TaxTMI 
TaxTMI 
2018 (12) TMI 1209
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...."DRP"). However, a subsequent order under section 154 of the Act dated 4 February 2015 was issued by the learned AO rectifying certain errors apparent from record. Each of the ground is referred to separately, which may kindly be considered independent of each other and without prejudice to each other. That on the facts and circumstances of the case and in law, Transfer Pricing grounds: 1. The learned AO / TPO / DRP has erred in making an addition of INR 11,432,576 to the total income of the appellant on account of a transfer pricing adjustment 2. The learned AO/TPO/DRP have erred by not accepting the economic analysis undertaken by the Appellant in accordance with the provisions of the Act read with the Income Tax Rules, 1962 ("the Rules"). 3. The learned AO / TPO / DRP have erred in making an adjustment under Section 92CA(3) of the Act without returning a finding about existence of any of the circumstances specified in clauses (a) to (d) of subsection (3) of Section 92C of the Act. 4. The learned AO / TPO / DRP have erred by considering outstanding receivables as a separate international transaction and benchmarking the same using CUP as the Most Appropriate ....
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.... * Other relevant services 3. Before us, the main issue involved is regarding receivables. The other issues are consequential. The Ld. authorised representative argued only for the adjustment regarding receivables and alternatively on working capital adjustment. On perusal of the details submitted by the authorised representative of the assessee, the Ld. transfer pricing officer observed that the payment on account of sales to associate Enterprises is realised after significant time period and that the realisation of payment will rise to more than a year which is non-realisation of payments from AEs within the period specified in the agreement. He further observed that such type of realisation in trade practice carries some kind of penal rate of interest depending on case to case and no independent enterprises would have allowed the 3rd parties to make late payments or else would have charged higher prices for delayed payments. The Ld. TPO referred to the agreements regarding charges and terms of payment and noted that all invoices, shall be based on the projects and shall be payable to service provider within 30 days from the date of receipt of invoice by associate Enterprises. T....
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.... the AO made final assessment order on 06.01.2015. On rectification application filed by assessee u/s 154 dated 05.01.2015, the ld. TPO, however, restricted the addition only with respect to Receivables to the extent of Rs. 1,14,32,576/- and deleted the addition of Rs. 7,86,53,767/- with respect to provision of IT Enabled Services. The AO accordingly also made rectification vide order dated 04.02.2015 u/s. 154 in final assessment. Aggrieved, the assessee is in appeal before the Tribunal. 4. The LD. Authorised Representative reiterated the submission made before the lower authorities and submitted that the lower authorities are not justified to make addition as per provisions of section 92CA (3) of the Income Tax Act, 1961. He also objected regarding application of CUP method adopted by the TPO for addition on Receivables. The ld. TPO did not concur with economic analysis undertaken by the assessee and modified the list of comparables companies for determining the ALP of the impugned transactions. The ld. TPO did not agree with the assessee's contentions and in view of expended definition of "international transaction" inserted retrospectively, proceeded to benchmark the interest o....
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....pon detailed negotiations by the assessee with its AE. Hence, after having determined the ALP in a sale/service transaction, it cannot be assumed that separate adjustment is required in respect of interest there from, since outstanding receivables emanate from the service transaction itself, which has already been benchmarked. The ld. AR, therefore, submitted that determination of ALP in respect of outstanding receivables from inter-company transactions is not required, once ALP of inter-company transactions has been already determined and no separate adjustment is necessary in this regard. 7. Regarding re-characterization of outstanding receivables as unsecured loan advanced to AE, it was submitted that the learned TPO has erroneously re-characterized outstanding receivables as unsecured loans advanced by the assessee to its AE, ignoring the facts and circumstances of the case and without understanding and appreciating the bona-fide nature of terms of Agreement entered into by the assessee with its AE. The learned TPO has failed to understand and appreciate the bona fide nature of terms of the written agreement between the assessee and the AE regarding credit period allowed to th....
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....ing of legitimate business transactions would be a wholly arbitrary exercise the inequity of which could be compounded by double taxation created where the other tax administration does not share the same views as to how the transaction should be structured." (Emphasis supplied) 9. In this context, reliance is also placed on the decision in the case of Evonik Degussa India Private Limited (ITA No. 7653/MUM/2011) and Abhishek Auto Industries Limited (2010) 136 TTJ 530. On the strength of these decisions, it is submitted on behalf of the assessee that it was necessary for the Income-tax authorities to accept and recognise a transaction as such and not to dictate or govern the terms thereof. Several other decisions of ITAT are also relied by the ld. AR of the assessee. He further submitted that the case laws relied by the Revenue are on different footings, therefore, the same are not applicable in the present facts of the case. 10. On the other hand the Ld. DR relied on the order of the lower authorities and submitted that the lower authorities are justified to make addition on receivables. Therefore, the order of the authorities below should be restored. He further submitted th....