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of <h1>Appeal Granted on ALP & Interest Rates: Turnover Filters & LIBOR+200 Applied</h1> <h3>iMedX Information Services Private Limited, Hyderabad Versus Deputy Commissioner of Income Tax, Circle 21 Hyderabad</h3> iMedX Information Services Private Limited, Hyderabad Versus Deputy Commissioner of Income Tax, Circle 21 Hyderabad - TMI Issues Involved:1. Determination of Arm's Length Price (ALP) for software development services.2. ALP adjustment in respect of interest on trade receivables.Summary:1. Determination of Arm's Length Price (ALP) for software development services:The assessee, engaged in medical transcription and software development services, challenged the final assessment order for the assessment year 2015-16, specifically the ALP adjustments made by the Transfer Pricing Officer (TPO). The TPO initially suggested adjustments based on a set of comparables, which were later modified by the Dispute Resolution Panel (DRP). The assessee contested the inclusion of certain comparables with significantly higher turnovers, arguing they were unsuitable for comparison. The Tribunal referenced multiple judicial precedents and the ICAI TP guidance note, emphasizing the importance of a turnover filter in comparability analysis. The Tribunal concluded that a turnover range of ten times on both ends should be applied, and directed the Assessing Officer/TPO to reassess the comparables within this range. 2. ALP adjustment in respect of interest on trade receivables:The assessee argued that outstanding receivables should not be treated as a separate international transaction requiring separate benchmarking. The Tribunal, referencing the retrospective amendment to Section 92B of the Income Tax Act, upheld that interest on outstanding receivables constitutes an international transaction. However, the Tribunal agreed with the assessee's alternative argument that the interest rate should be benchmarked using LIBOR+200 basis points, aligning with judicial precedents. The Assessing Officer/TPO was directed to adopt this rate for computing the ALP adjustment for interest on trade receivables.Conclusion:The appeal was partly allowed for statistical purposes, with directions for reassessment based on the specified turnover filter for software development services and the application of LIBOR+200 basis points for interest on trade receivables.
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