TaxTMI 
TaxTMI 
2022 (12) TMI 353
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....e Appellant submits as under: Erroneous transfer pricing adjustments arising from interest on trade receivables 1.1. The Deputy Commissioner of Income Tax, Circle - 6(1)(2), Bangalore (Learned Assessing Officer' or 'Ld. AO') / Assistant Commissioner of Income tax, Transfer Pricing Circle - 1(3)(1) ('Learned Transfer Pricing Officer' or 'Ld. TPO') has erred in considering outstanding receivables from Associated Enterprises (`AEs') to be a separate international transaction and computing interest on the same. The Hon'ble DRP erred in upholding the action of the Ld. AO/ Ld. TPO. 1.2. The Ld. AO/ Ld. TPO erred in not appreciating that creation of trade receivables was a secondary tr....
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....ions (i.e. proportionate adjustment) with the Associated Enterprises i.e., being 46.43% of the total software development income of the Appellant. 2. Erroneous non-set-off of brought forward business losses and unabsorbed depreciation 2.1. The Ld. AO has erred in not setting-off brought forward business losses and unabsorbed depreciation. The Hon'ble DRP has erred in not adjudicating this ground of objection raised by the Appellant before it. 3. Erroneous non-set-off of MAT credit entitlement 3.1. The Ld. AO has erred in law in not setting-off MAT credit entitlement pertaining to earlier AYs. The Hon'ble DRP has erred in not adjudicating this ground of objection raised by the Appellant before it. ....
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....ds of appeal, at any time before or during the hearing of the appeal." 2. Brief facts of the case are as under: 2.1 Assessee is in the business of software development and filed its return of income on 29/11/2015 declaring Nil income under the normal provisions of the Act and book loss of Rs. 28,40,01,000/- under MAT provisions. The return was processed u/s. 143(1) of the Act and the case was selected for scrutiny and notice u/s. 143(2) of the Act and 142(1) was issued to assessee. In response to the statutory notices, representative of assessee appeared before the Ld.AO and filed requisite details as called for. The Ld.AO noted that the assessee for the year under consideration entered into international transaction with its associat....
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....essee before this Tribunal is in respect of computation of notional interest on trade receivables. 5. Ground no. 1 - 1.6 is in respect of interest on trade receivables. 5.1 The Ld.TPO proposed to compute the interest on delayed trade receivables by using weighted average method. 5.2 Assessee was called upon to furnish invoices, the date of receipt and delay in the number of days in such receipts that was due to assessee. Based on the details furnished, the Ld.TPO computed the interest by using LIBOR - six months + 400 basis points that worked out to 4.3836%. The Ld.TPO proposed an adjustment of Rs.23,78,93,911/- by computing as under: Average delay period beyond due date 292 Invoice amount (INR) 680,69,45,661 Rate of....
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....tanding sum of invoices is akin to loan advanced by assessee to foreign AE., hence it is an international transaction as per explanation to section 92 B of the Act. Alternatively, it also argued that in TNMM, working capital adjustment subsumes sundry creditors. In such situation computing interest on outstanding receivables as loans and advances to associated enterprise would amount to double taxation. Hon'ble Delhi Tribunal in case of Orange Business Services India Solutions Pvt. Ltd. vs. DCIT in ITA No. 6570/Del/2016 vide its order dated 15.2.2018 has observed that: "There may be a delay in collection of monies for supplies made, even beyond the agreed limit, due to a variety of factors which would have to be investigated on a case to ca....
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....w." 5.7 Respectfully following the above, we direct the Ld.TPO to compute the interest on receivables based on the principle enunciated hereinabove. The directions of the DRP of granting credit period of 90 days is to be granted for year under consideration. In the event, it is found that the interest so computed stands subsumed in the Working Capital Adjustment, no further disallowance has to be made, as has been observed by Hon'ble Delhi High Court in case of Orange Business Services India Solutions Pvt. Ltd. vs. DCIT in ITA No. 6570/Del/2016 vide its order dated 15.2.2018. Accordingly these grounds raised by assessee stands allowed for statistical purposes. 6. Ground nos. 2 - 4 are in respect of the claim of assessee in respect ....