TaxTMI 
TaxTMI 
2021 (4) TMI 1290
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....ssued 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 * Infosys Limited * Thirdware Solutions Limited * Cybage Software Private Limited 3. On the facts and circumstances of the case and in contrary to law, ....
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....f 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 facts and circumstances of the case and in contrary to law, Ld. TPO erred in not f 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 avera....
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....ars. 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 2029/Bang/2017 M/s GXS India Technology Centre Pvt. Ltd vs ITO dated 04.01.2021; after considering Mobis India, holds that the said assessee's failure in placing on record the relevant working capital particulars only led to the impugned disallowance than on merits. We thus accept this 7th substantive ground for statistical purposes and direct the TPO to consider assesse....
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.... 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 negotiated between the above mentioned parties. The assessee further submitted that there was no prior agreement between the AE of the assessee and the AE of CDK Global India Limited. Hence, the said transaction would not fall under the meaning of Deemed international transactions. 22.4.2.4. The submissions of the assessee were considered and found to be not acceptable for the following reasons. i) The assessee did not furnish an....
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....n 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 Name of AE Invoice No. Date of Invoice Amount (In Rs.) Due date of receipt of payment as per agreement Actual Date(s) of receipt of payment (INR)** Period of delay Interest For the delay period *** Credit period allowed As per service agreement 23.2 Further, the assessee vide its letter dated 16.10.2018, submitted as follows, i) Outstanding receivables are not covered under the definition of International Transaction ii) Not an international transaction and no separate adjustment is warranted iii) ....
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....rvices 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/Del/2016 dated 16.05.2017). It is important to note that the Hon'ble Bench while arriving at the said conclusion distinguished its own earlier order in Bechtel case, and also rejected the contention that interest gets subsumed in the working capital adjustment. The relevant discussion holding 'deferred receivables' would constitute international transaction is as under:- "In the case of Techbooks India International Pvt. Ltd. us. DCIT (supra), taking note of the Explanation inserted by the Finance Act, 2012 to Section 92B, it was observed that there remained no doubt that apart from any short-term or long-term borrowing, etc., or even advan....
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....pital 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 or borrowing, etc., or any type of advance payments or deferred payments, any other debt arising during the course of business' has also been expressly recognized as an international transaction. That being so, the payment/non-payment of interest or receipt/non-receipt of interest on the loans accepted or allowed in the circumstances as mentioned in this clause of the Explanation, also become international transactions) requiring the determination of their ALP. If the payment of interest is excessive or there is no or low receipt of interest, then such interest expense/income need to be brought to its ALP. The expression 'debt arising during the course of business' in commo....
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....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 reasoning:- "As a general rule, we agree with the learned Chartered Accountant that what is to be assessed as income is the income earned by an assessee and not the income that could have been earned by the assessee. Thus there is a real difference between the actual and the probable. But that general rule of taxation is not as such directly applicable to the present case as the TPO was really examining the financial impact of an international transaction. What is made in an analysis of ALP is the evaluation of the said financial impact. On one side the pricing adopted by the assessee for all its international transactions with its AE is comparable and the ALP test is satisfied. To that extent in the present case, the TPO has ....