TaxTMI 
TaxTMI 
2021 (3) TMI 1055
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....here below may kindly be rectified in terms of provisions of section 254(2) of the Act. 3. It is respectfully submitted that in the instant appeal, in the memo of the appeal, the assessee has raised as many as six grounds of appeal (noted in para 2 of the order), and apart from the grounds raised in the memo of the appeal, it has raised additional grounds of appeal which has also been noted in the order of the Hon'ble Tribunal in para 8. The additional grounds raised by the assessee are numbered as ground no. 5.1 and ground no 7. 3.1 It is submitted that the Hon'ble Tribunal was pleased to admit additional ground no. 5.1 by holding that such ground is legal ground and can be raised by the assessee. The aforesaid additional ground raised by the assessee reads as under: "5.1 that on the facts and circumstances of the case and in law, the learned I AO/TPO/DRP erred in not considering the benchmarking of outstanding I receivable by applying the aggregated approach thereby ignoring the fact 1 that working capital adjustment takes into account the impact of | outstanding receivables on the profitability. " 3.2 It is respectfully submitted that in respe....
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.... by Hon'ble Delhi Hi Court and Hon'ble Supreme court of India. The Hon'ble IT AT acknowledged the need to undertake working capital adjustment to bring parity in the working capital investment of the tested party and the comparables rather than looking at the receivable independently. 3.2.5 Working capital adjustment on TPO/DRP comparable companies: After allowing working capital adjustment the margins would be as below: SL No. Company Name Unadjusted margins Adjusted margins 1 Accentia Technologies Limited 11.21% 12.61% 2 Acropetal Technologies Limited (Segmental) 9.64% 3.25% 3 Eclerx Services Limited 61.21% 64.14% 4 Excel Infoway Limited (Segmental) 41.48% 34.05% 5 Informed Technologies India Limited 7.10% 8.61% 6 e4e Healthcare Business Services Private Limited 13.45% 13.45% 7 Jindal Intellicom Private Limited 1.54% 3.73% 8 Caliber Point Business Solutions Limited 9.08% 10.92% 9 Microgenetics Systems Limited 20.41% 22.91% Arithmetic Mean 19.46% 19.30% * Computation has been done using interest rate as p....
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....paper book, the learned authorised representative could not show that assessee himself has claimed any working capital adjustment while preparing its comparability analysis. 3.5 In respect of the first reason, the Hon'ble Tribunal has noted that the shareholders fund available in the books of the appellant was Rs. 123,53,55,303/- whereas outstanding receivable from its associated enterprise is Rs. 132,48,07,379/- implying that the total profit earned by the assessee is enjoyed by is associated enterprise out of India. The total shareholders funds are available with assessee's associated enterprise as an interest free trade receivable clearly shows that outstanding receivable from the associated enterprise is not at all the transaction of sale of goods/services to the assessee. 3.5.1 It is respectfully submitted that while recording the aforesaid finding, the Hon'ble Tribunal has omitted to consider the facts on record. It is submitted that in para 14 of the order, the Hon'ble Tribunal has noted that the in the convenience paper book, the assessee has furnished the financial statements of the associated enterprise dated 31st of December 2008, 2009, 2010 and 201....
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.... record. It is submitted that while recording the finding, the Hon'ble Tribunal has inadvertently omitted to consider the aforesaid submissions/facts which was on record and has also been noted in the order, which constitute a mistake apparent from record u/s 254(2) of the Act. 3.5.3 Infact, the Hon'ble Tribunal has further recorded that "where total shareholders funds are available with its associated enterprise as an interest free trade receivable clearly shows that outstanding receivable from the associated enterprise is not at all the transaction of sale of goods/services to the assessee". It is submitted that here again, Hon'ble Tribunal has inadvertently overlooked that assessee is providing ITES services to its AE, and amount outstanding was only in respect of the services provided, as the assessee has neither provided any loan nor any advance to its AE and sum outstanding was only in respect of the services provided and nothing else. Infact, the Hon'ble Tribunal has also not recorded any finding that if the outstanding receivable from the associated enterprise is not in respect of sale of goods/services, then what was the nature of sum outstanding. It is s....
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....fully submitted that apart from the aforesaid, the Hon'ble Tribunal in para 20 of the its order has held as under; "Even otherwise the assessee could not show us what is the difference in working capital of the assessee compared with comparable companies. Thus the adjustment of working capital was not at all there in case of assessee for this year." 3.8.1 It is most humbly submitted that aforesaid finding of the Hon'ble Tribunal is contrary to the material on record. It is submitted that in the 'case synopsis', as has been extracted hereinabove, and financials of the comparables which was on record, it has been contended that there are difference between the working capital of the assessee and that of the comparables, and working capita! of the assessee and that of the comparables are not same and accordingly adjusted margin of the assessee and that of comparables were given. Infact, the learned / DR requested that same can be examined by the Id. TPQ and it appears while recording the aforesaid finding, same has been lost sight off, which constitute a mistake apparent from record which it is most humbly prayed that same be rectified. 4. Further, in the ad....
