TaxTMI 
TaxTMI 
2020 (12) TMI 294
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....the income tax act (in short act). It was further stated that the company is fully funded entity and the sales and receivables are running accounts. The assessee further submitted before the TPO that it does not bear the working capital risk, which require charging of notional interest. The taxpayer relied on the cases of Pegasystems Worldwide India Pvt. Ltd. for AY 2009-10, ITA No. 1758 & 1936/Hyd/2014, Evonik Degussa India P. Ltd., ITA No. 7653/Mum/2011, and Indo American Jewellery Ltd., ITA No. 5872/Mum/2009. 3.1. The TPO was not convinced with the submissions of the assessee in view of introduction of clause 'c" to Explanation to section 92B clarifying that all the transactions of capital financing including long term and short term borrowings and receivables or any debt arising during the course of business w.e.f. 01/04/2002 by finance act 2012. Thus, the TPO held that imputation of interest on receivables as international transaction and accordingly, rejected the contentions of the assessee and suggested adjustment for of Rs. 6,54,11,154/- u/s. 92CA(3) of the IT Act. 3.2. Accordingly, the AO issued draft assessment order proposing to make the adjustment u/s. 92CA(3)....
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.... Profit C= A- B 59016276 40978543 16299432 10800148 127094399 OP/ OC% OP/ OR% D= C/ B% E= C/ A% 22. 00 23. 03 31. 02 5. 63 18. 70 15. 75 Compara- ble margin F G (0. 84 ) 15. 69 17. 85 OP/ OC% OP/ OR% 2. 24 4.1. The assessee further submitted that the excess profit earned by the assessee was Rs. 8,77,55,919/-, which takes care of the adjustments that are required to be made to determine ALP in imputing the interest and, thus, argued that no separate adjustment is required to be made on account of imputation of interest on receivables. The assessee further argued that transaction is not covered in the definition of international transaction as defined u/s. 92B of the Act, since, the same was on account of international tra....
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....l in page nos. 5 & 6 of the DRP order placing reliance on the decision of coordinate bench of ITAT, Bangalore in Logix Microsystems Ltd. Further, as per the amendment made to Explanation to section 92B, it is clearly clarified that any type of advance, payment or default payments or receivables or any debit arising during the course of business constitute international transactions. For the sake of clarity and convenience, we extract clause (c) of explanation to section 92B, which as under: "(c) capital financing, including any type of long-term or short-term borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business". 6.1. From the plain reading of clause (c) of Explanation to section 92B, it is clear that any debt arising during the course of business constitute international transaction. No separate treatment was given for the trading transactions. Similarly, the contention of the Ld. AR if the international transaction at ALP, no separate adjustment is required to be made on account of outstanding deferred receivables has no basi....
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.... rival contentions. The service agreement dated 01st August 2009 is placed at page No. 294 to 311 of paper book. The service fees are governed by clause 4 of the agreement. According to clause No. 4.9 subsequent to confirmation of the invoices it is provided that the paying party will pay the invoice amount to the invoicing party in accordance with the BT group policy for the settlement of intra-group transaction. Schedule 1 of that agreement is with respect to the services, Schedule -2 is with respect to BTGS transfer pricing policy. According to para No. 3.4 of that policy the service fee for the provision and receipt of services are calculated in the order that BT, BT Ltd. and OPCO receive an arm's length return for the services provided and received. Therefore, according to that policy it is evident that the policy of the group is to charge the services at arm's length. In this background it needs to be examined that whether a third party in a given circumstances would allow it's outstanding to drift to such an extent. The apparent answer to this query would be emphatic "No". Further on reading the transfer pricing study report prepared by the assessee, in the credi....
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....BI does not prescribe any conditions for repatriation of exports proceeds for SEZ, it cannot be said that for determining ALP of export receivable, which becomes capital financing, if outstanding is beyond agreed or reasonable time limit, does not have any impact on the benchmarking of the same, as the purposes of RBI policy and Income Tax Act are on different footings. However, even if the agreement does not specify the term of the payment even then assessee must be given benefit of credit period which is accepted business practice in the trade. Before the ld. Transfer Pricing Officer as well as before the ld. DRP the assessee could not establish what is the accepted business practice in its trade about the credit period and what the group policy is in this regard. Therefore, there cannot be any grievance where the ld. Transfer Pricing Officer has considered as 30 days credit period. Even before us this credit period was not challenged. In view of this we do not find any infirmity in the order of the ld. Transfer Pricing Officer of considering 30 days as normal credit period. The subsequent question arises about the benchmarking analysis and computing the arm's length price. I....