TaxTMI 
TaxTMI 
2022 (12) TMI 920
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....e facts and in the circumstances of the case and in law, the order passed by the Ld. Assessing Officer ("AO") is bad in law. 2. That on facts and circumstances of the case and in law, the Ld. AO/ Ld. TPO/ Ld. Dispute Resolution Panel ("DRP") erred in making an adjustment to the arm's length price ("ALP") of the Appellant's international transactions with associated enterprises ("AEs") amounting to INR 9,378,115 by: 2.1. aggregating the "business support services" and "research and development" services as one segment and modifying the comparability' analysis conducted in the Transfer Pricing Documentation of the Appellant on inappropriate and inadequate grounds; 2.2. accepting companies that were functionally not comparable to the ....
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.... support service; and (ii) research and development support service. AEs enter into a direct contract with third party distributors for distribution of its products in India. The assessee liaises between its AEs and third party distributors in India. For the provision of these services, the assessee is compensated by its AEs on cost plus mark up. Trend Micro Group has call centre in Phillippines, which provides technical assistance to Trend Micro Group customers globally including India. The cost of this call centre is allocated to various Trend Micro Group companies one of which is the assessee, on the basis of the number of calls attended, emails received by it for each of the respective location. This cost allocation forms part of the co....
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....ties, netting off of receivables and payables should be allowed to the assessee. The Ld. AR submitted that the Ld. TPO while making the adjustment has only considered receivable paid beyond 60 days for making a notional interest adjustment ignoring payments/ receivables made in advance. In support the Ld. AR relied upon the recent judgement of the Delhi High Court in PCIT vs. Mckinsey Knowledge Centre India (P.) Ltd. (ITA No. 146/2020) dated 12.10.2021. The Ld. AR further submitted that as the working capital adjustment subsumes the adjustment on account of receivables no separate adjustment of outstanding receivable is required. 7.2 The Ld. DR relied on the order of the Hon'ble DRP and the Ld. TPO. He submitted that the findings of the Ho....
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....he period for which the amounts of receivables received in advanced enjoyed by the respondent is seen vis-a-vis the amount receivable beyond sixty days, it is apparent that the respondent has received significantly more advance rather than outstanding receivable beyond sixty days. 14. Consequently, on the facts and circumstances of the case, the notional interest relating to alleged delayed payments in collecting receivables from the AEs is uncalled for as in fact, there are no outstanding receivables as the amount received in advance far outweigh the amount received late." Respectfully following the principle laid down by the Delhi High Court in light of the factual matrix of the instant case we are of the view that the Ld. AO/TPO is ....
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....s, does not amount to an international transaction under section 92B in respect of which arms length price adjustment can be made. An outstanding balance unlike a loan or borrowing is not an independent transaction which can be viewed on stand alone basis. Reliance is placed on the case of PCIT vs. Kusum Health Care Pvt. Ltd. (ITA No. 765 of 2016) wherein the Hon'ble Delhi High Court held that the inclusion in the Explanation to Section 92B of the Act of the expression "receivables" does not mean that de hors the context every item of "receivables" appearing in the accounts of an entity, which may have dealings with foreign AEs would automatically be characterised as an international transaction. The Hon'ble Court further went on to hold th....