2022 (9) TMI 761 - AT - Income Tax

Commissioner's direction on interest claim exceeded jurisdiction; Tribunal remands for fresh decision

ACIT, Circle-14 (2), New Delhi Versus Knowledge Infrastructure Systems Pvt. Ltd.

ACIT, Circle-14 (2), New Delhi Versus Knowledge Infrastructure Systems Pvt. Ltd. - TMI Issues:Transfer pricing adjustment on account of trade receivables.Analysis:1. The appeal was filed by the revenue against the order passed by the Commissioner of Income Tax (Appeals) regarding transfer pricing adjustments on trade receivables. The case involved the determination of Arm's Length Price in respect of international transactions entered into by the assessee with its Associated Enterprises during the financial year 2013-14.2. The Transfer Pricing Officer (TPO) had made observations regarding transfer pricing adjustment on trade receivables, highlighting details of invoices raised, payments received, and interest charges. The First Appellate Authority directed the TPO to verify the claim of the appellant that interest was not charged on outstanding receivables and provide relief accordingly.3. The revenue challenged the direction before the Tribunal, arguing that the appellant failed to furnish detailed breakup-wise amounts realized from Associated Enterprises and Non-Associated Enterprises. The revenue contended that the direction to verify the claim was unjustified, citing discrepancies with the judgment of the Bombay High Court.4. During the hearing, the Departmental Representative (DR) emphasized the inconsistent approach of the assessee, while the Authorized Representative (AR) defended the findings of the Commissioner of Income Tax (Appeals), stating that benchmarking on interest on trade receivables was unnecessary due to the higher trade payables than receivables.5. The Tribunal analyzed the contentions and observations, noting that the TPO did not consider net payables while making transfer pricing adjustments. The Tribunal found that the appellant did not challenge this observation. The Tribunal also questioned the necessity of the direction issued by the Commissioner of Income Tax (Appeals) to verify the claim, as no disputed factual question was presented that warranted such intervention.6. The Tribunal highlighted the statutory provisions governing the powers of the Commissioner of Income Tax (Appeals), emphasizing that the direction to the TPO exceeded the Commissioner's jurisdiction. The Tribunal concluded that the direction was not sustainable and directed the Commissioner to call for evidence from the assessee and decide the matter afresh. The appeal was allowed for statistical purposes, and the issue was restored to the Commissioner of Income Tax (Appeals) for a fresh decision.