TaxTMI 
TaxTMI 
2022 (3) TMI 1503
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.... following grounds of appeal: "The grounds hereinafter taken by the Appellant are without prejudice to one another. I. Transfer Pricing 1. The learned Assessing Officer ("AO"), learned Transfer Pricing Officer ("learned TPO") and the Honourable Dispute Resolution Panel ("DRP") grossly erred in making an adjustment of INR 3,48,38,463/- with respect to the international transaction rendered by the Appellant under section 92CA of the Income-tax Act, 1961 ("the Act"). 2. The learned TPO erred in law and facts by charging notional interest on outstanding trade receivables and thereby erred in making an addition of INR 3,48,38,463/- thereby: a. Erred in not considering that receivables cannot be consid....
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.... interest has been charged by or paid to the AEs) which ought to have been netted off from the outstanding receivables from AEs before proposing TP adjustment in connection with notional interest on outstanding receivables from AEs." 2. Brief facts of the case are as under: The assessee is a company providing Assembly / Manufacturing activity and Engineering Design Services to its Associated Enterprises ("AE"). The assessee adopted TNMM as the MAM for the Manufacturing segment, which was accepted by the TPO. However, the Ld.TPO imputed cost to the outstanding receivables and computed interest for the same. 3. The Ld.TPO held that the outstanding receivables from the AE are of the nature of loan facility given to the AEs and imputed....
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....nterest on outstanding receivables at the rate equal to 5.87 % PLR (6 months LIBOR +400 basis points). The DRP directed the Ld.AO to apply short term deposit rate of SBI prevailing for financial year relevant to assessment year under consideration hat lead to enhancement. 5. The Ld.AR submitted that authorities below disregarded business/commercial arrangement between the assessee and its AE's, by holding outstanding receivables to be an independent international transaction. Ld. Counsel placed reliance on decision of Delhi Tribunal in Kusum Healthcare (P.) Ltd. v. Asstt. CIT reported in (2015) 62 taxmann.com 79 deleted addition by considering the above principle, and subsequently Hon'ble Delhi High Court in Pr. CIT v. Kusum Heal....
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....;ble Bombay High Court in the case of CIT v. Patni Computer Systems Ltd. reported in (2013) 215 Taxman 108, which dealt with question of law: (c) 'Whether on the facts and circumstances of the case and in law, the Tribunal did not err in holding that the loss suffered by the assessee by allowing excess period of credit to the associated enterprises without charging an interest during such credit period would not amount to international transaction whereas section 92B(1) of the Income-tax Act, 1961 refers to any other transaction having a bearing on the profits, income, losses or assets of such enterprises?' 8. He pointed out that while answering the above question, Hon'ble Bombay High Court noticed that amendment to ....
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....eceivable or any other debt arising during the course of business;....' 10. We note 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 transaction....
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....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. v. 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 requires an assessment on the working capital of the assessee. Applying the decision in Kusum Health Care (supra), the Hon'ble High Court directed the TPO to study the impact of the receivables appearing in the accounts of the assessee; looking int....