TaxTMI 
TaxTMI 
2021 (4) TMI 1290
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.... 'the Ld. TPO') and the Ld. AO under the directions issued by Hon'ble DRP, erred in making a Transfer Pricing addition of Rs. 43,93,92,803 to the Appellant's income and thereby determining a total income of Rs. 4,24,67,62,545 and the said addition being wholly unjustified are liable to be deleted. Transfer Pricing: 2. On the facts and circumstances of the case and in contrary to law, the Ld. TPO erred and the Hon'ble DRP further erred in upholding / confirming the action of the Ld. TPO in accepting the following comparable companies, without appreciating that these companies were functionally dissimilar to the Appellant, engaged in product development have presence of brand and intangibles, have peculiar economic circumstances, and huge turnover: * Tata Elxsi Limited * Rheal Software Private Limited * Mindtree Limited * Larsen & Toubro Infotech Limited. * R S Software (India) Limited * Infobeans Technologies Limited * Persistent Systems Limited * Nihilent Technologies Limited * Aspire Systems (India) Limited * Inteq Software Private Limited * Info....
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....lleged comparables. 8. On the facts and circumstances of the case and in contrary to law, the Ld. TPO erred in and the Hon 'ble DRP further erred in upholding / confirming the action of the Ld. TPO in not allowing risk adjustment in accordance with the provisions of Rule 10B of the Rules to account for differences ~ between the international transactions undertaken by the Appellant, being a captive unit, and those undertaken by the alleged comparables. 9. On the facts and circumstances of the case and in contrary to law, the addition made by the Ld.TPO with respect to interest on outstanding receivable is untenable and be deleted since the addition has been made by computing interest on an invoice to invoice basis as against on a weighted average basis for all invoices raised during the year under consideration. 10. On the facts and circumstances of the case and in contrary to law, Ld. TPO erred in not acknowledging the fact that the Appellant had received certain payments within the due date as per the agreement and the Ld. TPO had not given the benefit against the delayed invoices by not following the weighted average method. 11. On the fac....
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....ES. 2.3. Learned CIT DR has drawn our attention to DRP's detailed discussion in paras 2.7 , 2.12, 2.13, 2.17 and 2.18; entity wise, respectively; taking into consideration not only their financial statements but also the alleged FAR analysis. He fails to dispute that the very aspects already stand considered in tribunal's earlier decision in preceding assessment years. We thus adopt judicial consistency and decline Revenue's foregoing stand. This 2nd substantive ground raised at assessee's behest is restored back to the TPO for his appropriate adjudication in light of the coordinate bench directions since there is no factual or legal distinction involved in the twin assessment years. The 2nd substantive ground is treated as allowed for statistical purposes in above terms. 3. The assessee's 7th substantive ground is that the learned lower authorities ought to have granted it working capital adjustment. The Revenue relied on this tribunal coordinate bench decision in Mobis India Limited vs. Dy.CIT (2013) 38 taxman.com 231 (Chennai) denying identical relief to concerned assessee. Mr.Moharana fails to rebut the clinching fact that this tribunal's yet another decision in ITA 2....
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....suant to India Country Participation Agreement, the assessee company facilitated the business transfer by providing assistance to CDK with regard to facilities and maintenance, payroll costs etc., which have been recovered at cost and amount recovered towards employee benefit expenses, operating expenses and depreciation has been netted off against respective expenses heads. 22.4.2.2. In view of the above, it is evident that certain services were rendered by the assessee company to CDK Global (the AE of which has been reported as AE of the assessee company) but no mark-up was charged on the cost of Rs. 47,23,69,513/incurred in rendering such services. No independent party would render such service without a margin. In this connection, the assessee was required to show cause as to why a mark up 27.63%) should not be made on the cost of Rs. 47,23,69,513/- and thereby an adjustment of Rs. 13,05,15,696/- should not be made u/s 92CA(3) of the Act. 22.4.2.3. In response to the above, the assessee vide its letter dated 16/10/2018 submitted that the consideration for the transfer of 'Dealer Services' from the assessee company to CDK Global India Limited was negoti....
