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2023 (2) TMI 445
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....s, 1962 ('Rules') and modifying/ undertaking fresh analysis while determining the arm's length price and in doing so making an adjustment of INR 41,71,929 to the international transaction. Included in Ground No. 2. 2.Grounds against imputing interest on outstanding receivables due from AEs - Adjustment of INR 41,71,929 a) Not appreciating that outstanding receivables is not covered in the definition of international transaction as defined u/s 92B of the Act in the facts and circumstances of the case; b) Not appreciating that the receivables are consequential/ closely linked to the principal transaction of provision of services and hence have been aggregated for determination of ALP under TNMM; c) Not appreciating the fact that the working capital adjustments undertaken take into account the impact of outstanding receivables of the controlled transactions vis-à-vis the uncontrolled transactions in determining the arm's length margin and no separate benchmarking is required; d) Not appreciating the facts and circumstances surrounding the receivables and re[1]characterising the outstanding receivables as unsecured loans advanced to AEs; e) Not following any statutorily pr....
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.... incorporated to provide a range of centralized back office services in the nature of finance, accounting, administration, human resources, etc. in support of its Group entities' business. The assessee is a wholly owned subsidiary of Interbrew International B.V.. Netherlands which is ultimately held by AB InBev. 2.2 The Assessee filed its return of income for the year under consideration on 29/11/2017 declaring its total income under the normal provisions of the Act at INR 7,26,32,430/- and under section 115JB (MAT) at INR 36,84,54,490/-. 2.3 The case was selected for scrutiny assessment by the Ld.AO and also referred assessee's case to the Ld.TPO for determination of Arm's Length Price of the international transactions entered by the assessee with the AEs. 2.4 The Assessee made time to time submissions in response to the notices issued by the Ld. TPO. During the FY 2016-17, the Assessee had entered into the international transactions of provision of back office support services in the nature of IT enabled services. The Assessee applied TNMM as the most appropriate method and computed its margin that was within the range of the adjusted PLI (OP/OC) (i.e. after unde....
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.... this regard. 2.9 The Ld.AR alternatively submitted that, the assessee had trade payables amounting to Rs. 46,83,18,399 to its AE and invoices during the year amounting to Rs.1,71,05,79,298 to the AE in relation to the receipt of business support services availed for provision of services. The Ld.AR submitted that the AE provided the assessee with a credit period of 150 days from date of raising of invoice for making payments against the services rendered. (Refer page 181 of Item 5 of the appeal set). Further, it was submitted that the weighted average credit period by the Assessee to AEs -49.32 days is less than the credit period extended to Assessee by third parties. Therefore, the credit period provided by the Assessee is less than the credit period received from third parties. Hence, no adjustment is warranted on outstanding receivables from AEs. 2.10 It was argued by Ld.AR that, the authorities below disregarded business/commercial arrangement between the assessee and its AE's, by holding outstanding receivables to be an independent international transaction. The Ld.AR placed reliance on decision of Hon'ble Delhi Tribunal in Kusum Healthcare Pvt. Ltd. vs. ACIT reporte....
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....m 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;....'. 3.1 Ld.CIT.DR submitted that expression 'debt arising during the course of business' refers to trading debt arising from sale of goods or services rendered in course of carrying on business. Once any debt arising during course of business is an international transaction, he submitted that any delay in realization of same needs to be considered within transfer pricing adjustment, on account of interest income short charged or uncharged. It was argued that insertion of Explanation with retrospective effect covers assessment year under consideration and hence under/non-payment of interest by AEs on debt arising during course of business becomes international transactions, calling for computing its ALP. He referred to decision of Hon'ble Delhi Tribunal in Ameriprise (supra), in which this issue has been discussed at length and eventually interest on trade receivables has been held to be an international transaction. Referring to discussion in said order, it was stated that Hon'bl....
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....ise 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 case basis. Importantly, the impact this would have on the working capital of the assessee would have to be studied. It went on to hold that, there has to be a proper inquiry by the TPO by analysing the statistics over a period of time to discern a pattern which would indicate that vis-à-vis the receivables for the supplies made to an AE, the arrangement reflected an international transaction intended to benefit the AE in some way. Similar matter once again came up for consideration before the Hon'ble Delhi High Court in Avenue Asia Advisors Pvt. Ltd. vs. DCIT (2017) 398 ITR 120 (Del). Following the earlier decision in Kusum Healthcare (supra), it was observed that there are several factors which need to be considered before holding that every receivable is an international transaction and it re....
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....r Computation sheet to Final Order 1. Profit as per Statement of Profit & Loss account 34,62,30,361 34,62,30,361 2. Add/ Less: Adjustments -Provision for current tax 2,35,51,493 2,35,51,493 -Interest on delay in remittance of TDS u/s 201(1A) of the Act 3,29,679 - -Deferred Tax (16,57,043) - Book profits u/s 115JB of the Act 36,84,54,490 36,97,81,854 5.2 In this regard, with respect to adjustment on account of deferred tax, we humbly submit that as per Section 115JB of the Act: Explanation 1.-For the purposes of this section, "book profit" means the profit as shown in the statement of profit and loss for the relevant previous year prepared under sub-section (2), as increased by- if any amount referred to in clauses (a) to (i) is debited to the statement of profit and loss or if any amount referred to in clause (j) is not credited to the statement of profit and loss. and as reduced by. - (viii) the amount of deferred tax, if any such amount is credited to the statement of profit and loss. 5.3 In light of the above, as per exp....
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....e Ld. AO has considered an incorrect total income as per Intimation u/s 143(1) of the Act, which consists of an arithmetical error, thereby leading to adjustment of INR 1,84,174 while computing assessed income of the assessee. Screenshot of the same is mentioned below. 8.1 Further it was submitted that on the facts and in law, the Ld.AO was not justified and has erroneously computed interest u/s. 244A at INR 3,30,884/-, thereby resulting in short grant of interest. Necessary directions may please be given to the Ld.AO in this regard. On the contrary, the Ld.DR submitted that these issues do not arise out of the orders passed by the authorities below and therefore are to be rejected. We have perused the submissions advanced by both sides in the light of records placed before us. 9. We note that the above alleged mistakes are to be looked into in accordance with law by the Ld.AO in order to compute the correct taxable income in the hands of the assessee. The objection of the Ld.DR that these issues do not arise out of the orders passed by authorities below do not have any merit as in a 144C proceedings, the final computation of taxable income is computed by the Ld.AO whil....