TaxTMI 
TaxTMI 
2018 (5) TMI 2142
X X X X Extracts X X X X
X X X X Extracts X X X X
....wing grounds of appeal: "1. That on the facts and circumstances of the case and in law, the Ld. Commissioner of Incometax (Appeals) ["CIT(A)") erred in confirming the transfer pricing adjustment on account of interest on outstanding receivables from Associated Enterprise ('AE'). 2. The on the facts and circumstances of the case and in law, the Ld. CIT (A) erred in not appreciating the fact that such outstanding receivables cannot be equated to 'capital financing' under the amended definition of international transaction u/s 92B. 3. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the notional adjustment made by the Ld. AO / Ld. TPO towards interest on recei....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r modify all or any of the above grounds of appeal." 2. The only issue before us is, ALP adjustment with regard to interest on receivables. Brief facts relating to the above grounds of appeal are, assessee is engaged in the business of promotion and availability of good quality therapeutic products filed its return of income for the AY 2013-14 on 29/11/2013 admitting income of Rs. 6,52,37,970/-. The return of income was processed u/s 143(1) of the Act. Subsequently, the case was selected for scrutiny under CASS. Accordingly, notices u/s 143(2) and 142(1) were issued and served on the assessee. 2.1 During the year under consideration, assessee has entered into international transactions and accordingly, the case was referred to Transfe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ections of the assessee observed that as per the insertion of explanation in section 92B, international transaction include receivables. According to him, once receivables are international transactions, then, its ALP has to be determined. In such situation, any independent party would like to receive its funds within the credit period allowed and, if not, would normally charge interest. He relied on the case of Logix Micro Systems Ltd., 42 SOT 525, in which, Tribunal held that a reasonable period should be provided as 'interest-free' period and no interest should be calculated for such period. Accordingly, TPO has calculated ALP adjustment as per the below table after 30 days grace period and charged interest @ 14.45%.: Invoice No Da....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 321 2/11/2013 120211 9/17/2013 218 188 8947 322 2/11/2013 175388 9/17/2013 218 188 13054 323 2/11/2013 132157 9/17/2013 218 188 9836 324 2/11/2013 324045 9/17/2013 218 188 24118 346 2/13/2013 197709 9/17/2013 216 186 14558 347 2/13/2013 85635 9/17/2013 216 186 6306 348 2/24/2013 181959 9/17/2013 205 175 12606 349 2/25/2013 331152 11/13/2013 261 231 30284 388 2/27/2013 161132 9/17/2013 202 172 10972 389 2/27/2013 120305 9/17/2013 202 172 8192 390 2/27/2013 64070 9/17/2013 202 172 4363 391 2/27/2013 217837 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mended provisions. c. When the primary service transactions are found to be at arm's length, adjustment could be made on account of deferred receivables. d. Receivables are closely linked with the principal transaction of provision of service, and not an independent international transaction. Re-characterising the transaction as loan transaction is not permissible. e. Notional interest cannot be imputed on receivables when there is no finance cost to the assessee and when it has no external borrowings or when the assessee is a debt free company. 5. After considering the submissions of the assessee, the CIT(A) has confirmed the findings of TPO with regard to interest on receivables as ALP adjustment. However, he....