TaxTMI 
TaxTMI 
2022 (7) TMI 1355
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....ns in section 92C(3) of the Income-tax Act, 1961 ('the Act') were satisfied in the instant case. Accordingly, the order passed by the Ld. TPO is without jurisdiction. The Hon'ble Dispute Resolution Panel - 2 ('DRP') erred in upholding the actions of the Ld. AO/ Ld. TPO. 2. Assessment proceedings are time barred as per Section 144C(13) of the Act 2.1. The Ld. AO erred in not completing the assessment within the time limit prescribed as per section 144C(13) of the Act. The order passed under section 143(3) read with section 144C(13) of the Act by the Ld. AO was served on the Appellant on November 29, 2018 whereas the due date for completion of the assessment was October 31, 2018. 3. Erroneous treatment of foreign exchange loss pertaining to Foreign Currency Convertible Bonds as operating in nature 3.1. Given the facts and circumstances of the case, the Ld. AO/ Ld. TPO erred in considering foreign exchange loss on Foreign Currency Convertible Bonds ('FCCBs.) as operating in nature while computing the margins of the Appellant for transfer pricing purposes. The Hon'ble DRP erred in upholding the actions of the Ld. AO/ Ld. T....
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....sociated 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. 6.2. The Ld. AO/ Ld. TPO erred in not appreciating that creation of trade receivables was a secondary transaction arising out of international transactions with AEs which has already been benchmarked at the time of income recognition. The Hon'ble DRP erred in upholding the action of the Ld. AO/ Ld. TPO. 6.3. The Ld. AO/ Ld. TPO erred in not appreciating that the underlying agreement does not have a clause for interest on outstanding balance and hence no such interest is payable by AEs. The Hon'ble DRP erred in upholding the action of the Ld. AO/ Ld. TPO. 6.4. Without prejudice to the above, the Ld. AO/ Ld. TPO failed to appreciate that interest on trade receivables, to the extent prudently applicable, has been implicitly factored by the Appellant in pricing its transactions with its Associated Enterprises and could be verified using a working capital adjustment. 7. Erroneous levy of interest under section 234A and 234B 7.1. The Ld. AO has erred in....
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....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 associated enterprise exceeding Rs. 15 crores, and accordingly reference was made to the transfer pricing officer under 92CA of the Act. 2.2 On receipt of reference under 92CA, the Ld.TPO called upon the assessee to file economic details of the international transaction, with the associated enterprise. Upon receipt of the details, the Ld.TPO observed that, following were the international transaction between the assessee and its AE: 2.3 The Ld.TPO observed that assessee had used OP/OC as the PLI for computing its margin at 15.63%. The Ld.TPO noted that assessee treated foreign exchange fluctuation as operating in nature for computing the PLI of tested party of the comparables. The assessee used 4 comparables for SWD service segment. Applying TNMM as the most appropriate method, computed the arms length margin. The PLI in the hands of the comparable was determined by considering weighted average method for the preceding....
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....nd does not require adjudication. 4. Ground no. 2, 4 & 5 are not pressed. Accordingly, these grounds are dismissed as not pressed. 5. In respect of Ground no. 3, the Ld.AR submitted that in the assessee's own case for A.Y. 2010-11 forex gain on restatement of FCCB is held to be operating in nature. It is submitted that, also in respect of unrealised foreign exchange gain on FCCBS, whether to be treated as income or not, was also concluded in favour of assessee in assessee's own case in ITA No. 689/Bang/2014 which forms part of the order passed by this Tribunal for A.Y. 2010-11. It is submitted that following the view in A.Y. 2010-11, assessee did not claim foreign exchange gain of FCCB for acquisition of capital asset in the computation of income and the same was treated as operational income while computing margin under the transfer pricing provisions. 6. The Ld.DR submitted that the same may be verified and considered in accordance with law. 7. We have perused the submissions advanced by both sides in the light of records placed before us. 8. We note that Coordinate Bench of this Tribunal for A.Y. 2010-11 in assessee's own case considered the issue by observing ....
