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2019 (7) TMI 2030
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....t the assessee has reported the following international 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) ....
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....me Tax Rules, 1963. 2.4 That the assessing officer/ TPO erred on facts and in law in applying CUP method for benchmarking the transaction of payment of royalty without placing on record any 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'....
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.... that under identical circumstances, the Tribunal has restored the issue to the file of the A.O./TPO for determining the issue afresh on the basis of the additional evidences filed under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963. He submitted that 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....
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....additional evidence in respect of the issue pertaining to ALP of royalty in assessment year 2008-09, on identical reasoning, we admit additional evidence in this year as well. Since the lower authorities did not have the benefit of examining this document, the matter has to be necessarily restored to the 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 wi....
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....to section 92B by treating the continued debt balance as an international transaction. He accordingly submitted that no adjustment on account of receivables is called for. 14. The ld. DR, on the other hand, referred to page 35 and 36 of the order of the TPO and submitted that the TPO has given valid reasons for holding that the delay in 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 ....
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....Act of the expression 'receivables' does not mean that de hors the context every item of 'receivables' appearing in the accounts of an entity, which may have dealings with foreign AEs would automatically be characterised as an international transaction. There may be a delay in collection of monies for supplies made, even beyond the agreed limit, due to a variety of factors which will have 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 alread....
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....n case of AE can be made and drew our attention towards the details of invoices raised qua unrelated parties available at page 183A of the paper book wherein delay in realization of the receivables is also up to 218 days for AY 2010-11 and up to 417 days qua AY 2012-13 as per detail of invoices raised on unrelated parties qua AY 2012-13, available at page 236 of the paper book. 19. This issue has been dealt with by Hon'ble Bombay High Court 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 wi....