TaxTMI 
TaxTMI 
2024 (11) TMI 1572
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.... Principal Commissioner of Income Tax ("learned PCIT") is barred by limitation and thus, void ab-initio. 1.2 That on the facts and circumstances of the case and in law, the time limit to pass order pursuant to directions of Dispute Resolution Panel ("Hon'ble DRP") has already lapsed. Transfer pricing ("TP") adjustment in relation to notional interest on overdue receivables [INR 7,00,24,912] 2.1 That on the facts of the case and in law, the Transfer Pricing Officer ("learned TPO") / Hon'ble DRP have erred, in making an adjustment of INR 7,00,24,912 to the total income of the Appellant in respect of notional interest on overdue receivables. 2.2 That on the facts of the case and in law, the learned TPO/ Hon'ble DRP have erred in making the said adjustment despite Appellant being a debt free company and no TP adjustment can be made for overdue receivables as upheld by Hon'ble Income Tax Appellate Tribunal in Appellant's own case for AY 2014-15 (ITA No. 7290/Del/2018), AY 2015-16 (ITA No. 9131/Del/2019), AY 2016- 17 (ITA No. 466/Del/2021) and AY 2018-19 (ITA No 702/Del/2022). 2.3 That on the facts of the case and in law, t....
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....ant for deciding this appeal are that the appellant/assessee is engaged in the business of software services. It filed its original income tax return (hereinafter, the 'ITR') for the AY 2017-18 on 30.11.2017 declaring income of Rs.113,81,26,250/-. Later on, the said ITR was revised on 29/03/2018 at income of Rs.110,54,94,040/-. The case was picked up for scrutiny. The International Transactions with Associated Enterprises (hereinafter, the 'AE') as mentioned in Form 3 CEB filed by the appellant/assessee were referred to the Transfer Pricing Officer (hereinafter, the 'TPO') as per the provisions of section 92CA (1) of the Act for determination of Arm's Length price in relation to the international transactions. Subsequently, the order under section 92CA(3) of the Act was passed by the TPO on 27.01.2021 attributing an adjustment of Rs.55,50,66,879/- as the difference in Arm's Length Price of international transactions. Consequentially, a draft order was passed determining income at Rs.156,05,60,919/- (Rs.55,50,66,879/- plus income of Rs.110,54,94,040/- as per the revised ITR) under section 143(3) r.w.s. 144C of the Act. Aggrieved, the appellant/assessee came before the DRP. The AO, a....
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....for applying Rule 10CB of the Income Tax Rules in case the Bench held that the decisions of the Coordinate bench in the appellant/assessee's cases of preceding years were not applicable. He also requested for setting off of excess remuneration with the transfer pricing adjustment of Rs.7,00,24,912/- as the appellant/assessee had derived more income in other segments. 6. Further, the Ld. Counsel, placing reliance on the decision of the Hon'ble Delhi High Court in the case of Kusum Health Care Pvt. Ltd. in ITA 765/2016 (date of order: 25.04.2017), contended that the interest on trade receivables was not liable to any transfer pricing adjustment. Hence, he requested for deletion of the transfer pricing adjustment of Rs.7,00,24,912/-. 7. The Ld. CIT-DR submitted that the appellant/assessee's grievance relating to the transfer pricing adjustment of Rs.7,00,24,912/-. The Ld. CIT-DR submitted that the appellant /assessee was not a debt free company; therefore, the adjustment could be made in this case on account of interest receivable on outstanding/overdue trade receivables from the AE. The argument of the Ld. Counsel that the appellant/assessee was a debt free company was contrary....
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....ut to use for business purposes of the appellant/assessee company. Hence, the appellant/assessee was burdened with the finance cost. In case the same would have been timely realized, the performance of the appellant/assessee company would have been much better. No prudent business man would allow blocking of its huge fund with any independent party over the years. 9. The Ld. CIT-DR contended that the AO had not made any transfer pricing adjustment on any issue other than the interest on overdue receivables from the AEs; therefore, the facts of the case warranted the transfer pricing adjustment. It was further highlighted by the Ld. CITDR that the note below schedule 6 on trade receivables (Page No. 20 of the PB) revealed that the ultimate holding company of the appellant/assessee i.e. Avaya Inc, which was an AE having significant trade receivables outstanding, voluntarily filed a petition under Chapter XI of United States of America Bankruptcy Code on 19.01.2017. Keeping in view this fact, the appellant/assessee had mentioned in said note that there was uncertainty with regard to timing of recovery of the trade receivables from Avaya Inc as Avaya Inc was not legally permitted to....
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....available on the record. We also perused the above referred case laws. The facts of the present case as mentioned above are held distinguishable from the facts of the appellant/assessee's cases of earlier years. The finance cost borne by the appellant/assessee over the years clearly establish that it is not a debt-free company. It is very surprising to note that why the appellant assessee did transactions, contrary to the decision of a prudent businessman, with its holding company when the holding company filed a petition under Chapter XI of United States of America Bankruptcy Code on 19.01.2017 and realization of debts were not taking place since years. Such transactions with holding company, prima-facie, is a burden on the appellant/assessee. 14. The Hon'ble Delhi High Court, in the case of Kusum Health Care Pvt. Ltd. (supra), has held that the delay in collection of money may be due to different reasons require investigation on a case-to-case basis. What needs to be analysed is the pattern that may emerge from the receivables over a period of time which indicate that the arrangement of parking huge receivables with the related parties reflects an international transaction wit....