TaxTMI 
TaxTMI 
2019 (4) TMI 1021
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.... Associated Enterprise. 2. The reference made by the Ld. Assessing Officer (AO) suffers from jurisdictional error as he has not recorded reasons in the draft assessment order based on which he reached the conclusion that it was necessary or expedient to refer the matter to the Ld TPO for computation of Arm's Length Price (ALP) as required under section 92CA(1) of the Income tax Act (the Act). 3. The Ld. AO / Ld. TPO erred in proposing to enhance, the returned income of the appellant by Rs. 5,95,999/-/- by treating the delayed receipts of export proceeds as deemed loan advanced to Associated Enterprise (AE) and charging notional interest for the period of delay @ 14.75% p.a. and in doing so have grossly erred in: i) disregarding the ALP determined by the appellant in the transfer pricing documents maintained by it; ii) completely disregarding the detailed and proper comparability analysis submitted by the appellant; iii) disregarding various judicial pronouncements in undertaking the TP adjustment; iv) not granting the benefit of the +/- 5% range as allowed in the proviso to section 92C(2) of the Income tax Act. 4. The Ld. Assessing Officer has erred in disallowing an ....
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....,95,999/-. 3.1 Before us, Ld. counsel for the assessee submitted that interest on overdue receivables is as a result of sale of goods and when the main transaction has been considered to be at Arm's Length Price (ALP) then there is no reason to treat the receivables as a separate international transaction. According to him, the Explanation to Section 92B only relates to lending or borrowing of the funds and not in case of commercial over-dues which are already subjected to transfer pricing. He submitted that trade receivables have a different business perspective altogether and interest on overdue is only an incidental activity to the main activity of sale. He further submitted that working capital adjusted margins of the assessee have already factored into account for the impact of delay in receivables and thus, any separate adjustment on this account was not warranted in view of the judgment of the Hon'ble Delhi High Court in the case of Principal CIT Vs. Kusum Health Care Pvt. Ltd., reported in (2017) 398 ITR 66 Delhi HC. Learned counsel further made an alternative prayer that if the international transactions of interest on overdue trade receivables is benchmarked applying the....
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.... differentiation between debt-claims or debts in national currency and those in foreign currency is normally no use, because, for instance, a US $ loan advanced by a US lender is to him a debt-claim in national currency whereas to a German borrower it is a foreign currency debt (the situation being different, however, when an agreement in a third currency is involved). Moreover, a difference in interest levels frequently reflects no more than different expectations in regard to rates of exchange, rates of inflation and other aspects. Hence, the choice of one particular currency can be just as reasonable as that of another, despite different levels of interest rates. An economic criterion for one party may be that it wants, if possible, to avoid exchange risks (for example, by matching the currency of the loan with that of the funds anticipated to be available for debt service), such as taking out a US $ loan if the proceeds in US $ are expected to become available (say from exports). If an exchange risk were to prove incapable of being avoided (say, by forward rate fixing), the appropriate course would be to attribute it to the economically more powerful party. But, exactly whe....
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....nsaction of interest on overdue receivables. Accordingly, grounds no. 1 to 3 of the appeal are partly allowed. 4. Ground No. 4 of the appeal relates to disallowance of Rs. 16,11,000/- under Section 14A of the Act. Learned counsel before us, submitted that the Ld. Assessing Officer, while computing the disallowance under Section 14A read with Rule 8D(2)(iii) of the Income-tax Rules, 1962 (in short 'the Rules') has considered the average value of the investment, whereas the Special Bench of the Tribunal in the case of Vireet Investment Pvt. Ltd. and ANR. (2017) 165 ITD 0027 (Delhi) (SB), has held that only investment which has yielded exempt income should be considered for the purpose of Rule 8D(2)(iii) of the Rules. 4.1 The learned DR could not controvert the submissions of the learned counsel of the assessee. 4.2 We have heard the rival submissions and perused the relevant material on record. In the case, the assessee has shown exempt dividend income of Rs. 78,87,186/- and made suo motu disallowance of Rs. 8,17,000/-. However, the assessing officer invoking Rule 8D computed the disallowance of Rs. 24,28,000/- and thus, made net addition of Rs. 16,11,000/-. The learned DRP also u....
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....n Bench, and holding the view that the earlier decision is wrong, itself gives effect to that view, the result would be utter confusion. The position would be equally bad where a judge sitting singly in the High Court is of opinion that the previous decision of another single judge on a question of law is wrong and gives effect to that view instead of referring the matter to a larger Bench." The above decision was followed by the Supreme Court in Baradakanta Mishra v. Bhimsen Dixit, AIR 1972 SC 2466, wherein the legal position was reiterated in the following words (at page 2469) : "It would be anomalous to suggest that a Tribunal over which the High Court has superintendence can ignore the law declared by that court and start proceedings in direct violation of it. If a Tribunal can do so, all the subordinate courts can equally do so, for there is no specific provision, just like in the case of Supreme Court, making the law declared by the High Court binding on subordinate courts. It is implicit in the power of supervision conferred on a superior Tribunal that all the Tribunals subject to its supervision should conform to the law laid down by it. Such obedience would also be con....