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....s.373 & 374/Bang/2015 of acquisition of a new industrial undertaking and was therefore on capital account. The Hon'ble supreme Court in the case of Woodward Governor (supra) laid down the principles in this regard. The Hon'ble Court in Para-4 of its judgment observed as follows:- "At the outset, for the sake of convenience, we may state that in this batch of civil appeals broadly we have before us two categories. In the first category, we are concerned with exchange differences arising in foreign currency transaction on revenue items. In such category, we are concerned with the assessee(s) incurring loss on revenue account. In that category, we are concerned with the provisions of ss. 28, 29, 37(1) and 145 of the IT Act, 1961 ("1961 Act"). In the second category of cases, we are concerned with exchange differences arising on repayment of liabilities incurred for the purpose of acquiring fixed assets. In other words, in the second category of cases, we are concerned with the assessee(s) incurring liabilities on capital account. In such cases, we are required to consider the provisions of s. 43(1), 43A (both, before and after amendment vide Finance Act, 2002)." ....
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....ing out the printed prospectus to the issue of GDS, the Commissioner viewed that the aggregate net proceeds received were used principally to fund the establishment of offshore software development and the balance was used for working capital and for other general corporate purposes. The Commissioner viewed that the assessee had kept FDs of the GDS proceeds on its own and not because of any compulsion. Consequently, the amount received on account of exchange fluctuation to the tune of Rs.16,35,77,977/- was to be treated as revenue receipt and the Assessing Officer erred in reducing it in the income of the assessee while computing the deduction under Section 80HHE. The Hon'ble Madras High Court held that the claim of the revenue was unsustainable. The Hon'ble Court held that since the amount had direct nexus with the capital raised, the assessee's claim that the same was capital receipt and hence not taxable was correct. 42. In our view the facts of the case in the decision of the Madras High Court in the case of PVP Ventures Ltd. (supra), is identical to the facts of the case of the Assessee in this appeal. FCCBs are instruments issued to investors for raising ....
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.... ITR 66 (Del), held that no interest could have been charged as it cannot be considered as international transaction. He also placed reliance upon decision of Delhi Tribunal in case of Bechtel India vs DCIT reported in (2016) 66 taxman.com 6 which subsequently upheld by Hon'able Delhi High Court vide order dated 21/07/16 in ITA No. 379/2016, also upheld by Hon'ble Supreme Court vide order dated 21/07/17, in CC No. 4956/2017. 10.2 It has been submitted by Ld.AR that outstanding receivables are closely linked to main transaction and so the same cannot be considered as separate international transaction. He also submitted that into company agreements provides for extending credit period with mutual consent and it does not provide any interest clause in case of delay. He also argued that the working capital adjustment takes into account the factors related to delayed receivables and no separate adjustment is required in such circumstances. 10.3 On the contrary Ld.CIT.DR submitted that interest on receivables is an international transaction and Ld.TPO rightly determined its ALP. In support of the contentions, he placed reliance on decision of Delhi Tribunal order in Ameriprise Ind....
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....itted that, while answering above question, Hon'ble Bombay High Court referred to amendment to section 92B by Finance Act, 2012 with retrospective effect from 1.4.2002. Setting aside view taken by Tribunal, Hon'ble Bombay High Court restored the issue to file of Tribunal for fresh decision in light of legislative amendment. It was thus argued that non/under-charging of interest on excess period of credit allowed to AEs for realization of invoices, amounts to an international transaction and ALP of such international transaction has to be determined by Ld.TPO. In so far as charging of rate of interest is concerned, he relied on decision of the Hon'ble Delhi High Court in CIT vs. Cotton Naturals (I) Pvt. Ltd (2015) 276 CTR 445 (Del) holding that currency in which such amount is to be re-paid, determines rate of interest. He, therefore, concluded by summing up that interest on outstanding trade receivables is an international transaction and its ALP has been correctly determined. 10.6 We have perused the submissions advanced by both the sides in the light of the records placed before us. This Bench referred to decision of Special Bench of this Tribunal in case of Special Bench of I....