TaxTMI 
TaxTMI 
2018 (3) TMI 65
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....rary to the facts and based on mere conjectures and surmises. 1.2. The Ld. TPO failed to appreciate the submissions made/ contentions raised by the Appellant and further erred in making several allegations, observations, assertions and inferences in the order, which were both factually incorrect as well as legally untenable. 2. The Ld. AO/Ld. TPO (following the directions of the Ld. DRP), erred both on facts and in law in enhancing the income of the Appellant by Rs. 22,40,719/- by treating the receivables outstanding beyond 30 days from associated enterprises as deemed loan and charging notional interest. 3. The Ld. AO/Ld. TPO (following the directions of the Ld. DRP), erred in disregarding the detailed arguments/ submissions put forth by the Appellant during the course of the DRP/ assessment proceedings while passing its direction under section 144C of the Act." 2. Briefly, the facts of the case are that draft assessment order prepared by A.O. under section 144C(1) of the I.T. Act proposing variations in the income returned for assessment year under appeal constitutes the basis for undertaking proceedings by the DRP in respect of the assessee-company.....
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....'s A.Es as well as third parties, as a matter of norm, did not charge interest on outstanding receivables even beyond the credit free period from both the categories of parties. Reliance was placed on the decision of M/s. Indo American Jewellery Ltd., reported in 223 Taxman 8 (Bom.) (HC) in which it was held that "where an assessee was not charging interest on the outstanding recoverable from the A.Es as well as non- A.Es, there was no need to compute the notional interest in the case of the outstanding receivables from the A.Es." The assessee also contended that following considerations should not be ignored : (a) Business and commercial considerations. (b) Long term business relationships predicate waiver of this right. (c) Interest income is only associated with loans and not services. (d) Question of interest on excess credit period arises only when there is a standard credit period for the services sold at the same price and the credit period allowed to the AEs is substantially more than the credit period allowed to independent enterprises. (e) If the 'A' is a debt free company and there was no interest burden on the A' then it cann....
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.... the opportunity cost of the outstanding amounts of money so lying with it's A.Es. The assessee did not furnish any details of comparable group affiliates who had entered into the transaction with independent third parties or of independent third parties who had entered into similar transactions with third parties in this fashion. The order of TPO in charging notional interest was accordingly upheld and this ground of objection of assessee were dismissed. 4. The Learned Counsel for the Assessee reiterated the submissions made before the authorities below. He has submitted that TPO treated the receivables outstanding beyond 30 days as a loan. The TPO computed interest on loan @ of one month LIBOR plus 300 bps per annum for making the addition. The assessee filed detailed submissions which have not been appreciated. The assessee provides software solutions and design services to its customers both in the domestic and international markets. Customers of the assessee consists of both group companies as well as independent third parties. Further, the assessee is engaged in provision of maintenance and support services, upgradation and development of software. The majority of the asse....
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.... Assessee had undertaken working capital adjustment for the comparable companies selected in its transfer pricing report. It was further noted that "the differential impact of working capital of the Assessee vis-a-vis its comparables had already been factored in the pricing/profitability" which was more than the working capital adjusted margin of the comparables and, therefore, "any further adjustment to the margins of the Assessee on the pretext of outstanding receivables is unwarranted and wholly unjustified." 9. Mr. Raghvendra Singh, learned counsel appearing for the Revenue submitted that the ITAT overlooked the fact that the expression "international transaction" as defined in Explanation (i)(c) to Section 92B of the Act included "payments or deferred payment or receivable or any other debt arising during the course of business", and therefore, the outstanding receivables could by themselves constitute an international transaction. He further referred to the OCED Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. Paras 3.48 & 3.49 under Chapter III para A.6.1 of the said Guidelines titled "Different types of comparability adjustments" s....
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....TAT giving rise to any substantial question of law for determination. The appeal is, accordingly, dismissed." 4.2. He has submitted that facts of the case of assessee are similar with the decision in the case of Kusum Healthcare Pvt. Ltd., Therefore, the issue is covered in favour of the assessee. Learned Counsel for the Assessee relied upon the order of the ITAT, Bangalore Bench in the case of ACIT vs. M/s. Millipore (India) Ltd., I.T.(T.P.) No.327/Bang./2015 dated 07th March, 2017 in which it was held that "early or late realization of sale proceeds was only incidental to the transaction of sale and was not a separate international transaction and therefore, no ALP adjustment was permissible in respect of the same." Learned Counsel for the Assessee also relied upon the decision of ITAT, Hyderabad Bench in the case of Oakton Global Technology Services Centre (India) (P.) Ltd., vs. ACIT, Circle- 16(2), Hyderabad (2016) 76 taxmann.com 119 (Hyd. Trib.) in which it was held as under : "Where TPO made addition of interest to assessee's ALP on ground that it had allowed excessive credit period to its AE for receiving payment of software development services, in view of f....
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....He has, therefore, submitted that receivables are increasing day-by-day, therefore, authorities below correctly made the adjustment. 5. We have considered the rival submissions and perused the material available on record. The assessee has given several reasons to explain that it being a business transaction, commercial consideration should have been considered by the authorities below. It was explained that the long term business relation with the customer and A.E. predicate waiver of this right. The interest is only associated with the loans and not services. It was explained that payments are received only after satisfaction of the customer and therefore, there was delay in receiving the payments. The assessee also explained before T.P. authorities below that average outstanding days for recovering sales dues was 57 days in the case of A.Es, whereas, in the case of non-A.E. it was 66 days. It was also explained that non-charging of interest from A.Es. as well as non-A.E. on interest receivables was that it being pre-dominantly involved in the provision of services to it's A.Es. as well as third parties. The contention of the assessee have not been disputed by the authorities ....