2018 (3) TMI 1465

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....the CIT(A) in the same name. Thereafter, there has been a merger with M/s. Open Text Corporation India Pvt. Ltd., and the revised Form No. 36 incorporating the name of assessee as M/s Open Text Corporation India Pvt. Ltd., is filed on 27.10.2017 and therefore this appeal is disposed in the name of the merged company. 2. In this appeal, the assessee is aggrieved by the transfer pricing adjustment made by the TPO by imputing interest on outstanding receivables relating to provision of software services rendered by the assessee to its AEs as on 31.03.2011. The assessee has raised the following grounds of appeal: 1.a) Making TP adjustment by imputing interest at 5% on outstanding receivables relating to provision of software service....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... and 234D of the Act on the Transfer Pricing adjustment. 3. Imposing penalty u/ s 271(1)( C ) of the Act 3. Brief facts of the case are that the assessee company, which is engaged in the business of providing software development services, consultancy and reselling services, filed its e-return for the A.Y 2011-12 on 29.09.2011 admitting a total income of Rs. 9,90,00,709/- under the normal provisions of the Act and Rs. 10,40,34,469/- under the provisions of sec 115JB of the Act. During the assessment proceedings u/s 143(3), the A.O observed that the assessee has entered into an international transaction with its AEs and therefore he made a reference to the TPO u/s 92CA of the Act for determining the Arm's Length Price. 4. The ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....t which the assessee is in appeal before us. 7. The Ld. Counsel for the assessee submitted that the interest on outstanding receivables has become an international transaction only by virtue of Finance Act 2012 and therefore is applicable only prospectively and cannot be applied to the assessment year before us. He submitted that similar transaction of corporate guarantee also has become an international transaction only by virtue of the amendment in 2012, and various Benches of the Tribunal including the Benches at Hyderabad have held the amendment to be applicable prospectively. He also placed reliance upon some decisions to contend that notional interest on outstanding receivables cannot be treated as an international transaction and ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... pointed out by the Ld. Counsel, the outstanding receivables on account of services cannot be equated with capital financing as provided for in the Explanation by the amendment by Finance Act, 2012 retrospectively. Even otherwise, as rightly held by the Logix Micro Systems Ltd v. ACIT [42 SOT 525] (supra), TPO should have allowed some interest free period for receiving the outstanding service charges. While acknowledging the order of the ITAT, TPO did not even bother to exclude the reasonable period and levied interest not only from the date of invoice to the date of realization during the year but also for the period beyond 31- 03-2010 in later year. We were informed that no such addition was made in the later year on Assessee's receiv....