TaxTMI 
TaxTMI 
2022 (11) TMI 201
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....us liable to be quashed in-limine. 2. On the facts and circumstances of the case and in law, the learned Transfer Pricing Officer (TPO)/ the learned Assessing Officer (AO) under directions of the Hon'ble Dispute Resolution Panel ("DRP') erred in making an addition of Rs. 1,26,43,352/- to the total income of the Appellant on account of interest chargeable on trade receivables in relation to the international transactions entered into by the Assessee with its AE. 3. On the facts and circumstances of the case and in law, the learned TPO / the learned AO under directions of the Hon'ble DRP erred in treating outstanding trade receivables as a separate international transaction undertaken by the Assessee without any material in support thereof. Trade receivables were incidental to the main sale transaction, which were held to be at arm's length, hence no separate benchmarking was required for benchmarking the trade receivables. 4. Without prejudice, on the facts and circumstances of the case and in law, the learned TPO / the learned AO under directions of the Hon'ble DRP erred in not appreciating that no addition was warranted on account of ....
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....f arm's length price ("ALP"), assessee analysed service level agreement of AE with assessee and AE with Indian third-party service providers for medical transcription services. The assessee compared the price for the services as well as terms and conditions governing the services and came to the conclusion that weighted average per line rate charged by the assessee to US AE is higher than the weighted average per line rate charged by independent 3rd parties (i.e. non-AEs) for the similar services rendered to US AE. Accordingly, assessee claimed that the international transaction pertaining to provision of medical transcription services is at ALP. 7. As regards IT and IT enabled services segment, the assessee used Transactional Net Margin Method ("TNMM") as the most appropriate method with Profit Level Indicator ("PLI") of Operating Profit to Total Operating Expenses, for benchmarking the transaction. By considering itself as the tested party, assessee identified 12 comparable companies with arithmetic mean of weighted adjusted net cost plus markup of 10.44%, with 35th and 65th percentile range between 7.40% to 9.47% and median of 8.31%. As the assessee has net cost plus margin o....
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....marking the alleged transaction of outstanding receivables from AE. The AO, in conformity, passed the final assessment order. Being aggrieved, the assessee is in appeal before us. 10. During the course of hearing, learned Authorised Representative ("learned AR‟) submitted that in respect of medical transcription services segment, weighted average per line rate charged by the assessee to the AE is higher than the weighted average per line rate charged by the independent 3rd parties after including interest cost, considering 45 days‟ credit period and interest rate of LIBOR plus 3.25%. The learned AR further submitted that even applying the interest rate adopted by the TPO, i.e. average 6 months LIBOR plus 450 basis points, weighted average per line rate charged by the assessee to the AE is higher than the interest cost adjusted per line rates charged by the independent 3rd party from the AE. In respect of provision of IT and IT enabled services segment, learned AR submitted that this transaction was benchmarking considering the working capital adjusted margins of the comparable companies and assessee was found to be at arm's length, therefore, impact of delayed receiv....
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.... view that average line rate charged by the assessee to its AE in respect of provision of medical transcription services is at arm's length vis-à-vis comparable interest cost adjusted rate charged by the third-party vendors to the AE and thus no further adjustment, as made by TPO/AO and upheld by the learned DRP, is warranted. Accordingly, we direct the TPO/AO to delete the adjustment on account of outstanding receivables in respect of provision of medical transcription services. 13. As noted above, the transaction pertaining to provision of IT and IT enabled services was benchmarked by the assessee by adopting TNMM and margin of the assessee was found to be at arm's length vis-à-vis working capital adjusted margins of the comparables. From the record, it is evident that the TPO has also, inter-alia, accepted the benchmarking analysis conducted by the assessee in respect of transaction pertaining to provision of IT and IT enabled services. The plea of the assessee is that aforesaid benchmarking has already considered the impact of delayed receivables and thus no further adjustment on account of outstanding receivables is required. In this regard, we find that Hon'b....