TaxTMI 
TaxTMI 
2021 (1) TMI 86
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....2. The directions of the Dispute Resolution Panel (DRP, the consequential transfer pricing order and the final assessment order is erroneous in so far as determining and quantifying downward adjustment to the value of international transactions with the associated enterprises (AE) of the Appellant. Adjustment towards Interest on Overdue receivables 3.1 The TPO/AO) erred in imputing interest on overdue receivable and the DRP erred in sustaining the said adjustment. 3.2 The DRP/TPO/AO failed to appreciate that the outstanding receivables cannot be considered as an international transaction and it does not raft within the purview of capita! financing as contemplated under Section 92B of the Act. 3.3 The DRP/TPO/AO erred in not appreciating the fact that the Act provides far taxing only real income whether received or accrued under the normal provisions. 3.4 The DRP/TPO/AO erred in not appreciating the fact that transfer pricing adjustment cannot be made on hypothetical and notional basis until and unless there is some material on record that there has been under charging of real income. 3.5 The TPO/AO erred in imputing interest on delayed receivable....
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.... and non-metallic minerals. The assessee company trades in Millscale, Barites powder, yellow maize/corn, Bentonite powder, Barytes Lump, Coal and Iron ore fines. The assessee company has entered into various international transactions with its associated enterprises (AEs) and benchmark its international transactions under CUP method and stated that its international transactions with AEs are at arm's length price. The assessee has filed its return of income for the assessment year 2015-16 on 24.11.2015, admitting total income of Rs. 19,59,35,990/-. The case was selected for scrutiny and during the course of assessment proceedings, a reference was made to Transfer Pricing Officer (TPO) for determination of arm's length price of international transactions with its AEs. During the course of transfer pricing proceedings, the TPO has rejected CUP method selected by the assessee as most appropriate method and has applied TNMM as most appropriate method to benchmark international transactions with its AEs. The TPO after considering relevant facts and has selected certain comparables in each segment and held that assessee's PLI is well above the PLI of the comparables and hence no upward a....
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....rtain judicial precedents and held that when the assessee has allowed credit period over and above normal credit period allowed in business, then the same needs to be benchmarked, more particularly, if the agreement does not specify the term of payment or period of credit. The DRP has also rejected another argument taken by the assessee in light of interest free security deposits received from AE and held that, because receivables are separate international transactions on which arm's length price is to be computed whether assessee has received interest free security deposits or not is not relevant to decide applicability of Chapter X of the Income Tax Act, 1961. Therefore, DRP opined that there is no error in computation of arm's length price by the TPO by allowing normal credit period of 45 days on all export receivables by adopting 13% rate of interest by taking SBI prime lending rate. Being aggrieved by the DRP order, the assessee is in appeal before us. 5. The learned AR for the assesse, at the time of hearing, submitted that this issue is squarely covered in favour of the assessee by the decision of ITAT 'D' Bench, Chennai in assessee's own case for the assessment year 201....
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....ny party, whether Associated Enterprises or non- Associated Enterprises, there could not be any selective imputing of notional interest on receivable from AE for belated realization of export bills. The relevant findings of the Tribunal in IT(TP) No.57/Chny/2018 dated 05.04.2019 are as under:- 23. Now we take up the dispute regarding the Arms Length Price adjustment imputing interest on overdue receivables. It is not disputed by the Revenue that assessee had not charged interest either from its Associated Enterprise or from Non Associated Enterprises, for delay in collection of receivables. It is also not disputed that out of the total transactions of the assessee almost 57% were with its Non Associated Enterprises. Once there is complete uniformity followed by assessee in not charging any interest from any party, whether Associated Enterprise or Non Associated Enterprises, in our opinion there could not be any selective imputing of notional interest. Submission of the assessee that out of total sales of about of Rs. 261 Crores to its Associated Enterprise, Rs. 100 Crores was received well within the due date and small delays were only in the balance of Rs. &nb....