TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1805
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....-21 on 12/02/2021 declaring a total income of Rs. 19,19,53,860/-. Subsequently, the case was selected for scrutiny under CASS and notice U/s 143(2) of the Act was issued on 29/06/2021. Subsequently notice u/s. 142(1) of the Act was issued along with an annexure calling for relevant details. In the course of assessment proceedings, the Ld. AO noticed that Form 3CEB report of the assessee company had international transactions with its Associated Enterprises (AEs). Hence, a reference was made to the Transfer Pricing Officer u/s. 92CA(1) of the Act for the international transactions undertaken by the assessee company in the F.Y.2019-20. Accordingly, the TP matters were examined by the DC/ACIT (TPO)-3, Hyderabad and an order u/s. 92CA(3) of the Act was passed on 18/02/2022 determining the proposed adjustment as follows: Sl No Description Adjustment u/s. 92CA (in Rs. ) 1. Payment of royalty for technical support services 24,84,58,065 2. Interest on ECB 40,49,995 3. Interest on Trade Receivables 5,57,443 Total adjustment u/s. 92CA 25,30,65,503 Thus, the Ld. TPO proposed to make an upward transfer pricing adjustment of Rs. 25,30,65,503/- while computing the income o....
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....,49,995/- in respect of payment of interest on ECB and Rs. 5,57,443/- on account of imputation of notional interest on outstanding receivables. Further, the Ld. AO and the Ld. DRP erred in disallowing an amount of Rs. 23,47,826/- towards amortization of leasehold rights. Grounds for imputation of notional interest on outstanding receivables. 1. On the facts and in the circumstances of the case, the Ld. DRP/AO/TPO erred in : 1.1. Considering overdue receivables from AEs as an international transaction under the provisions of section 92B of the Act. In doing so, the Ld. DRP/AO/TPO erred in imputing an interest on such outstanding receivables. 1.2. On the facts and circumstances of the case and in law, the Ld. DRP/AO/TPO erred in making an adjustment of Rs. 5,57,443/- to the income of the appellant in respect of notional interest on outstanding receivables. 1.3. The Ld. DRP/AO/TPO erred in not appreciating the fact that since no interest has been charged in case of overdue receivables from Non-AEs, following the same principle interest should not be imputed on the overdue receivables. 1.4. The Ld. DRP/AO/TPO erred in ignoring the fact that the appellant does not pay any in....
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....an adjustment to the Arm's Length Price determined by the appellant in respect of the international transaction in connection with payment of ECB by the appellant to its AEs by not appropriately applying any of the prescribed methods as per section 92C(1) of the Act and not bringing on record any comparables uncontrolled transactions. Grounds for disallowance of leasehold amortization charges 4. On the facts and in the circumstances of the case, the Ld. DRP/AO erred in 4.1. Disallowing land leasehold amortization charges of Rs. 23,47,826/- by concluding that same as an apportionment of prior period expenditure and further that the same is disallowable expenditure since there is no concept of deferred revenue expenditure in IT Act and all that the expenses must be allowed in the year in which it is incurred. 4.2. Failing to appreciate that the company follows mercantile system of accounting, wherein the period costs relating to relevant year are accounted for in that year even if the liability for the same was settled in earlier years. 4.3. The Ld. AO completely erred in considering lease amortization charge as a prior period expenditure just because of settlement of liabi....
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....mitted that the Ld. TPO / DRP has concluded that there are no comparables and the ALP was taken at NIL. The assessee further submitted that the impugned year was covered under a unilateral APA application filed with CBDT, wherein the transaction in question is a subject matter of negotiation, which is pending for finality. He also referred to the decision of the jurisdictional Bench in the assessee's own case for the AYs 2017-18 and 2018-19 whereas this Bench has remitted the mater back to the Ld. TPO to decide the case on merits subject to outcome of the Advance Pricing Agreement (APA) with CBDT by the assessee. He further submitted that the Ld. TPO has followed the "other method" while determining the ALP as NIL under "other method" and accordingly made adjustment of Rs. 24.84 Crs. On this issue, he relied on the decision of the Coordinate Bench of Mumbai in the case of M/s.Sulzer Tech India Pvt Ltd vs. Addl./Jt.Dy./Asst. Commissioner of Income Tax in ITA No. 633/Mum/2021 (AY 2016-17) wherein vide para 22 of the order it was held that the ALP of the international transaction was treated to be NIL is not valid by following the decision of the Hon'ble Delhi High Court in the case o....
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....onsidering any comparables as detailed in the T.P. Study report. Further, it was also submitted by the Ld.AR that TPO has not rejected the comparables and neither followed Rule 10AB of the I.T. Rules, 1962. This issue is identical to ground No. 6 in ITA No. 154/VIZ/2022. The plea of the Ld.AR is to remit back the issue to the file of the TPO to decide the issue subject to the final outcome of the Advance Pricing Agreement with CBDT. We find merit in the argument of the Ld. AR and we are of the considered opinion that this issue shall be remitted back to the file of the Ld. TPO to decide the case on merits subject to the outcome of the APA with CBDT by the assessee. We therefore allow the Ground No.2 and its sub-grounds raised by the assessee for statistical purposes. 10. Ground No.3 and its sub-grounds relate to payment of interest on ECB.This issue is identical to that of the issue raised by the assessee in its own case for the AY 2017-18 & 2018-19 in ITA Nos. 154 & 155/Viz/2022. The Tribunal vide its order dated 23/01/2023 decided this issue of payment of interest on ECBwhich is raised by the assessee vide Ground No.7 of its appeal in ITA No. 154/Viz/2022 (AY 2017-18). For the s....