TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 980
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....17,23,81,163/- and Rs. 4,53,00,367/- on account of interest on overdue receivable. 3. The brief facts of the case show that Andante India is a limited liability partnership firm engaged in the business of processing and selling of fruits & vegetables, food processing and nutraceuticals. The facility of the assessee provides farmers with latest technology and methods guaranteeing them yearly yields. Constant supply of fruits & vegetables to its production line allows it to service to its customers for a variety of packaging. In fact it manufactures pickles and other products. Assessee has one subsidiary in Belgium which acts as sales agent of the company for sale of its products in Europe, America, Canada & South Africa. The Belgium agent enters contract with customers on behalf of assessee, but it cannot enter contract with customers independently without assessee's authorization. Each purchase order obtained from the customers is forwarded to the assessee and assessee will have a right to refuse the contract. If the assessee agrees to manufacture, it will supply the goods, and the Belgium entity is paid a remuneration in the form of sales commission @ 9% on Free on Board value ....
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....dian entity is relatively less and therefore selection of the AE as tested party was rejected, therefore the whole TP Study Report was rejected. The TPO carried out fresh search adopting several filters by putting the keywords of food processing and trading in Prowess Database on 26.5.2023 and reached at a set of 7 comparables whose 3 years 35th percentile margin ranging from 3.39% to 65th percentile margin of 45.3%, having median margin of 6.04%. The TPO computed the PLI of Operating Profit/ Operating Revenue [OP/OR] of the assessee of (-) 91.103%, the ALP was considered at Rs. 16,67,32,942 against the cost incurred of Rs. 33,91,14,105 resulting into adjustment of Rs. 17,23,81,163. 9. It was further found that the assessee has received the consideration from its AE late beyond 120 days as per agreement and therefore the TPO was of the view that the assessee should charge interest as it is a separate international transaction. As the invoices are prepared in euro, he computed the interest at the LIBOR rate of 6.818% and worked out the interest chargeable at Rs. 4,53,367. 10. After the above adjustment, draft order was passed against which the assessee filed objections wherein....
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.... in carrying out a fresh benchmarking analysis with the Appellant as the tested party wherein Appellant is a complex and unique entity owning intangible assets. 2 Interest on delayed trade receivables 2.1 The TPO erred in law and in facts in considering outstanding receivables of the Appellant from its AE as separate international transaction and re-characterising the receivables as loan to the AE 2.2 The learned TPO has grossly erred in facts by charging notional interest on delayed receipt from associated enterprise 13. The ld. AR submitted a paperbook containing 124 pages. The ld. AR referred to the document submitted before the DRP. It was the claim of assessee that assessee manufactures processed pickles at its manufacturing plant, It has s a subsidiary in Belgium and operation of the AE are funded by the Indian entity, assessee. The Belgium entity assumes normal risk as all significant business and entrepreneur risk are borne by the Indian entity. The Belgium entity is compensated by appropriate sales commission. The assessee submitted that Belgium agent enters into contract with customers on behalf of assessee and it cannot enter into contract with custo....
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....getable. The products are consigned to AE in England, Canada, USA, and other jurisdictions. The assessee adopted TNMM as the most appropriate method using the refinitive fundamentals and worldwide profit company database for comparable companies engaged in distribution of processed food products in Belgium. The assessee selected 13 comparable with median margin of 2.27%, but AE earned a margin of (-) 7.41% from sales commission. Therefore, it was stated that as the operating profit margin of the AE is lower than the operating profit margin earned by the independent companies in Belgium, the international transaction relating to sales commission are deemed to be at arm's length. We also failed to appreciate the reason for combining the sales transaction with the commission income transaction as both are governed by separate terms and conditions. We find that assessee is showing that all transaction for sales to and commission payment to Belgium entity is at arm/s length whereas the ld. TPO is determining the ALP of sale of processed foods of Rs. 11.78 crores. Assessee has shown its search matrix at page no 138 onwards in TPSR where in potential comparable are stated to be 311 result....