TPO justified charging 6% interest on receivables beyond 30 days due to inadequate supporting evidence from assessee

The ITAT Hyderabad upheld the TPO's decision to charge 6% interest on receivables outstanding beyond 30 days, finding the assessee failed to provide adequate supporting evidence like ledgers and confirmations despite submitting invoices and calculations. The tribunal rejected the assessee's argument that deferred receivables don't constitute separate international transactions requiring benchmarking. However, regarding section 10AA deduction, the tribunal directed the AO to delete the disallowance, noting that CPC had already allowed the deduction through rectification and the AO had not disputed this in the draft assessment order.

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Issues Involved:
1. Determination of Arm's Length Price (ALP) of international transactions.
2. Deduction under Section 10AA of the Income Tax Act.
3. Education cess and secondary and higher education cess.

Summary:

Issue 1: Determination of Arm's Length Price (ALP) of international transactions

The assessee, M/s. Corteva Agriscience Services India Private Limited, filed an appeal against the final assessment order dated 18/01/2022, which incorporated an upward adjustment of Rs. 18,46,834/- suggested by the Transfer Pricing Officer (TPO) for interest on delayed receivables. The Dispute Resolution Panel (DRP) held that deferred receivables constitute a separate international transaction requiring benchmarking. The DRP directed the assessee to submit complete information relating to payables to AEs and non-AEs, which the assessee failed to fully comply with. The Tribunal upheld that outstanding receivables are an international transaction requiring separate benchmarking and agreed that a 6% interest rate on such receivables is fair and reasonable. The Tribunal found no merit in the assessee's contention and ruled that the interest should be charged at 6% p.a. for receivables outstanding for more than 30 days.

Issue 2: Deduction under Section 10AA of the Income Tax Act

The assessee claimed a deduction under Section 10AA amounting to Rs. 6,79,99,896/-. Initially, the CPC did not allow this claim, but later rectified it. The Assessing Officer missed this aspect in the final assessment order and added the disallowed amount. The Tribunal directed the Assessing Officer to delete the addition, as there was no reason to disregard the rectification order allowing the deduction.

Issue 3: Education cess and secondary and higher education cess

The grounds related to education cess and secondary and higher education cess were not pressed by the assessee during the arguments and were dismissed as not pressed.

Conclusion:

The appeal was partly allowed, with the Tribunal ruling in favor of the assessee on the deduction under Section 10AA and upholding the DRP's decision on the interest adjustment for delayed receivables. Other grounds were deemed consequential and required no adjudication.

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