TaxTMI 
TaxTMI 
2023 (7) TMI 846
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....ring of technical services Antactic Biscuits Pvt Ltd 1,42,65,536/- 2 Interest on term loan Antactic Biscuits Pvt Ltd 27,47,425/- Equator Foods Ghana Ltd 1,80,13,714/- Arctic Biscuits Pvt Ld 3,47,50,000/- 3 Investment in equity shares Oceanic Holdings Pte Ltd 11,74,99,550/- 4 Payment of share application money Arctic Biscuits Pvt Ltd 2,58,02,787/- 5 Cost sharing Oceanic Holdings Pte Ltd 11,72,06,400/- Arctic Biscuits Pvt Ltd 22,18,334/- Parlite Foods SARL 28,88,299/- Pardee Foods Nigeria Ltd 77,90,782/- Equator Foods Ghana Ltd 28,20,510/- Kilimanjaro Biscuits Ltd 14,42,253/- Esteem Foods Products LLC 19,36,881/- The assessee filed the return of income for A.Y. 20/08/2019 on 29/03/2019, admitting an income of Rs.519,58,54,430/-. Since the assessee had international transaction as listed above, a reference was made to the TPO to compute the arm's length price in relation to the said international transaction. The TPO made the following adjustments:- 1. Interest on accoun....
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.... 365 58290 Technical Service Fees 30-12-2016 NPR 15,69,643 9,80,108 365 53,900 Technical Service Fees 30-12-2016 NPR 9,94,819 6,21,179 265 34,165 Technical Service Fees 30-12-2016 NPR 14,51,382 9,06,264 365 49845 Technical Service Fees 31-03-2017 NPR 12,82,778 8,00,985 365 44054 Technical Service Fees 31-03-2017 NPR 13,59,512 8,48,899 365 46689 Technical Service Fees 31-03-2017 NPR 12,35,855 7,71,686 365 42443 Technical Service Fees 31-03-2017 NPR 10,54,579 6,58,495 365 36,217 Technical Service Fees 26-05-2017 NPR 6,52,500 4,07,430 309 18971 Technical Service Fees 26-0-2017 NPR 13,21,039 8,24,876 309 38408 Technical Service Fees 31-08-2017 NPR 17,23,859 10,76,403 212 34386 Technical Service Fees 31-08-2017 NPR 14,72,526 9,19,467 212 29373 Total 5,32,605 5. The TPO while calculating interest excluded the receivables which were outstanding for a period less than 90 days. The assessee obj....
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.... if that is so, no exception can be made for the assessee, as in that situation party-wise reasons can be made for the assessee, as in that situation, party-wise reasons can be forwarded in many cases. It shall be difficult to enter in to the business rationale of the transactions made and take separate decisions accordingly on a stand-alone basis. Lastly, the assessee has pleaded that the interest receivable cannot be termed as an International transaction and therefore, no interest should be charged on the same. In fact, the contrary is true. There is no doubt that the assessee itself is charging interest on money advanced or money receivable. Interest is always charged with reference to a time period. So, logically speaking, if the interest is not being paid in time, further interest should be charged on the same In any case, the interest receivable also, finally speaking income receivable only and there is no particular reason why it should be differentiated from a trade receivable. The assessee has cited specific reasons party-wise for not receiving interest in time. The reasons given are general in nature and no cognizance can be taken of them at this level. The assessee coul....
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....f 90 days should be applied while arriving at the interest on delayed receives on outstanding for more than 90 days. Accordingly, we direct the TPO / AO to revise the interest working after taking into consideration the credit period of 90 days as has been allowed in the case of invoices outstanding for less than 90 days. Needless to say that the assessee be given an opportunity of being heard. It is ordered accordingly. Interest on interest outstanding/interest receivable 9. During the course of TP proceedings, the TPO noticed that the assessee has given loans to its AE and has been charging interest @5.5%. The TP further noticed that the outstanding interest receivables from AEs is as per details given below:- AEs Interest receivable - in INR Arctic Biscuits 34,54,098 Parlite Foods 75,60,565 Equator Foods 18,82,50,255 Antarctic Biscuits 1,27,14,832 10. The Assessing Officer treated the interest receivable as a separate international transaction and accordingly charged interest as given below - The working of interest as has been done by the TPO extracted below:- Arctic Biscuits Pvt. Ltd Description of transaction Date of invoice ....
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.... 365 36502749 Loan interest 31-03-16 USD 5,61,032 3,64,91,859 365 3649186 Loan interest 31-03-17 USD 3,96,200 2,57,70,480 365 277048 Total (D) 1,71,67,764 G.Total (A+B+C+D) 1,79,28,615 11. The assessee contended before the DRP that interest on interest receivable is not a separate international transaction and that the interest is a hypothetical income not real income. Besides, the assessee also submitted entities specific reasons for the delay in interest receivable: - Arctic Biscuits Arctic Biscuits is based out of Bangladesh. As per the jurisdiction specific regulations, the entity is required to take an approval from the local regulatory authority for taking any foreign currency loan and its repayment. However, during the time obtaining the loan from PBPL, Arctic could not obtain the local regulatory approval. Accordingly, at the time of repayment of the loan (along with interest), the repayment could not be undertaken as the approval (at the time of taking loan) was not in place. In addition to above,....
