TaxTMI 
TaxTMI 
2025 (7) TMI 175
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....length price ('ALP') of the international transactions of exports entered by the Appellant, by proposing an upward adjustment of INR 2,80,66,728/-. 1.2. On the facts and in the circumstances of the case and in law, the learned AO / Hon'ble DRP has erred in not considering the exponential increase in Demurrage & Detention charges of INR 2,57,46,964/- as extra-ordinary cost and hence, non-operating in nature. 1.3. Without prejudice to the above, the learned AO/Hon'ble DRP has erred in not considering the subject transaction at arm's length by applying Internal CUP i.e. average sales price to AE is higher than the average sales price to third party during the relevant assessment year. 1.4. Without prejudice to the above, the learned AO / Hon'ble DRP has erred in not considering the subject transaction at arm's length by applying Internal CUP i.e., average sales price to AE is higher than the average purchase price from the same AE during the relevant assessment year. 1.5. Without prejudice to the above, the learned AO / Hon'ble DRP has erred in facts and circumstances of the case and in law, in not making the TP adjus....
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....reporting of outstanding receivables. 3.1. On the facts and in the circumstances of the case and in law, the learned AO / Hon'ble DRP has erred in facts and circumstances of the case and in law, in proposing penalty under section 271AA of the Act for non-reporting of outstanding receivables considering it as a separate international transaction. 3.2. On the facts and in the circumstances of the case and in law, the learned AO / Hon'ble DRP has erred in facts and circumstances of the case and in law, in considering the outstanding receivables falling within section 92(B) of the Act as a capital financing transaction. 4. Ground No 4 - Initiation of penalty under section 270A of the Act 4.1. On the facts and in the circumstances of the case and in law, the learned AO/Hon'ble DRP has erred in initiating the penalty proceedings under section 270A of the Act." 3. The assessee-company is a partnership firm engaged in the business of trading of Raw Cashew Nuts. The assessee filed the return of income on 15.02.2022 declaring a business loss of Rs. 1,77,96,363/-. The return was processed under Section 143(1) of the Income Tax Act, 1961 ('....
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....ges. The demurrage charges paid in earlier years for a turnover of Rs. 19 to 36 crores was Rs. 1.5 lakhs to Rs. 4.05 lakhs only. During the year under consideration the demurrage charges paid were to the tune of Rs. 2.57 Crores. Considering the demurrage charges OP/OC would be 1.35% which would be within the tolerance limit of ALP of 1.78%. These facts are not in dispute. 7.1 On this issue, we are guided by order of Co-ordinate Bench of Delhi in the case of Transwitch India (P.) Ltd. Vs. DCIT, 21 taxmann.com 257, wherein it was held as under:- I. Section 92C, read with section 92CA, of the Income-tax Act, 1961 - Transfer pricing - Computation of arm's length price - Assessment year 2006-07 - Assessee-company was a wholly owned subsidiary of an American company and operated a design centre for its parent company for design and development of software and related services - During financial year under consideration, it had undertaken international transactions of provision of software development services with its associated enterprise - As operating profit margin (OP/OC) earned by it at 8.39 per cent was higher than weighted average of operating profit margin of comparab....
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.... satisfied arm's length criteria and TPO had wrongly rejected aforesaid claim of comparability adjustment on account of abnormal expenses incurred by assessee - Held, yes [In favour of assessee]" Following the guidelines given by the above order, we hold that the demurrage charges being an extra ordinary cost shall be treated as non-operating in nature. Appeal of the assessee on this ground is allowed. II. Interest on outstanding receivables INR 1,15,16,837 8. The TPO held that the assessee has made sale to AE and has shown outstanding receivable of Rs. 32,53,34,324/- in its financial statements. The TPO held that the same has not been reported in Form 3CEB. The TPO held that the assessee has also not submitted the details of outstanding receivables viz. invoice date, credit period, due date, date of receipt and interest rate etc. even after repeated reminde Rs. The assessee submitted that against the gross outstanding receivables of Rs. 32.53 crores from the AE, the gross outstanding payable were to the tune of Rs. 21.61 crores and the net receivables from the AE could be considered as Rs. 10.91 Cr. considering the normal business trading cycle. The Ld. DRP held that ....