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.... respect of software development segment of the assessee's international transactions and the shortfall of Rs. 18,74,75,482/- is treated as transfer pricing adjustment u/s 92CA in respect of ITeS of the assessee's international transactions. 23. INTEREST ON DELAYED TRADE RECEIVABLES: 23.1. It is seen from TP Study report that, there are outstanding receivables from AEs to an extent of Rs. 26,11,83,164/-. It was informed to the assessee vide this office show cause notice dated 28.09.2018, that in case of trade receipts from AEs beyond credit period, the delayed receipts are proposed to be treated as "unsecured loans" advanced to the AEs for the period of delay and the interest rate is proposed to be charged on the basis of average SBI PLR during the financial year 2014-15 (i.e. 14.75% per annum). Further, the assessee was asked to furnish invoice wise aging details of outstanding receivables, in respect of all invoices raised during the FY 2014-15 as well as the invoices which were raised in previous FYs but remained unpaid on the opening day of current FY 2014-15 vis-a-vis credit period as per service agreement with its AEs in following format: S. No ....
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....ing or action is intended to be enforceable by legal proceeding ... » In view of above and doctrine of 'substance over form', deferred payment or receivable or any other debt arising during the course of business is held to be an "International Transaction" within the meaning of section 92B( 1) of the Act. In this case, admittedly, the taxpayer has provided benefit to its AE by way of advancement of interest free loan in the garb of delayed receipt of sale proceeds. These funds could have been otherwise deployed for at least earning interest income. The taxpayer has therefore incurred cost in connection with a benefit and services provided to the AE by way of delayed receipt of sales proceeds. Accordingly, the delay in receipt of receivables is an international transaction u/s 92B(1) read with clause (v) of section 92F. ii) In view of the above, non-charging or under charging of interest on the excess period of credit allowed to the AE, for the realization of sales invoices would amount to an international transaction. This view finds support in the latest decision of the Hon'ble ITAT, Delhi in the case of Bechtel India Pvt. Ltd.(in ITA No. 6530/....
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...., that the assessee argued before the TPO that interest on receivables is not an international transaction. At this stage, it would be apposite to note that the Finance Act, 2012 has inserted Explanation to section 92B with retrospective effect from 1.4.2002. Clause (i) of this Explanation, which is otherwise also for removal of doubts, gives meaning to the expression 'international transaction' in an inclusive manner. Sub-clause (c) of clause (i) of this Explanation, which is relevant for our purpose, provides as under:- . Explanation.-For the removal of doubts, it is hereby clarified that- (i) the expression "international transaction" shall include- (a) (b) (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; 22. On going through the relevant part of the Explanation inserted with retrospective effect from 1.4.2002, thereby also covering the assessment year under consideration, there remains no doubt that apart from any long-term or short-term lending ....
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....25. The foregoing discussion discloses that non-charging or undercharging of interest on the excess period of credit allowed to the AE for the realization of invoices amounts to an international transaction and the ALP of such an international transaction is required to be determined. " Similar views have bee taken by the Hon'ble ITAT, Bangalore in the case of Ingersoll Rad (I) Pvt Ltd (dated 10.11.2017) and ITAT Delhi in the case of BT e-serve India Pvt. Ltd (dated 30.10..2017) (87 Taxmann.com 251). The Hon'ble ITAT, Delhi in the case of BT e-serve India Pvt. Ltd. held that : "receivables or any other debt arising during the course of business is included in the definition of capital financing as an international transaction as per explanation 2 to section 92B w.e.f. 2002 inserted by the Finance Act, 2012. Even outstanding receivables partake the character of capital financing and consequently overdue outstanding is an international transaction". iii) Even prior to the said amendment by the Finance Act, 2012, the Bangalore ITAT, in the case of Logix Micro Systems Ltd. held deferred receivables to be an international transactions with the following reason....