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ITAT allowed the assessee's appeal regarding transfer pricing adjustments on two grounds. First, demurrage and detention charges of Rs. 2.57 crores constituted extraordinary costs and were non-operating in nature, given the exponential increase from previous years' charges of Rs. 1.5 lakhs to Rs. 4.05 lakhs on lower turnovers. Excluding these charges brought the operating profit/operating cost ratio to 1.35%, within the arm's length price tolerance limit of 1.78%. Second, no notional interest could be charged on outstanding receivables of Rs. 10.91 crores from local parties transacting on behalf of the associated enterprise, considering the assessee was debt-free and receivables remained unpaid, following established precedent regarding notional interest charges.
ITAT allowed the assessee's appeal regarding transfer pricing adjustments on two grounds. First, demurrage and detention charges of Rs. 2.57 crores constituted extraordinary costs and were non-operating in nature, given the exponential increase from previous years' charges of Rs. 1.5 lakhs to Rs. 4.05 lakhs on lower turnovers. Excluding these charges brought the operating profit/operating cost ratio to 1.35%, within the arm's length price tolerance limit of 1.78%. Second, no notional interest could be charged on outstanding receivables of Rs. 10.91 crores from local parties transacting on behalf of the associated enterprise, considering the assessee was debt-free and receivables remained unpaid, following established precedent regarding notional interest charges.
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