TaxTMI 
TaxTMI 
2023 (6) TMI 275
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.... 3) It is not correct for the Assessing Officer to apply the provisions of Sec.92 of the I.T.Act when the net result of the business activity for the year under consideration is a loss and the appellant did not derive any income from the transaction. 4) The Assessing Officer erred in arriving at the adjustment on account of arms length price at Rs.6,68,92,985/-* 5(i) The learned DRP erred in confirming the action of the Assessing Officer and the TPO in holding that the provisions of Sec.92CA(3) are applicable to the facts of the case. 5(ii) The learned DRP erred in holding that the margin of profit with non AE was 18.22% and that the profit from AE segment was only 8.5% 5(iii) The learned DRP erred in holding that the difference worked out to Rs.6,27 ,51,897 I - and further erred in directing the Assessing Officer to make the adjustment of the income. 6) The learned DRP is not justified in holding that the deferred receivables would constitute international transaction. 7) The learned DRP erred in holding that adjustment can be made for non charging of interest in spite of the fact that the arms length price was determi....
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....on'ble ORP vide its order in F.No. 56/DRP- 1/BNG/2018-19 dated 24.09.2018 gave certain reliefs to the assessee and directed to recompute the adjustments. Accordingly, as per the directions of the Hon'ble DRP, the OCIT (TPO)-2, Hyderabad vide order dated 26.11.2018 has recomputed the adjustment for the purpose of arms length price at Rs.6,68,92,985/- and the same is added to the income of the assessee. 3. Feeling aggrieved, the assessee is before us for the grounds mentioned hereinabove. 4. The assessee has drawn our attention to Paras 2 to 11 of the order of TPO wherein the TPO has recorded the following finding : 2. As per 3CEB report/TP document, the International transactions reflected areas under(Table 1): A.E Nature of transaction Amount (in Rs. Maxicon Container Line Pte Limited Liner agency services 5,48,75,630 Seaways Shipping Line Pte Limited Container Line Income 2,41,35,243 Container Line Expenses 3,14,59,961 Slot Hire Income 5,38,495 Maxicon Shipping Agencies Sdn bhd Slot Hire Income 26,15,701 Slot Expenses 27,03,287 Seaways Shipping Line Pte Limited Reimbursement by AE 18,14,....
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....0% shall be paid on amounts collected from shipper. The taxpayer did not provide any documentary evidence on which the analysis under TNMM or CUP has been provided. The company apparently relied upon the agency agreement which which cannot be accepted as CUP. This is for the reason that the agreement is bilateral and Is between related parties. For comparability one has to rely on uncontrolled transactions which are not case here. From the data filed, it is seen that the taxpayer has compared the prices charged by them to the AE with the prices charged by independent third parties to the AEs. The data has been perused. The taxpayer has given the list of AE transactions and the non-AE transaction, however, it Is not known how the prices have been compared. What is the break-up of the cost which is sought to be compared. For example the first entry for the month of April, 2011 with the AE Mexican Container Line pte. Ltd., Singapore states that amount of Rs.54,85,923 being credited towards F&F @ 10.5% of 5,48,75,630. It is not known how this has been compared with the non- AE transaction whose list running into 242 items. 7. Thus as the taxpayer failed to provide the....
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....r:- 8.1 Liner Agency Services:- As per the RPT disclosure the following are the details: Gross revenue earned on agency =Rs.64,55,95,652 Cost of operation =Rs.35,52,39,650 Balance =Rs..29,03,56,002 50% of Rs.29.03.56,002/- =Rs.14,51,78,001 Less: Retained by the taxpayer = Rs. 5,48,75,630 Short fall proposed as adjustment = Rs. 9,03,02.371 Thus the arm's length price of international transaction Liner Agency Services is computed as above and the sum of Rs. 9,03,02,371/- is treated as adjustment u/s. 92CA of LT. Act and the total income of the taxpayer will be enhanced accordingly u/s 92CA(3) of the LT. Act. 8.2 Slot Hire Income: As per the RPT disclosure the following are the details: Sales =Rs.31,54,196 Expenses =Rs.27,03,287 Balance =Rs4,50,909 50% of Rs. 4,50,909 = Rs.2,25,455 Less: Retained by the taxpayer = Rs.NIL Short fall proposed as adjustment =Rs/2,25,455 Thus the arm's length price of international transaction Slot Hire Income is computed as above and the sum of Rs. 2,25455/- is treated as adjustment u/s. 92 CA of LT. Act and the tota....
