Tribunal upholds CIT(A)'s decision on notional interest adjustment, citing RBI policies.

The Tribunal upheld the CIT(A)'s decision to delete the upward adjustment of notional interest on outstanding receivables made by the Revenue. The Tribunal found that interest should not be charged for outstanding periods less than 180 days, contrary to the Revenue's argument based on a 335-day delay. The Tribunal supported the CIT(A)'s decision, emphasizing adherence to RBI policies on credit periods and dismissing the Revenue's appeal.

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Issues:
1. Upward adjustment of notional interest on outstanding receivables.
2. Upward adjustment of notional mark-up on transaction for Liason Support services.

Analysis:
1. The appeal was filed by the Revenue against the order passed by the Ld. CIT(Appeals)-2, Ahmedabad for A.Y. 2012-13. The Revenue raised two grounds of appeal related to the deletion of upward adjustments. The first ground was about the deletion of Rs. 1,50,75,015/- towards notional interest on outstanding receivables. The Revenue argued that the ALP interest was required to be charged due to delay in realization of sale invoices beyond the credit period. The second ground was the deletion of Rs. 24,00,000/- towards notional mark-up on a transaction for Liason Support services. The Revenue contended that some estimation and approximation were necessary for transfer pricing adjustments, which the CIT(A) ignored.

2. The assessee company, engaged in pharmaceutical products manufacturing, had filed a return declaring a loss. The AO made adjustments in international transactions. The CIT(A) partly allowed the appeal. The Ld. D.R. argued that the CIT(A) erred in deleting the upward adjustment of notional interest, emphasizing a delay of 335 days in realization of sale invoices. The Ld. A.R. supported the CIT(A)'s decision, mentioning a delay of approximately 179 days. The Tribunal noted that the CIT(A) found that interest should not be charged for outstanding periods less than 180 days. The TPO's interest calculation for 335 days was deemed incorrect, but the rate applied was justified. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal.

3. The Tribunal's detailed analysis highlighted the importance of adhering to RBI policies regarding credit periods. The Tribunal found no fault with the CIT(A)'s findings on the delay period and upheld the deletion of the upward adjustment of notional interest. The Tribunal concluded that there was no need to interfere with the CIT(A)'s decision, ultimately dismissing the Revenue's appeal.

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