TaxTMI 
TaxTMI 
2020 (6) TMI 774
X X X X Extracts X X X X
X X X X Extracts X X X X
....he assessee has entered into the following international transactions with its AE's :- Nature of Transaction Method Value (Rs.) Import of medical instruments and comsumables for resale TNMM using operating profit as a PLI 39,365,247 Import of medical Instruments capitalized Operating Revenue 9,412,171 Provision of business support services TNMM using operating Profit as a PLI operating Cost 227,720,946 4. The TPO noted that the cost of the medical instruments which were used in the business were capitalized in the books of account of the assessee. Its related operating cost i.e. depreciation has been charged to the P & L account while computing the profitability of the trading segment of DHR India. Subsequently such instruments were installed at the customer's premises and the consumables required by the customer in using these instruments were provided by the assessee. As the above international transaction was closely linked to the assesee's business of trading of medical equipment, the TNMM analysis was used to bench mark the arms length nature of the international transaction of purchase of medical equipment. The TPO disregarded the assessee's bench marking and det....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and 2.2 Arriving at 'Nil' value without applying any of the specified methods, thereby disregarded Rule 10 B and Rule 10 C of the Income-Tax Rules, 1962 and also erred in not appreciating that the medical equipments could not have been imported at Nil price. 3. On facts and in law, the Ld. AO and Ld. TPO erred in making an adjustment of Rs. 17,745 to the alleged international transaction of interest on outstanding receivables by 3.1 Not appreciating that the outstanding receivables was not a separate international transaction as per provisions of section 92 B of the Act and erred in treating the receivables as an "unsecured loan", and 3.2 Rejecting the Appellant's contention that the issue of outstanding is subsumed in the working capital adjustment granted to the Appellant and no separate adjustment on account of outstanding receivables is called for. 4. That on the facts and circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under section 271 (1) (c ) of the Act as per the impugned order consequential to the above disallowances. 5. On the facts and in law, the Ld. AO erred in levying an interest of Rs. 1,26,297 under section ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....India Private Ltd. ITA no. 4229/Del/2014) 6. ACIT Vs. Netafirm Irrigation India Private Limited ITA No. 3668/Mum/2008 ( AY 2003-04) ITA No. 4837/Mum. /2009 A. Y. 2004-05) & ITA No. 1874/Mum/2011 (A. Y. 2005-06) 7. Bucher Hydraulics P. Ltd. Vs. ACIT, Circle - 5 (1) ITA No.177/Del/2016 (A.Y. 2011-12) 10. So far as interest on outstanding receivables is concerned he submitted that the DRP in the Appellant's own case in A.Y. 2009-10 deleted the adjustment of interest on outstanding receivables stating that the issue of interest on receivables stood subsumed in the working capital adjustment provided. Accordingly, it was held that no separate adjustment is called for. He submitted that in the present year also, working capital adjustment has been provided by the Hon'ble DRP for the services segment which already takes into account the impact of outstanding receivables. Further the TPO failed to appreciate that during AY 2011-12, there were more 'outstanding payables' than 'outstanding receivables'. Furthermore, the average payment period to AEs is 176 days, whereas the average collection period from AEs is only 19.55 days. Thus no adverse inference is warran....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the cost of transportation of these assets has observed as under :- "4. The assessee has stated that these fixed assets are new and have been purchased by the AE and sold to the assessee. The assessee could have easily filed a copy of purchase bills of these assets relating to purchase by the AE, and if the AE had sold these assets to the assessee at the same price at which they were purchased by the AE, then the transaction could have been shown to be at arm's length. The assessee has however, chosen not to produce this basic evidence. A copy of the valuer's report has also not been filed. 5. The TPO's decision to hold the ALP to be nil and make an adjustment of the entire purchase cost is not sustainable, as the assessee has not claimed the purchase cost as revenue expenditure, and has claimed only the depreciation treating this as capital expenditure. In view of the facts discussed above, the ALP and the WDV for calculating depreciation, is limited to the customs duties paid and the cost of transportation of these assets. Depreciation is allowable only on the WDV so computed. The AO is directed to limit the depreciation allowed to the depreciation allowable on the WDV so co....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a delay in collection of monies for supplies made, even beyond the agreed limit, due to a variety of factors which will have to be investigated on a case to case basis. Importantly, the impact this would have on the working capital of the Assessee will have to be studied. In other words, there has to be a proper inquiry by the TPO by analysing the statistics over a period of time to discern a pattern which would indicate that vis-a-vis the receivables for the supplies made to an AE, the arrangement reflects an international transaction intended to benefit the AE in some way. 11. The Court finds that the entire focus of the AO was on just one AY and the figure of receivables in relation to that AY can hardly reflect a pattern that would justify a TPO concluding that the figure of receivables beyond 180 days constitutes an international transaction by itself. With the Assessee having already factored in the impact of the receivables on the working capital and thereby on its pricing/profitability vis-a-vis that of its comparables, any further adjustment only on the basis of the outstanding receivables would have distorted the picture and recharacterised the transaction. This was cl....