TaxTMI 
TaxTMI 
2019 (7) TMI 2030
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....nternational transactions:- International Transactions Name of the AE Value (in Rs. ) Method Payment of Royalty TPUSA Inc. 25,300,568 TNMM Information Technology Enabled and related IT Services TPUSA Inc. 674,155,488 TNMM Information Technology Enabled and related IT Services Teleperformanc, UK. 1,161,236 TNMM Reimbursement for expenses incurred TPUSA Inc. 30,471,276 CUP Reimbursement for expenses incurred (training expense] Merkafon De Mexico, SA De C.V. 25,42,550 CUP Reimbursement for expenses incurred (software expense) Teleperformance Group Inc., USA 32,66,046 CUP Reimbursement for expenses (received] Teleperformance Group Inc., USA 2,92,178 CUP Total 73,68,97,164 3. After considering various objections filed by the assessee from time to time, the TPO proposed the following adjustments to the international transactions entered into by the assessee with its AEs:- S. No. Nature of International Transaction ALP determined by assessee (INR) ALP determined by this office (INR) Adjustment u/s 92CA (INR) 1. Payment of Royalty 2,53,00,568 Nil 2,53,00,568 2. Receivables Nil 52,80,570 52,80,570 Total 3,05,81,138 4. The ....
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....y comparable data for comparison. 2.5 That the assessing officer/ TPO erred on facts and in law in not appreciating that the transaction of payment of royalty has already been benchmarked applying TNM method as the most appropriate method and accordingly, no adjustment is required to be made on this account. 2.6 Without prejudice, that the assessing officer/DRP erred on facts and in law in not appreciating that the payment of royalty was made in respect of sale of services to the customers of the associated enterprise in terms of the agreement and was incurred wholly and exclusively for purposes of business. 3. That the assessing officer/ DRP erred on facts and in law in making a transfer pricing adjustment of Rs. 10,28,714 in respect of the receipt of receivable from the associated enterprise considering the same to be an 'international transaction' of loan, on the basis of the order passed under section 92CA(3) of the Act by the Transfer Pricing Officer ('TPO'). 3.1 That the Dispute Resolution Panel ('DRP') erred on facts and in law in upholding the order of the TPO, wherein, it was held that the alleged delay in realization of receivables is as an international transacti....
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.... for this year also the assessee is filing an application under Rule 29 of the Income-tax (Appellate Tribunal) Rules which should be admitted and he has no objection if the matter is restored to the file of the A.O./TPO. He submitted that since the licence agreement was misconceived by the lower authority, therefore, the assessee is filing these additional evidences. He accordingly submitted that the matter should be restored to the file of the Assessing Officer. 8. The ld. DR, on the other hand, while supporting the order of the A.O./TPO/DRP, fairly conceded that he has no objection if the matter is restored to the file of the A.O./TPO. 9. We have considered the rival arguments made by both the sides and perused the orders of the A.O./TPO/DRP and the paper book filed on behalf of the assessee. We find, in the immediately preceding assessment year i.e., 2010-11, vide ITA No. 1161/Del/2015, order dated 27th July, 2018, the Tribunal has restored the issue to the file of the A.O./TPO for fresh adjudication by observing as under:- "6. We have considered the submissions of both the parties and perused the material available on record. It is noticed that an identical issue having sim....
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....he file of the Assessing Officer / TPO for deciding the issue of royalty afresh after duly considering this agreement and after giving due opportunity to the assessee to present its case." 7. So respectfully following the aforesaid referred to order dated 14.5.2018 for the assessment years 2008-09 and 2009-10 in assessee's own case. The issue under consideration in the present case relating to payment of royalty is also set aside to the file of the AO / TPO to be adjudicated afresh in accordance with law by keeping in view the directions given in the aforesaid referred to order dated 14.5.2018." 10. Since the facts of the impugned assessment year are identical to the facts of the preceding assessment year, therefore, following the order of the Tribunal in assessee's own case for the immediately preceding assessment years, we restore the issue to the file of the A.O./TPO with a direction to decide the issue afresh and in accordance with the law in the light of the directions of the Tribunal. The ground of appeal No.2 raised by the assessee is accordingly allowed for statistical purposes. 11. So far as ground of appeal No.3 is concerned, the ld. counsel for the assessee drew the ....
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.... realization of receivables is an international transaction in terms of section 92B of the IT Act and, thereby, making adjustment on account delay in realization of receivables. He accordingly submitted that the grounds raised by the assessee should be dismissed. 15. We have considered the rival arguments made by both the sides and perused the orders of the A.O/TPO/DRP and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. The only issue to be decided in the impugned ground is regarding the transfer pricing adjustment of Rs. 10,28,714/- in respect of the realization of receivables from the AEs considering the same to be an international transaction of loan. From the various details filed by the assessee as well as the submission made by the ld. counsel, we find the assessee has earned a profit margin of 31.86% from its AEs whereas the profit margin from the third parties/unrelated parties is only 4.67%. We find the coordinate Bench of the Tribunal in the case of Global Logic India (supra) while deciding an identical issue has held that no adjustment can be on account of notional interest on receivables, by relying upon Ex....
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....e to be investigated on a case to case basis. Importantly, the impact this would have on the working capital of the Assessee will have to be studied. In other words, there has to be a proper inquiry by the TPO by analysing the statistics over a period of time to discern a pattern which would indicate that vis-à-vis the receivables 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 recharacterised the transaction. This was clearly impermissible in law as explained by this Court in CIT v. EKL Appliances Ltd. (2012) 345 ITR 241 (Delhi)....
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....rt in case cited as CIT-9 vs. M/s. Indo American Jewellery Ltd. in ITA (L) No.1053 of 2012 order dated 08.01.2013 wherein following question was framed :- "B. Whether on the facts and in the circumstances of the case and in law the ITAT was justified in deleting the addition of Rs. 87,66,641/- being internet receivable on outstanding amount due to the Assessee Company from the Associated Enterprises? 20. Aforesaid question was decided in favour of the taxpayer by upholding the order rendered by the Tribunal by making following observations :- "5. On appeal filed by the Revenue, the ITAT upheld the order of CIT (A). While, upholding the order of CIT (A), the ITAT held that interest income is associated only with the lending or borrowing of money and not in case of sale. We express no opinion on the above reasoning of the ITAT and keep that reasoning open for debate in an appropriate case. However, in the facts of the present case, the specific finding of the ITAT is that there is complete uniformity in the act of the assessee in not charging interest from both the Associated Enterprises and Non Associated Enterprises- debtors and the delay in realization of the export proceeds....