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....currency loan and its repayment. However, Antarctic Biscuits could not take the approval before obtaining the loan from PBPL. At the time of repayment of the loan along with interest, the repayment could not be undertaken as the approval (at the time of taking loan) was not in place. Thus, subsequently Arctic Biscuits made application for loan and also an application for loan repayment. However, there was delay in receipt of the approvals from NRB due to which Antarctic could not proceed with the payment to PBPL as on 31 March 2018. The assessee also submits below snapshots of the communication with AE, which shows that while AE had filed an application the same was lost by NRB, and hence the whole procedure of obtaining approval from NRB for repayment of loan was delayed. From: Poorcm S. Negi To: "Santosh"" Date: Tuesday, May 28, 201 9 01: 57PM Subject: Re: ; Application for Interest on Loan _______________________________________________________________________________________________ _______________________________________________________________________________________________ With reference to Application filed on ....
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.... from AEs cannot be termed as an international transaction, notional interest on interest receivables is equal to hypothetical income and not real income and there are entity specific reasons for the AEs for the outstanding interest receivables. Considering the said submissions the assessee prayed before the DRP that no interest should be levied on the interest receivables from the AEs as on 31 March 2018. The DRP after considering the submissions upheld the charging of interest by the TPO. 13. The Ld.AR submitted that as per the loan agreements (pages 305 & 330 of the paper book), there is no clause to charge interest on interest receivables. The Ld.AR further submitted that there are specific entity-wise reasons for the interest to be outstanding which have not been considered by the lower authorities. The Ld.AR further objected to treating the interest on interest receivables as a separate international transaction and charging of interest on the same would result in re-characterising the same as loan. 14. The Ld.DR, on the other hand, submitted that there has been an inordinate delay in the interest receivable and, therefore, the AEs are benefitted by not making the payme....
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....he utilisation of funds given by the assessee to its AE and the interest element on the said loan if not paid improves the liquidity position of the AEs and become part and parcel of the said loan transaction. Therefore, we see no infirmity in the action of the TPO in treating the interest receivable as a loan outstanding and charging interest on the same accordingly. In view of this discussion, we confirm the TP adjustment made and dismiss the ground raised by the assessee. Ground No.2 (2.1 to 2.3) 16. The Ld.AR in this regard submitted that the AO while passing the final assessment order did not give effect to the directions of the DRP. The Ld.AR submitted that during the year under consideration, the assessee has made an addition of Rs.3,26,32,245/- while computing the total income as "any other addition u/s 28 to 44DA of the Act". The assessee in the ITR form, Srl No.A(23) of the Schedule BP -Computation of Income from business or profession had disallowed a sum of Rs.4,02,57,245/- includes the above sum and also donation of Rs.76,25,000/-. The Ld DRP after considering submissions of the assessee had given following directions:- "7.3 Discussions and Directions of....
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....eparing the return of income for assessment years 2019-20 and 2020-21, the aforesaid expenses came to the knowledge of the assessee. Since, the expenses were pertaining to assessment year 2018-19, the said expenses were not claimed as deduction in assessment years 2019-20 and 2020-21. As the time limit for filing the revised return of income has expired, the assessee was not in a position to claim the said expenses in the original or revised return of income for assessment year 2018-19. 3) The assesses submits that it hadinadvertently missed to upload the claim of priot period expenses on the e-filing portal at the time of making submissions during the assessment proceedings. The assessee submits that the failureto raise the claim at the time of assessment proceedings was neither deliberate nor contumacious and is therefore, essential to be adjudicated in the interest of justice. Accordingly, the assessee has now filed an additional claim before the Hon'ble Panel to claim the deduction of the said expenditure as the same pertains to assessment year 2018-19 and is revenue in nature. 4) The assessee submits that as the effect for the prior period income/expense ....
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.... deducted and paid in the current AY 2020-21 on the expenses aggregating to INR 26,60,360. Since, the tax been deducted and paid on these expenses in AY 2020-21, the same was claimed as deduction only in AY 2020-21. No deduction was claimed in relation to the balance prior period expense of INR 1,39,55,079 (INR 1,66,15,439 less INR 26,60,360), A copy of the statement of computation of income of assessment year 2020-21 is enclosed herewith at pages 713 to 734in the paper book volume IV. 10) Out of the balance prior period expenses of INR 1,39,55,079 recognised in assessment year 2020-21, expenses to the extent of INR 35,06,501 are pertaining to assessment year 2018-19. 11) The details of the said expenses are provided below: Particulars Amount(Rs) Amount(Rs) Expenses booked in assessment year 2019-20 Administration Charges of Provident Fund 211 Contribution to Provident Fund Pension Scheme 2,703 Contribution to ESIC 1,522 Contribution to Provident Fund 1,192 Excise expense 59,988 Legal and professional expense 5,32,531  ....
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....penses which arise even if all the documentation is not complete by the stipulated time. There is no doubt that prior-period expenses can indeed be claimed in appropriate cases However, we find that the specific reasons could not immediately be provided by the assessee explaining the lack of knowledge about these expenses. The expenses range from VAT/CST expenses, discount / refund on account of shortage"; legal professional expenses, contractors wages, to electricity charges, building repairs and consultancy charges etc . As a concept, prior period expenses are allowable provide the assessee furnishes satisfactory reasons for not claiming it in the relevant year but in a subsequent year or years. Accordingly, the AO is directed to verify these claims and the reasons for their delayed claim and allow if found satisfactory. This objection is disposed off in these terms." 20. The Ld.AR submitted that the Assessing Officer did not consider the directions of the DRP and has retained the same income as in the draft assessment order. 21. We heard the parties and perused the material on record. We notice that the asessee has submitted additional evidences before the DRP and th....