TaxTMI 
TaxTMI 
TaxTMI 
2023 (2) TMI 1427
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....s:- S. No. Description Adjustment u/s 92CA (In Rs.) 1 Software Development Segment Rs.6,82,65,017/- 2 ITES Segment Rs.1,73,95,200/- 3 Trade Receivables Rs.36,19,348/- Total adjustment u/s 92CA Rs.8,92,79,565/- 4. Aggrieved, the assessee raised its objections before the DRP and accordingly the TP adjustment was reduced to Rs.5,38,21,502. The assessee is in appeal against the final order of assessment passed pursuant to the DRP directions. 5. During the course of hearing, the ld. AR submitted that out of 20 grounds raised, the following grounds are pressed :- Ground No.10 - ITeS Segment - Exclusion of Domex E Data P. Ltd Ground No.11 - TPO not applying upper turnover filter Ground Nos.15 to 18 - Notional interest on receivables Ground No.19 - Non granting of TDS and advance tax credit 6. The ld. AR submitted that the assessee has also raised additional grounds with regard to exclusion of certain companies based on application of upper turnover filter. The ld. AR also submitted that these companies were omitted to be included in the list of companies while raising the main grounds and since the same does not warrant examination of any fresh issues,....
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....) 89 Taxmann.com 44 (Bang-Trib) order dated 13.10.2017, took note of the decision of the ITAT Bangalore Bench in the case of Sysarris Software Pvt.Ltd. Vs. DCIT (2016) 67 Taxmann.com 243 (Bangalore-Trib) wherein the Tribunal after noticing the decision of the Hon'ble Delhi High Court in the case of Chryscapital (supra) and the decision to the contrary in the case of CIT Vs. Pentair Water India Pvt.Ltd., Tax Appeal No.18 of 2015 dated 16.9.2015 wherein it was held that high turnover is a ground to exclude a company from the list of comparable companies in determining ALP, held that there were contrary views on the issue and hence the view favourable to the Assessee laid down in the case of Pentair Water (supra) should be adopted. The following were the conclusions of the Tribunal in the case of Dell International (supra): "41. We have given a very careful consideration to the rival submissions. ITAT Bangalore Bench in the case of Genesis Integrating Systems (India) Pvt. Ltd. v. DCIT, ITA No.1231/Bang/2010, relying on Dun and Bradstreet's analysis, held grouping of companies having turnover of Rs. 1 crore to Rs.200 crores as comparable with each other was held to be proper. The fo....
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....the CIT(A) excluding companies with turnover of above Rs.200 crores from the list of comparable companies is held to correct and such action does not call for any interference." 19. The Tribunal in the case of Autodesk India Pvt. Ltd. Vs. DCIT (2018) 96 Taxmann.com 263 (Bangalore-Tribunal), took note of all the conflicting decision on the issue and rendered its decision and in paragraph 17.7. of the decision held as that high turnover is a ground for excluding companies as not comparable with a company that has low turnover. The following were the relevant observations: "17.7. We have considered the rival submissions. The substantial question of law (Question No.1 to 3) which was framed by the Hon'ble Delhi High Court in the case of Chryscapital Investment Advisors (India) Pvt.Ltd., (supra) was as to whether comparable can be rejected on the ground that they have exceptionally high profit margins or fluctuation profit margins, as compared to the Assessee in transfer pricing analysis. Therefore as rightly submitted by the learned counsel for the Assessee the observations of the Hon'ble High Court, in so far as it refers to turnover, were in the nature of obiter dictum.....
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.... the ratio laid down in Willis Processing Services (supra) and have to be regarded as per incurium. These three decisions also place reliance on the decision of the Hon'ble Delhi High Court in the case of Chriscapital Investment (supra). We have already held that the decision rendered in the case of Chriscapital Investment (supra) is obiter dicta and that the ratio decidendi laid down by the Hon'ble Bombay High Court in the case of Pentair (supra) which is favourable to the Assessee has to be followed. Therefore, the decisions cited by the learned DR before us cannot be the basis to hold that high turnover is not relevant criteria for deciding on comparability of companies in determination of ALP under the Transfer Pricing regulations under the Act. For the reasons given above, we uphold the order of the CIT(A) on the issue of application of turnover filter and his action in excluding companies by following the ratio laid down in the case of Genisys Integrating (supra)." 20. In view of the aforesaid decision, we hold that companies listed in Ground No.10.5.1 of the original grounds of appeal whose turnover in the current year is admittedly more than Rs.200 Crores should be exclu....