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.... 5. It is further submitted that in support of the additional ground no. 5.1, the applicant has referred to the order of the Hon'ble Tribunal in the case of Kusum healthcare private limited versus ACIT (ITA number 6814/del/2014] which was also upheld by the Hon'ble Delhi High Court in 1TA No. 765/2016 vide a judgment dated 25/04/2017, wherein credit period for the debtors in the sale contract with unrelated entities was 180 days, whereas in the case of the AEs they were "allowed to linger for long" and hence the said receivables qua the AE was treated as a separate international transaction. The Hon'ble Tribunal deleted the adjustment by holding that "the differential impact of working capital of the Assessee vis-a-vis its comparables had already been factored in the pricing/profitability" which was more than the working capital adjusted margin of the comparables and, therefore, "any further adjustment to the margins of the Assessee on the pretext of outstanding receivables is unwarranted and wholly unjustified." The Hon'ble High Court upheld the finding the Hon'ble Tribunal by holding as under: "10. The Court is unable to agree with the above submissions. The incl....
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.... and Apex Court judgment is mistake apparent from record and so has to be rectified. Reliance is placed on the following judicial pronouncements: i. ACIT vs. Saurashtra Kutch Stock Exchange Ltd reported in 305 ITR 227 (SC), ii. CIT vs. Subodhchandra S. Patel 265 ITR 445 (Guj), iii. Bhagheeratha Engineering Ltd. vs. CIT 227 ITR 504 (Ker), iv. South India Corporation Ltd. vs. ACIT 360 ITR 039 (Ker) v. R.M. Exports vs. CIT [2014] 264 CTR 206 (Punjab & Haryana). 6. It is further submitted that in the instant case, in the memo of the appeal, the applicant has raised five grounds of appeal (ground no. 6 was only consequential), by contending as under: i. Outstanding receivables from the related parties is not an "international transaction" within the meaning of section 92B(1) of the Act (Ground no. 2). ii. Re-characterizing the transaction of trade receivables as unsecured loans advanced to the AE"s and charging interest on the same is incorrect in law (Ground No. 3). iii. While benchmarking the transaction, CUP method has been applied without understanding the business model/contractual terms of the Appella....
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....gh Courts have been all along holding that Hon'ble Tribunal should consider all the evidences in favour of and against the assessee. In this regard reference can be made to the judgment of the Apex Court in the case of Shri Udhavdas Kewalram vs. CIT, 66 ITR 462, wherein it has held that it is obligatory for the ITAT to consider all relevant facts and give its findings on all pleas raised in the light of the evidences and application of law. Similar view has been taken by the Hon'ble Madhya Pradesh High Court in the case of CIT vs. ITAT, 172 ITR 15 8.in which it was held that material for determining the amount of tax is pressed and not considered, would certainly constitute a mistake apparent from the record within the meaning of section 254 (2) of the Act and if the said mistake being pointed out by the assessee, the Tribunal, in the circumstances referred to above, has to amend its order. 8. The assessee at this juncture seeks to rely upon the judgment of Apex Court in the case of Honda Siel Power Product Ltd. vs. CIT reported in 295 ITR 466 wherein it was held that, if a prejudice had resulted to the party, which prejudice is attributable to the Tribunal's mistake, ....
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....cant has not filed any other Miscellaneous Application under section 254(2) of the Act against the order dated 06.07.2020 except the instant miscellaneous application." 3. Shri C. S. Aggarwal, ld Sr. Advocate , on behalf of the assessee, submitted that tribunal has admitted the additional grounds of the assessee with respect to working capital adjustment and the impact of outstanding receivables, however, on the merits the coordinate bench rejected the ground as stated in para 3.4 of the MA. He further submitted that the tribunal failed to consider that associated enterprises has incurred substantial loss and due to accumulated losses there was cash crunch and therefore there was delay in making payment by the associated enterprises to the assessee for bills of assessee and thus such delay is on account of business reasons. He otherwise submitted that assessee was earning a markup of 15.50% and therefore, the finding of the coordinate bench is by overlooking the material/ facts on records and thus there is a mistake apparent from the record. The ld AR further stated that even otherwise in para No. 3.8 shows that claim of the assessee was rejected on merits. He submitted that the....
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....he assessee and in analyzing the comparable prices, the financial condition of the associated enterprise was not at all required to be considered. Further the associated enterprise as we have already held in the order that has taken away the whole money from the associated enterprise, which was lying as reserve and surplus in the hands of the assessee. We do not now hesitate to state that the associated enterprise has withdrawn the full results are available with the assessee in the form of outstanding advances which are really in the form of dividend payment to the associated enterprise from India. Therefore, in our view it is immaterial whether the associated enterprise is making a losses or it is making of profit for working out the operating margin of the assessee. 7. The second contention raised by the assessee is that coordinate bench has inadvertently overlooked that assessee is providing ITeS services to its associated enterprise and amounts outstanding was only in respect of the services provided and that it had not made any loan or had made any advances to its associated enterprise and the sum outstanding was only in respect of services provided and nothing else. We....