TaxTMI 
TaxTMI 
2023 (4) TMI 1363
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....ircumstances of the case and in law, SAP India Private Limited (hereinafter referred to as 'SAP India' or 'Company' or the 'Appellant'), respectfully craves leave to prefer an appeal against the appeal order passed by the DC/ACIT Circle 6(1)(1), BLR [hereinafter referred to as the learned AO'] under section 143(3) r.w.s 144C(13) of the Income-tax Act, 1961 ('Act') pursuant to the Directions issued by the Dispute Resolution Panel (Hon'ble DRP') under section 144C(5) of the Act on the following grounds: On the facts and circumstances of the case and in law, the leaned AO has erred on the following: 1. Disallowance of ESOP expenses of Rs. 25,65,94,500 1.1. The learned AO has erred, in law and in facts, in contending that ESOP expenditure are capital in nature and accordingly not allowable under section 37 of the Act, ignoring the fact that said expenses has been incurred wholly and exclusively for the purpose of the business of the Appellant. 1.2. The learned AO has erred in law and in facts in disallowing the ESOP expenditure on the basis that the said expenditure incurred by Appellant is notional or fictitious in nature an....
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....ted at Source (TCS) credit 5.1. Based on the facts and circumstances of the case, the Appellant respectfully submits that, the learned AO has erred, in law and in fact, in not granting full TDS credit of Rs. 270,09,01,239 claimed in the return of income. 5.2. The learned AO has erred in law and in facts, in not granting full TCS credit of Rs. 11,925 claimed in the return of income. 6. Levy of interest 6.1. The learned AO has erred, in law and in facts, in levying interest under section 234B of the Act amounting to Rs. 73,58,29,568. 6.2. The learned AO has erred, in law and in facts, in levying interest under section 234C of the Act amounting to Rs. 4,47,15,835. 7. Initiation of Penalty proceedings under section 270A read with section 274 of the Act 7.1. The learned AO has erred, in law and on facts, in initiating penalty proceedings under section 274 read with section 270A of the Act. The Appellant submits that each of the above grounds is independent and without prejudice to one another. The Appellant craves leave to add, alter, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of....
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....ional interest on delayed receivables from AEs 2.1. The learned TPO/ AO has erred, in law and on facts, by determining a transfer pricing adjustment of Rs. 4,12,67,948 on account of interest on outstanding receivables, not appreciating the fact that such receivables are closely linked to the primary transactions and should not be tested separately or recharacterized as a loan transaction. 2.2 Without prejudice, the learned TPO/AO has erred, in law and on facts, by using the SBI Short term deposit interest rate as against using of LIBOR rates. 3. Initiation of Penalty proceedings under section 270A read with section 274 of the Act 3.1. The learned AO has erred, in law and on facts, in initiating penalty proceedings under section 274 read with section 270A of the Act. The Appellant submits that each of the above grounds is independent and without prejudice to one another. The Appellant craves leave to add, alter, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal, so as to enable the Hon'ble Tribunal to decide on the appeal in accordance with the law." 3. We first take up the g....
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....tion was a capital expenditure of the foreign parent company. As far as the assessee is concerned, the difference between the fair market value of the shares of the parent company and the price at which those shares were issued to its employees in India was and employee cost which is a revenue expenditure incurred for the purpose of the business of the company and had to be allowed as deduction. There is no reason why this expenditure should not be considered as expenditure wholly and exclusively incurred for the purpose of business of the assessee. With regard to the observations of the Commissioner (Appeals) that the ESOP actually benefits only the parent company, it can be said that the expenditure in. question is wholly and exclusively for the purpose of the business of the assessee and the fact that the parent company is also benefited by reason of a motivated work force would be no ground to deny the claim of the assessee for deduction, which otherwise satisfies all the conditions referred to in section 37(1). The facts and circumstances of the present case, he expenditure in question was wholly and exclusively for the purpose of the business of the assessee and h....
