TaxTMI 
TaxTMI 
2023 (8) TMI 377
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....ssee are challenging the transfer pricing adjustment made on account of alleged corporate guarantee and alleged standby letter of credit given by the assessee on behalf of its associate enterprise (AE). 5. We have heard the rival submissions and perused the material available on record. The assesse, Phoenix Lamps Ltd is engaged in the business of manufacturing and trading of Automative Halogen Lamps, CFL's (Compact Fluorescent Lamps) and General Lighting Lamps. Auto Halogen Lamps are supplied to major original equipment manufacturers (OEMs) in Automobile Industry, original lamp manufacturers (OLMs) are also sold in after sales market in India and outside India. CFLs are supplied to the domestic as well as industrial markets while General Lighting lamps are mainly sold in domestic market though its depots situated in various cities across India. The international transactions of the assessee as tabulated in the order of the ld. DRP are as under:- S. No. Nature of Transaction Method Selected Amount (INR) 1. Export of automotive lamps Comparable Uncontrolled Price 34,25,33,470 2. Standby letter of credit (SBLC for short) No Benchmarking Required 6,32,40,000 3....
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....e action of the ld. TPO. Final assessment order was passed pursuant to the directions of the ld. DRP making the transfer pricing adjustment in respect of CG and SBLC intended to be issued by the assessee on behalf of its AE. Aggrieved, the assessee is in appeal before us. 9. We find that the ld. AR drew our attention to the annual report of the assessee company for AY 2011-12 wherein in the Director's Report, it has been specifically mentioned under the head 'Acquisition of assets and trademarks of companies in Europe' as under:- "Since the terms & conditions of the various agreements entered into by the parties could not be fulfilled either in terms of spirit or by action, the Board of Directors decided that the acquisition of overseas entities be called off. Further, as per the terms of the Agreements, the transaction shall get RESTITUTED and the Seller shall be required to refund the purchase price towards sale and purchase of the Sale Shares / equity investment and / or unsecured loans made by the Purchaser to the Company. Accordingly, the accounts of the subsidiaries have not been consolidated with the Company's accounts as on 31.03.11. The Directors of the Company are ....
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.... the AE. Hence, it was argued that once the working capital adjustment is granted by the assessee which is worked out by taking into account the outstanding trade receivables and outstanding trade payables at the end of the year, there is no need for separate imputation of interest on outstanding receivables from the AE as the same would get subsumed in working capital adjustment itself. Reliance was placed in support of this argument on the decision of the Hon'ble Jurisdictional High Court in the case of PCIT vs. Kusum Healthcare Pvt. Ltd. in ITA 765/2016 dated 25.04.2017. 13. We have gone through the judgement of the Hon'ble Delhi High Court in the case of Kusum Healthcare Pvt. Ltd (supra) and we find that the Court has held as under:- "8. Aggrieved by the said order, the Assessee filed an appeal before the ITAT. By the impugned order dated 31th March 2015, the ITAT set aside the assessment order. The ITAT noted that the Assessee had undertaken working capital adjustment for the comparable companies selected in its transfer pricing report. It was further noted that "the differential impact of working capital of the Assessee vis-à-vis its comparables had already been fac....
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....vables for the supplies made to an AE, the arrangement reflects an international transaction intended to benefit the AE in some way. 11. The Court finds that the entire focus of the AO was on just one AY and the figure of receivables in relation to that AY can hardly reflect a pattern that would justify a TPO concluding that the figure of receivables beyond 180 days constitutes an international transaction by itself. With the Assessee having already factored in the impact of the receivables on the working capital and thereby on its pricing/profitability vis-à-vis that of its comparables, any further adjustment only on the basis of the outstanding receivables would have distorted the picture and re-characterised the transaction. This was clearly impermissible in law as explained by this Court in CIT v. EKL Appliances Ltd. (2012) 345 ITR 241 (Delhi)." 14. From the perusal of the aforesaid decision, it is amply clear that the assessee is duty-bound to prove before the ld. TPO, the pattern of realization of export proceeds from its AEs in the past as well as in the subsequent years. In the instant case, the assessee had merely given the bill wise outstanding details from AE....
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.... directions to ld. TPO to recompute the interest on outstanding receivables would meet the ends of justice as it would be in true spirit of the decision of the Hon'ble Delhi High Court and also the provisions of Explanation (iii) to section 92B of the Act. With these directions, ground Nos.5 and 5.1 raised by the assessee are allowed for statistical purposes. 18. Ground Nos.6, 7 and 8 are general in nature and does not require any specific adjudication. 19. Ground No.9 is regarding the initiation of penalty proceedings u/s 271(1)(c) of the Act which would be premature for adjudication at this stage, hence, dismissed. 20. In the result, the appeal of the assessee is partly allowed for statistical purposes. ITA No.1152/Del/2017 (AY 2012-13) 21. Grounds No.1, 9 and 10 raised by the assessee are general in nature and does not require any specific adjudication. 22. Ground No.2 to 4.5 raised by the assessee for AY 2012-13 are exactly identical to those raised for AY 2011-12. 23. We have heard the rival submissions and perused the material available on record. We have also held hereinabove that the CG and SBLC were intended to be given on behalf of its AEs only from 01.04.2011, bu....