TaxTMI 
TaxTMI 
2026 (1) TMI 548
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....ion 92B of the Act which has been inserted by Finance Act, 2012 with retrospective effect from 01.04.2002, to include interest on delayed receivables for the purposes of benchmarking. Thereafter, the Ld. TPO has worked out an amount of Rs.1,80,07,955/- @ 15.25%. However, the Ld. DRP directed that this quantum should be reduced in line with LIBOR plus 400 basis points after giving a grace of 60 days on the entire quantum of delay in receiving payments against invoices raised by the assessee. The impugned amount resulted thereon. 1.1 The assessee is aggrieved with the impugned order and has approached the ITAT with the following grounds: - "Appeal under section 253(1)(d) of the Income Tax Act, 1961 (hereinafter referred to as the "Act"), against the order dated 28th September 2024, passed by the Assessment Unit of Income Tax Department under Section 143(3) read with Section 144C(13) & 144B of the Act. A. GENERAL GROUND: 1. That on the facts and circumstances of the case and in law, the Assessing Officer ("AO") has erred in assessing the total income of the Appellant under 143(3) read with Section 144C(13) & 144B of the Act. of the Act, for assessment yea....
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....g interest cost were utilized by the Appellant to grant extra credit period to AEs. This is grossly incorrect given that the Appellant is a debt-free company. 2.7. That on the facts and circumstances of the case and in law, the AO/TPO/DRP erred in arbitrarily assuming a credit period of 60 days in computing the alleged delay in realization of receivables, without appreciating the commercial factors related to Appellant's business, warranting a longer credit period. C. OTHER GROUNDS: 3. That on the facts and circumstances of the case and in law the AO erred in not granting the credit of entire TDS amounting to INR 2,96,77,034 as claimed by Appellant in its return of Income ignoring the fact that Ld. ADDL/JCIT in the subject Assessment Year has allowed complete TDS credit and resulting in short grant of TDS credit of INR 42,76,437 to the Appellant. 4. That on the facts and circumstances of the case and in law the AO has erred in not grating due interest u/s 244A under the Act. 5. That on the facts and circumstances of the case and in law the AO has erred in levying interest u/s 243D under the Act. 6. That on the facts and circ....
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....P directed to increase the credit period from 30 days to 60 days and directed Ld. TPO to compute interest @4.465% (i.e. LIBOR + 400 basis point). After giving effect to Hon'ble DRP's directions the transfer pricing adjustment was reduced to INR 75,65,322. 2 Ground No 2 - Interest on Outstanding Receivables Key contention of ERM * Principal transaction has been accepted to be at ALP by the Ld. TPO - The net cost-plus margin earned by the Appellant was more than the comparable companies (both unadjusted and working capital adjusted) * Working capital adjustment undertaken by the Appellant and submitted with the Ld. TPO and Hon'ble DRP, subsumes the impact of outstanding balances. The Appellant has earned a higher margin of 18.03% vis-a-vis a working capital adjusted mean margin of 7.60% earned by the comparable companies. * The Appellant entered into substantial third-party transactions which forms 67.83% of the revenue. The revenue split between related and non-related parties is tabulated below: AE Service Revenue 246,669,998 32.17% Non-AE Service Revenue 520,043,261 67.83% Total Service Revenue 766,713,259 100....
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....t be sustained. 2.1 The Ld. AR relied on the order in assessee's own case for AY 2016- 17 [ITA No.513/Del/2021] in which this issue was decided in favour of the assessee at para 11. It was pointed out that the Coordinate Bench had relied on the case of Kusum Healthcare Pvt. Limited (398 ITR 66 (Del)) to hold that the addition made on account of interest on delayed receivables was not sustainable for the year under consideration. It was also pointed out that the working capital adjustments of the assessee were compared to the independent comparable companies and it was revealed that the working capital adjusted margin for the assessee was 18.03% as compared to 7.60% earned by the independent comparable companies. It was the submission that the working capital adjusted margin also considers late realizations on outstanding amounts and in this case the margin earned was adequate to cover for any loss of revenue on that account. It was the further submission that the third-party transactions were 67.83% of the revenue and consequently the Associated Enterprises revenue was only 32.17%. It was pointed out by the Ld. AR that delay in receiving the billed amounts was a common phenomeno....
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....AE's. 3.1 Regarding the TDS issue the Ld. DR was agreeable to necessary directions being given to the Ld. AO. 4. We have heard the rival submissions and have gone through the documents before us. Regarding the TP issue, we find that a Coordinate Bench of the ITAT has already adjudicated in favour of the assessee for AY 2016-17, by following the judgment in the case of Kusum Healthcare (supra). Normally this would clinch the issue in favour of the assessee. However, since the Ld. DR has pointed out the determining paragraphs in the Kusum Healthcare case (supra) and the two other ITAT cases relied upon by him (supra),we feel that it is necessary to discuss the issue in the light of all these orders before us. While we would agree that just as in the Kusum Healthcare case (supra) the TPO has confined himself to the year under consideration and has not even, if we may add, attempted to work out any pattern of remarkable difference between an AE and a non AE transaction,we also find that after giving this observation in para 10, the Hon'ble High Court has proceeded ahead to direct deletion of the adjustment on these very same grounds. The facts of the case before us are remarkably....