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....nce towards delay in deposit of employees' contribution to Provident Fund before the due date. This issue is covered against the assessee by the decision of Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. Vs. CIT (2022) 143 taxmann.com 178 (SC) wherein it has been held that "deduction u/s 36(1)(va) in respect of delayed deposit of amount collected towards employees' contribution to PF cannot be claimed when deposited within the due date of filing of return even when read with Section 43B of the Income tax Act, 1961." Respectfully following the decision of Hon'ble Supreme Court, this ground of appeal is dismissed. 6. Ground no. 4 is in respect of disallowance of notional IND-AS (Accounting Standards issued by Institute of Chartered Accountants of India) adjustment of Rs. 1,30,60,532/-while arriving at total income of the assessee. In this respect, we note from the order of Ld. DRP in para 8.2 wherein a direction has been given to the Ld. AO to delete the disallowance after obtaining reconciliation from the assessee with regard to the amounts incorrectly considered in the schedule Business & Profession and included in the schedule, Income from Other sources. ....
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.... call for any specific adjudication. 9. Now we take up ground No. 2 specific to AY 2018-19 which relates to transfer pricing adjustment of Rs. 4,12,67,948/-in respect of notional interest on delayed receivables from Associated Enterprise (AEs), Ld. Counsel for the assessee submitted that these receivables are closely linked to the primary transactions and should not be tested separately, nor these can be re-characterised as loan transactions. In this respect assessee had furnished details of realisation of the receivables according to which the weighted average realisation of receivables for the relevant year is 47 days for the software distribution segment. Ld. TPO levied interest on outstanding receivables for more than 30 days by treating it as a separate international transaction. Ld. Counsel for the assessee further stated that assessee does not pay any interest on outstanding payables to its AEs. Accordingly, by principle of consistency, no interest should be charged on outstanding receivables from AEs as well. He further stated that assessee does not have a practice of charging interest or penalty on the outstanding balance of receivable from party whether it is A....
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...., this issue was considered by the Tribunal in assessee's own case for AY 2014-15 and in para 23 to 23.9 of the order dated 21.5.2020 this Tribunal held as under:- "23. Ground No. 14-17 alleged by assessee against adjustment of notional interest on outstanding receivables. From TP study, it is observed that payments to assessee are not contingent upon payment received by AEs from their respective customers. Further Ld.AR submitted that working capital adjustment undertaken by assessee includes the adjustment regarding the receivables and thus receivables arising out of such transaction have already been accounted for. Alternatively, he submitted that working capital subsumes sundry creditors and therefore separate addition is not called for. 23.1. Ld. TPO computed interest on outstanding receivables under weighted average method using LIBOR + 300 basis points applicable for year under consideration that worked out to 3.3758% on receivables that exceeded 30 days. It has been argued by Ld.AR that authorities below disregarded business/commercial arrangement between the assessee and its AE's, by holding outstanding receivables to be an independent international transa....
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....ebt arising from sale of goods or services rendered in course of carrying on business. Once any debt arising during course of business is an international transaction, he submitted that any delay in realization of same needs to be considered within transfer pricing adjustment, on account of interest income short charged or uncharged. It was argued that insertion of Explanation with retrospective effect covers assessment year under consideration and hence under/non-payment of interest by AEs on debt arising during course of business becomes international transactions, calling for computing its ALP. He referred to decision of Delhi Tribunal in Ameriprise (supra), in which this issue has been discussed at length and eventually interest on trade receivables has been held to be an international transaction. Referring to discussion in said order, it was stated that Hon'ble Delhi Bench in this case noted a decision of the Hon'ble Bombay High Court in the case of CIT v. Patni Computer Systems Ltd. [2013] 33 taxmann.com 3/215 Taxman 108 (Bom.), which dealt with question of law: "(c) 'Whether on the facts and circumstances of the case and in law, the Tribunal did not err in ho....
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....dia Solutions (P.) Ltd. v. Dy. CIT [2018] 91 taxmann.com 286 has observed that: "There may be a delay in collection of monies for supplies made, even beyond the agreed limit, due to a variety of factors which would have to be investigated on a case to case basis. Importantly, the impact this would have on the working capital of the assessee would have to be studied. It went on to hold that, 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-a-vis the receivables for the supplies made to an AE, the arrangement reflected an international transaction intended to benefit the AE in some way. Similar matter once again came up for consideration before the Hon'ble Delhi High Court in Avenue Asia Advisors Pvt. Ltd v. DCIT [2017] 398 ITR 120 (Del). Following the earlier decision in Kusum Healthcare (supra), it was observed that there are several factors which need to be considered before holding that every receivable is an international transaction and it requires an assessment on the working capital of the assessee. Applying the decision in Kusum Health Care (supra), the Hon'ble High Cou....