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2024 (12) TMI 1341
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....OI of Rs. 4,26,28,48,182 under the provisions of section 115JB of the Act is assessed at Rs. 4,66,44,31,180/-. 2. The assessee is a subsidiary of Biocon Ltd. engaged in the development, manufacture and commercialisation of biosimilar. Assessee filed its original Return of Income on 12/2/2021 which was revised on 31st of March 2021 and tax was payable on Book profit tax. 3. This return was picked up for scrutiny and as assessee has entered into international transactions, a reference was made to the DCIT(TP), 1(1)(2) [ld. TPO] to determine the arm's length price (ALP) of various international transactions. The assessee has also entered into several specified domestic transactions. 4. The ld. TPO examined the international transactions. He found that as per Form no 3CEB there are several outstanding receivables from the Associated Enterprises, however assessee did not benchmark them separately but stated there in that these are interlinked transactions. As per form No 3CEB Trade receivable from associated enterprise UK is of Rs. 6,684,881,819/-, trade receivable from AE [ Malaysia] is 100, 24,77,407/- and from USA entity is Rs. 86,728,364/-. 5. The ld. TPO found that aggr....
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..... It was also rejected that the TPO has recharacterized the transaction of overdue receivable. It also rejected the contention of assessee that if there is no policy of charging interest from non-AE and therefore from AE such interest cannot be imputed. With respect to the interest rate of LIBOR + 450 basis points, the ld. DRP confirmed the same for computing interest. The assessee filed certain additional evidence to allow the credit period as per inter-company agreements, whereas the TPO has allowed the standard 30 days as per agreement. The ld. DRP rejected it holding that the credit period of inter-company arrangement is transaction with related party and therefore cannot be considered. 8. Accordingly, the action of the ld. TPO was confirmed. Based on this, the assessment order u/s. 143(3) r.w.s. 144C(13) was passed on 27.6.2024 wherein the total income of assessee is determined at Rs. 14,05,46,884. 9. The assessee is aggrieved with the same and has preferred the following grounds of appeal:- "General Grounds 1. The impugned final assessment order has been passed without following due procedure laid crown in law, and hence, bad in law. 2. The im....
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....instead of restricting the same up to 31 March 2020. 6.6 Erred in law and on facts, by not appreciating that the Appellant has earned higher margin and excess income from its AEs, embedded in its service fee, as compared to comparable companies, and the margins of the being at arm's length, the need for a separate adjustment in account of interest on delayed receivables is unwarranted as also unjustified 6.7 Working capital adjustment subsumes the delay in receivables and payables and hence, no separate adjustment on outstanding receivables is required. 6.8 By ignoring the fact that the Appellant has a consistent policy of non-charging of interest on delayed realisation of trade receivables from both third party customers as well as its AEs. 6.9 Erred on facts, by not appreciating that the Appellant does not have a policy of charging interest from other unrelated parties in similar transactions nor has it paid any interest on its outstanding trade payable at year end to unrelated vendors. 6.10 Erred in law and on facts, by not appreciating that the Appellant is not paying any interest on trade payable balances of AEs. 6.11 E....
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.... 8.4 in not granting the tax credit (i.e., advance tax, TDS/TCS) even though the same are appearing in Form 26AS of both the entities (i.e., the Appellant and BRL). 8.5 in not granting Foreign Tax Credit ("FTC") of INR 2,87,674 claimed by the Appellant in the tax return for the subject AY. 8.6 in not granting the above-mentioned credits, without appreciating that no adjustment was proposed with regard to the above in the SCN or in draft assessment order or in final assessment order. Hence, in the subject final order, no adjustments can be made. Consequential Grounds 9. The Ld. AO has erred in initiating penalty proceedings u/s 270A of the Act for underreporting of income. 10. On the facts and in the circumstances of the case and in law, the Ld. AO has erred in not granting the interest in accordance with the provisions of section 244A of the Act. 11. The Ld. AO has erred, in law and on facts in levying excess interest u/s 234C of the Act of INR 47,42,435. The Appellant submits that each of above grounds is independent and without prejudice to one another. The Appellant craves leave to add, alter, amend, var....