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.... outstanding receivables based on SBI term deposit rates. So, applying above interest rates, Arm's length price of transaction is determined at Rs.23,025,211. As tax-payer has taken value of transaction to be 'Nil', adjustment u/s 92CA of Rs. 23,025,211 'is to be made for assessment year 2014*15 on account of this transaction. The Arm's Length Price and the adjustment of international transaction is as under:- S. No. International transaction Arm's Length Price (Rs) Adjustment(Rs.) 1 Receivables 39,15,633 39,15,633 39,15,633 10. Summary of adjustments S. No. Description Amount 1 Liner Agency Services 9,03,02,371 2 Slot Hire Income 2,25,455 3 Receivables 39,15,633 Total 9,44,43,459 Thus, the total TP adjustment on international transactions is computed. at Rs. 9,44,43,459. The Assessing Officer is required to enhance the total income of the taxpayer by Rs. 9,44,43,459 /- u/s 92CA of the IT Act. 11. As seen from Para. No.3, the taxpayer did not report the transaction of receivables either in Form 3CEB or in TP document. Therefore, ....
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.... of the geographical differences, it cannot be taken for comparison. Further the assessee had not filed any information or documentation as to the nature of revenue earned by the AE from its global operations. Therefore the computation given by the assessee is not reliable. 2.3.3 It was further submitted that assessee had gross revenue of Rs.41.52,12,647/- from Liner Agency income done for non-AEs and in respect of which it had earned commission income of Rs.71.16,5601- which constituted 1.71% of the revenue and in comparison the income earned from AE at 8.50% is higher and at ALP. The assessee sought to accept this under 'Other Method'. However, the assessee has not furnished any basis for the said commission income of Rs.71,16,560/-. There is no information available in its financial statement. The assessee also did not file any documentation or agreement in support of such plea. Hence this analysis is also not acceptable. 2.3.4 In this factual scenario, we note on perusal of the annual report. that the assessee has categorized its revenue into Logistics division and shipping division and the revenue from logistic division is broadly comparable to the ag....
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....t in time and those funds were properly deployed, the assessee company may earn an income at the maximum rate applicable to deposits and not at the rate applicable to roans. Therefore, we vacate the direction of the TPO to adopt the PLR rate of 10.25%. Instead we find it appropriate to adopt a reasonable rate that would be available to the assessee on short-term deposits". Accordingly, we are of the .' view that short term deposit rates of interest of State Bank of India, prevailing for the financial year 2013-2014, as applied by the TPO as the ALP interest rate is in order. 2.4.17 We also note that the Hon'ble Delhi ITAT in the case of BT e-serve India Private Limited held that where the agreement does not specify any credit period for payment, then adopting a reasonable credit period of 30 days is justified, Accordingly, we do not find any infirmity in the TPO's action in allowing reasonable credit period of 30 days. 2.4.18 It is seen that the assessee has not furnished the details of realization of the outstanding receivables invoice wise. The assessee is directed to furnish these information, including those relating to the opening balance, and the....
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....ar agency business carried out by the assessee cannot be compared with the agency functions performed by the assessee. For both the activities, the FAR are different and therefore both cannot be compared for the purpose of benchmarking the linear agency functions. In the opinion of the bench, the residual method applied by the Ld. DRP, was without any basis and therefore the same is required to be quashed. In the present case the international transaction referred by the assessee in form 3CB was only linear agency services with Maxicon containers line Pte Ltd for which the assessee had shown the revenue of Rs. 5,48,75,630/-. The Ld. TPO after applying the Profit Split Method had made the upward addition of Rs. 9,03,02,371/-to the income of the assessee. In our view when though the assessee was carrying the composite business and the profit of the linear agency services and the corresponding expenditure can be worked out with precision , then it is easy for the lower authority to compare the prices charged by the assessee from its AE, with the other comparable company carrying the same/similarly situated activities with the unrelated parties. The above-mentioned aspect has not been ....
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.... 30-45 days -- -- -- 45-60 days -- -- -- >=60 days 29 11,63,338 0.02 Sub total (B) 519 62,38,68,941 Total (A) + (B) 3520 7,10,54,46,805 10. From the perusal of the Chart, it is absolutely clear that there were 519 invoices valued at Rs.62,38,68,941/- for which the payments were due beyond the credit period 60 days. In our view, the lower authorities have computed the Arm's Length Price and have mentioned that the same being international transaction, the same is required to be bench marked by considering the SBI short term deposit interest rate. 11. The above-said issue of delay in receivables is no more res integra. The co-ordinate Bench in the cases relied upon by the Revenue examined the issue and thereafter directed the TPO / Assessing Officer to apply rate of interest of 6% on outstanding receivable at the year end. The assessee had relied upon various judgements. All these judgments have been considered by the co¬ordinate Bench and thereafter, the above said direction was issued by the ....