TaxTMI 
TaxTMI 
2024 (12) TMI 1679
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....tates that outstanding receivables are in the nature of capital financing and Is an international transaction? B. Whether on the facts and circumstances of the case and in law the Hon'ble ITAT was correct in holding that the amounts outstanding as receivable with foreign AE was not a separate international transaction, especially when about 70% of the sale of the assessee to its foreign AE is lying in debts and much beyond the agreed time period of 180 days as per terms of contract of sale? C. Whether on the facts and circumstances of the case and in law the Hon'ble ITAT was correct in aggregating the amount remaining outstanding/ receivables from the foreign AE, beyond the terms of contract, with the sale consideration is arrived at, on the basis of recovery in span of 180 days? D. Whether the Hon'ble ITAT has erred in law and on the facts in deleting the addition on account of non- changing of mark up on support service charges billed to AGNSI amounting to Rs. 1,99,26,043/-, an Indian affiliate of the assessee company? E. Whether the Hon'ble ITAT has erred in law and on the facts in deleting the disallowance of expenses amountin....
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....ot mean that de hors the context every item of "receivables" appearing in the accounts of an entity, which may have dealings with foreign associated enterprises would automatically be characterised as an international transaction. There may be a delay in collection of monies for supplies made, even beyond the agreed limit, due to a variety of factors which will have to be investigated on a case to case basis. Importantly, the impact this would have on the working capital of the assessee will have to be studied. In other words, there has to be a proper inquiry by the Transfer Pricing Officer by analysing the statistics over a period of time to discern a pattern which would indicate that vis-à-vis the receivables for the supplies made to an associated enterprise, the arrangement reflects an international transaction intended to benefit the associated enterprise in some way. 11. The Court finds that the entire focus of the Assessing Officer was on just one assessment year and the figure of receivables in relation to that assessment year can hardly reflect a pattern that would justify a Transfer Pricing Officer concluding that the figure of receivables beyond 180 days c....
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....in a debt, but every debt does not involve a loan. Liability to pay a debt may arise from diverse sources, and a loan is only one of such sources. Every creditor who is entitled to receive a debt cannot be regarded as a lender. If the requisite amount of consideration had been borrowed from a stranger, interest paid thereon for the purpose of carrying on the business would have been regarded as a permissible allowance; but that is wholly irrelevant in considering the applicability of clause (iii) of subsection (2) to the problem arising in this case. The legislature has under clause (iii) permitted as an allowance interest paid on capital borrowed for the purposes of the business; if interest be paid, but not on capital borrowed, clause (iii) will have no application." 5. It was further submitted that the words "deferred payment" or "receivable" would have to be interpreted ejusdem generis with the other services and lending facilities which are spoken of. 6. In order to enable Mr. Agarwal, learned counsel to address further submissions, let the appeals be re-notified for 03.05.2024. 7. We also accord liberty to the appellants to place such additional mat....
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.... with the view ultimately taken by the Tribunal. 4. That only leaves us to examine question "F" and which is concerned with the disallowance under Section 40(a)(ia). We note that while dealing with this aspect, the Tribunal in para 31 had observed as follows: - "31. It can be seen from the above that so long as a payment to non-resident entity is in the nature of payment consisting of income chargeable under the head 'Salaries', the assessee does not have any tax withholding applications u/s 195 of the Act. In our considered view, the nature of income embedded in related payments is relevant for deciding whether or not section 195 will come into play. We have also gone through the agreements exhibited at pages 525-530 of the paper book and have also considered Form 16 which are placed on record on page 605 of the paper book. Considering the facts on record, it can be reasonably concluded that the employees seconded to the assessee company are working as the employees of the assessee company, their salary is subject to TDS u/s 192 of the Act and, therefore, provisions of section 195 are not applicable on the facts of the case in hand." 5. Since this issue stan....