnecessary. The Tribunal concluded that no rectification was needed on this issue.Issue 2: Consideration of interest on advances for equity investment:The second point raised was regarding additions made for interest on advances. The assessee contended that these advances were given for equity investment, later converted into equity, and shares were allotted to the assessee company. The Tribunal, after examining the issue, found a mistake in not considering its own decision in the assessee's previous case. Therefore, the Tribunal decided to remand the issue to the Assessing Officer/TPO for a fresh examination to determine if the investment was made for equity and whether shares were allotted to the assessee.Issue 3: Treatment of interest on outstanding receivables in ALP adjustment:The third issue involved the Tribunal's consideration of interest on outstanding receivables in the ALP adjustment. The assessee argued that the working capital adjustment already accounted for interest on delayed receivables, so no separate addition was necessary. However, the Tribunal clarified that the working capital adjustment only covered interest on receivables as of the closing date of the accounting year, not on delayed receivables during the relevant year. Therefore, the Tribunal rejected the assessee's argument on this issue.In conclusion, the Tribunal partly allowed the M.As filed by the assessee, addressing the issues raised in each application. The order was pronounced in the Open Court on 14th July 2021.