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....material on record. We notice that the coordinate Bench in the case of Altair Engg (supra) has considered the exclusion of Domex E Data P. Ltd. and held that - "34. In so far as comparability of Domex E Data Pvt. Ltd., is concerned, the argument was that this company is engaged in providing KPO and therefore cannot be compared with an ITeS such as the assessee. On this objection, the DRP again held that ITeS and KPO have to be regarded as one and the same. Learned Counsel has pointed out that in the following decisions, Tribunal has taken the view that companies rendering KPO services cannot be regarded as a comparable company with an ITeS company. Transperfect Solutions India Pvt. Ltd vs ACIT [[TS-497- ITAT2022(PUN)-TP]] AY 2016-17 Schlumberger India Technology Centre (P.) Ltd. Vs DCIT [TS- 473ITAT- 2022(PUN)-TP] AY 2016-17 Credence Resource Management (P.) Ltd vs ACIT [2022] 138 taxmann.com 543 (Pune - Trib.), for AY 2016-17 35. In the light of the aforesaid decisions, we are of the view that Domex E Data Pvt. Ltd., should be excluded from the list of comparable companies." 16. We notice that the profile of the assessee is providing SWD and ITeS services which is similar....
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.... The Ld. TPO has also erroneously adopted the rate of 100 basis points without any rationale. 19. The ld. AR relied on the decision of the coordinate bench in the case of Tio-Tech Pvt. Ltd. v. DCIT, IT(TP)A 237/Bang/2021 dated 12.10.2022 wherein it was held that - 26. We have considered the rival submissions and perused the material on record. We have heard the rival submissions and perused the material on record. The impugned issue is squarely covered by the decision of the coordinate Bench of the Tribunal in the case of Swiss Re Global Business Solutions India Pvt. Ltd. (supra) wherein it was held as under:- "35. The only other issue that remains for adjudication is ground No.15 with regard to re-characterizing certain trade receivables as unsecured loans and computing notional interest on such trade receivables. The main contention of the ld. AR is that deferred receivables would not constitute a separate international transaction and need not be benchmarked while determining the ALP of the international transaction. In our opinion, 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 Trib....
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....t interest on receivables is an international transaction and Ld.TPO rightly determined its ALP. In support of the contentions, he placed reliance on decision of Delhi Tribunal order in Ameriprise India (P.) Ltd. v. Asstt. CIT [2015] 62 taxmann.com 237 wherein it is held that, interest on receivables is an international transaction and the transfer pricing adjustment is warranted. He stated that Finance Act, 2012 inserted Explanation to section 92B, with retrospective effect from 1.4.2002 and sub-clause (c) of clause (i) of this Explanation provides that: (i) the expression "international transaction" shall include- . . . . . (c) capital financing, including any type of long-term or short-term borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business;. . . . ' 23.5. Ld.CIT.DR submitted that expression 'debt arising during the course of business' refers to trading debt 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 transac....
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....ransaction and its ALP has been correctly determined. 23.7. We have perused the submissions advanced by both the sides in the light of the records placed before us. This Bench referred to decision of Special Bench of this Tribunal in case of Special Bench of ITAT in case of Instrumentation Corpn. Ltd. v. Asstt. DIT (IT) [2016] 71 taxmann.com 193/160 ITD 1 (Kol. - Trib.), held that outstanding sum of invoices is akin to loan advanced by assessee to foreign AE., hence it is an international transaction as per Explanation to section 92B of the Act. We also perused decision relied upon by Ld.AR. In our considered opinion, these are factually distinguishable and thus, we reject argument advanced by Ld.AR. 23.8. Alternatively, it has been argued that in TNMM, working capital adjustment subsumes sundry creditors. In such situation computing interest on outstanding receivables and loans and advances to associated enterprise would amount to double taxation. Hon'ble Delhi Tribunal in case of Orange Business Services India 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....
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....t of the Bombay High Court in the case of CIT v. Aurionpro Solutions Ltd., 99 CCH 0070 (Mum HC). It is ordered accordingly" 27. In view of the above discussion and considering the decision of the of the coordinate bench of the Tribunal and the judgment of the Hon'ble High Court of Karnataka in the case of AMD (India) Pvt. Ltd. (supra), we hold that the treatment of interest on deferred receivables is rightly considered as an independent international transaction and benchmarked separately by the revenue authorities. 20. Respectfully following the above decision of the coordinate bench we hold that the interest on receivable is a separate international transaction as has been rightly considered by the lower authorities. With regard to calculation of interest, we place reliance on the judgment of the Bombay High Court in the case of CIT v. Aurionpro Solutions Ltd., 99 CCH 0070 (Mum HC) and direct the TPO to consider the interest at the rate of LIBOR rate + 2%. The TPO is also directed to consider a credit period of 30 days considering the fact the assessee has collected the payments against the receivables within a period of 90 days as submitted by the ld AR. It is ordered accor....