TaxTMI 
TaxTMI 
2025 (5) TMI 2256
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....he international transactions entered into by the Assessee with its Associated Enterprise ('AE"). 2. On the facts and circumstances of the case and in law, the learned AO/ learned TPO, under the directions of the Hon'ble DRP, erred in treating trade receivables as a separate international transaction undertaken by the Assessee without any material in support thereof. 3. On the facts and circumstances of the case and in law, the learned AO/ learned TPO, under the directions of the Hon'ble DRP, erred in not appreciating the fact that working capital impact/adjustment subsumed any excess credit period, accordingly, no separate adjustment ought to be made for the same. 4. Without prejudice, on the facts and circumstances of the case and in law, the learned AO/ learned TPO, under the directions of the Hon'ble DRP, erred in adopting average six months USD Libor + 450 basis points to calculate the interest on outstanding receivables. 5. On facts and circumstances of the case and in law, the learned AO erred in levying interest under Section 234A and Section 234B of the Act." 3. The issue arising in grounds no.1 to 4, raised in assesse....
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....t appropriate method with the Profit Level Indicator ("PLI") of Operating Profit to Total Operating Expenses. By considering itself as the tested party, the assessee identified 11 comparable companies with an arithmetic mean of weighted adjusted net cost plus markup of 22.60%, with 35th and 65th percentile range between 19.18% to 28.32% and a median of 22.64%. As the assessee has a net cost-plus margin of 31.15%, accordingly, it claimed the transaction pertaining to the provision of Medical Transcription Services is at ALP, even by adopting TNMM as the most appropriate method. 6. As regards the ITeS segment, the assessee adopted TNMM as the most appropriate method with the PLI of Operating Profit to Total Operating Expenses, for benchmarking the transaction. By considering itself as the tested party, assessee identified 11 comparable companies with an arithmetic mean of weighted adjusted net cost plus markup of 23.61%, with 35th and 65th percentile range between 20.17% to 23.37% and median of 23.66%. As the assessee has a net cost-plus margin of 39.84%, accordingly, it claimed the transaction pertaining to the provision of ITeS to be at ALP. 7. The Assessing Officer ("AO") ma....
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....ng trade receivables due as on 31/03/2020 from AE, which are pending for more than 45 days. In its response, the assessee submitted that the outstanding receivables pertain to the international transactions of provision of Medical Transcription Services and the provision of ITeS with AE. The assessee further submitted that the early or late realisation of such proceeds is incidental to and a consequence of the main transaction and should be considered as intrinsically linked to the main transaction, and not a separate transaction in itself, per se. The assessee submitted that once the ALP is determined in respect of the main transaction, it would be deemed to be covering all the elements and consequences of such transaction. The TPO, vide order passed under section 92CA(3) of the Act, disagreed with the submissions of the assessee and computed adjustment by adopting average 6 months USD LIBOR plus 450 basis point (i.e. 5.67%) as the arm's length interest to be charged to the AE on the invoices that were outstanding for a period in excess of 90 days. As a result, in respect of outstanding receivables pertaining to the provision of Medical Transcription Services, the TPO computed tot....
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.... proceeds was incidental to the main transaction. 13. From the computation of the margins of the comparable companies in the Medical Transcription Services segment, as placed on pages 153-162 of the paper book, we find that the assessee applied the interest-rate benchmark PLR of 13.68% while computing the working capital adjusted margins of the comparable companies. Similarly, while computing the margins of the comparable companies in the ITeS segment, as placed on pages 163-172 of the paper book, we find that the assessee applied the interest-rate benchmark PLR of 13.68% while computing the working capital adjusted margins of the comparable companies. Thus, it is evident that even after the working capital adjustment, the margins of the comparable companies were found to be lower than the margin of the assessee. From the record, it is evident that the TPO accepted the benchmarking analysis conducted by the assessee in respect of international transactions pertaining to the provision of Medical Transcription Services and the provision of ITeS to the AE and found the margin of the assessee to be at arm's length vis-à-vis working capital adjusted margins of the comparable c....