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....see as closely linked to other international transaction of sale and services under the combined transaction approach and were not evaluated separately. Therefore, according to him, same are inter-linked and closely connected transactions. iv. He further referred to the provisions of Rule 10A(d) where transaction is defined as, it includes a number of closely linked transaction and therefore he submitted that international transaction of outstanding due receivable could not have been separately benchmarked. v. He further referred to the decision of Hon'ble Delhi High Court in the case of Kusum Healthcare Pvt. Ltd. v. ACIT, 398 ITR 66 (Del) and referred to para 11 of that order, wherein it is held that where the transaction of outstanding receivables are already factored on pricing and profitability, no further adjustment only on the basis of outstanding receivable can be made as it would distort the picture and re-characterise the transaction. vi. He further referred to the decision of Hon'ble Delhi High Court in the case of Sony Ericsson Mobile Communications India P. Ltd. v. CIT, 55 taxmann.com 240 and referred to para 100 & 101 stating that net profit ....
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....resolution panel. 14. We have carefully considered the rival contentions and perused the orders of the learned lower authorities. We have also considered factual paper book and case law compilation submitted by the ld. AR. We have considered those decisions wherever we find them relevant. 15. Form number 3CEB submitted by the assessee clearly shows that the receivable from associated enterprises are already shown in international transaction as per serial number 19 of that form. It is submitted that the transactional net margin method is adopted to benchmark this international transaction as these are closely linked to the transaction stated in para number 11B of the form 3CEB. In the transfer pricing study report in paragraph number 4.7 it is stated that though the finance act 2012 has amended the definition of the term 'International transaction' to include capital financing transaction including any type of advance, payments or deferred payment or receivable or any other debt arising during the course of the business. In this regard, receivables from associated enterprises have been considered as closely linked transactions to provision of services under a combined transac....
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.... of the computation, it is clear-cut that the addition had been made of Rs. 5.65 crores. The adjustment should have been restricted only up to 365 days. Therefore, there is a computational error in the addition made by the learned transfer pricing officer. 17. We have been shown the press release dated 1 April 2020 by the Reserve Bank of India regarding the measures taken by the reserve bank of India for dealing with the Covid 19 pandemic. According to that it was stated that presently the value of the goods or software exports made by the exporters is required to be realized fully and repatriated to the country within a period of nine months from the date of exports. In view of the disruption caused by the Covid 19 pandemic, the time period for realization and repatriated of export proceeds for exports made up to or on 31 July 2020 has been extended to 15 months from the date of export. The measure will enable the exporters to realize the receipts, especially from the Covid affected countries within the extended period and also provide greater flexibility to the exporters to negotiate future exports contracts with the buyers. Thus, the financial year for which the relevant rela....
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....eceivables should be net of first against the outstanding payable, provided there are no contrary agreements, facts and circumstances. It is for the assessee to show that the outstanding receivable is not received by the assessee beyond the credit period from associated enterprises for the reason that there is an outstanding payable to the same party. Such facts are required to be demonstrated, the learned TPO is directed to look into these facts, if placed before him. 21. Another argument of the learned authorized representative that instant adjustment was not proposed in show cause notice, no addition could have been made in the draft and final assessment order. We find that the learned transfer pricing officer has given an ample opportunity to the assessee which has been discussed in paragraph number 5 of the transfer pricing order, the reply of the assessee has also been considered, it cannot be said that assessee is not at all been given any opportunity of hearing before the learned lower authorities. The purpose of show cause notice is to make assessee aware about the likely step by the ld. AO and ld. TPO. Thus, assessee has been made aware about the issue in TP Assessment....
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....fresh after granting the assessee an opportunity of hearing. If the learned assessing officer/learned TPO reaches at the conclusion that still there is an adjustment to be made with respect to the interest on overdue receivable from the assessee's associated enterprises, it should be restricted to the period in financial year only. 23. Accordingly, ground number 6 is disposed of with above direction and is allowed to the extent indicated. 24. Ground number 7 is corporate tax Grounds wherein the grievance of the assessee is that while computing the book profit under section 115JB of the act the learned assessing officer has considered the assessed profits and gains from business and profession and treated as its book profit u/s 115 JB of the Act. We have considered this ground of the appeal and find that in the return of income filed by the assessee at schedule MAT the assessee has computed the book profit being under section 115JB of Rs. 4,262,848,182/- tax payable under section 115JB was determined at Rs. 639,427,227/-, whereas in the tax computation sheet, ld. AO computed tax payable at serial number 20 under that section at Rs. 69,96,64,677/-. There is no reference of such....