TaxTMI 
TaxTMI 
2024 (9) TMI 1921
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....Chennai u/s. 143(3) r.w.s 92CA(4) r.w.s 144C(3) of the Income Tax Act, 1961 (hereinafter 'the Act') dated 28.03.2017. 2. At the outset, it is noticed that this appeal was adjudicated vide order dated 06.09.2023 and subsequently, vide Miscellaneous Application filed by assessee in MA No. 141/CHNY/2023, the Tribunal's order was recalled and appeal was fixed for fresh hearing. 3. The only issue in this appeal of the assessee is against order of the CIT(A) confirming final assessment order on the issue of treating outstanding receivables by the assessee from its Associated Enterprises as separate international transactions u/s. 92B(1) of the Act and making adjustment on account of interest on the outstanding receivables and also raised, w....
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....e TPO/ Assessing Officer to adopt LIBOR rate and not SBI PLR rate, while giving effect to the order. Aggrieved, the assessee is in appeal before the Tribunal. 5. Before us, the ld. counsel for the assessee argued that the TPO while making adjustment of interest on the receivables outstanding has accepted the position that the interest is factored in the working capital adjustment and for this, he drew our attention to the relevant observations of TPO, which reads as under:- "The assessee was show caused why an adjustment should not be made on the receivables outstanding more than the credit period provided in the invoices. Further the receivable outstanding were treated as international transactions with retrospective effect fro....
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....Since the operating margin of the assessee is more than the comparables selected by this office, no adjustment is considered necessary for this segment." Accordingly, the ld. counsel argued that the working capital adjustment margin subsumes the interest on delayed receivables and no separate adjustment is required. He agreed that in view of the amendment by Finance Act, 2012 amended section 92B which reads the definition of international transactions under the amendment is retrospective w.e.f. 01.04.2002. The receivables on overdues is defined as international transaction and hence, receivables arising during the course of business forms part of capital financing and the definition of international transaction, therefore includes receiv....
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....onstitutes an international transaction by itself. With the Assessee having already factored in the impact of the receivables on the working capital and thereby on its pricing/profitability vis-à-vis that of its comparables, any further adjustment only on the basis of the outstanding receivables would have distorted the picture and re-characterised the transaction. This was clearly impermissible in law as explained by this Court in CIT v. EKL Appliances Ltd. (2012) 345 ITR 241 (Delhi). 12. Consequently, the Court is unable to find any error in the impugned order of the ITAT giving rise to any substantial question of law for determination. The appeal is, accordingly, dismissed." In view of the above, the ld. counsel argued....
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....en benchmarked separately. It also emerges that the assessee is a zero-debt entity and do not incur significant interest expenditure. Therefore, to allege that the assessee accommodated its AEs in the guise of receivables would not be a correct proposition. Therefore, this addition is not sustainable. We order so. The corresponding grounds raised by the assessee stand allowed. 6.1 The ld. counsel also relied on the decision of Hon'ble Delhi Court in the case of PCIT vs. Inductis India Pvt. Ltd., in ITA No. 175/2019 dated 12.04.2023 wherein the Hon'ble Delhi Court held that "the assessee company being a debt free company the question of receiving any interest on receivables did not arise, thereby adjustment made by AO on account of intere....
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.... foreign AEs would automatically be characterized as an international transaction. The Hon'ble High Court held that there may be 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 case to case basis and the impact of this would have an the working capital of the assessee will have to be studied and enquired properly by the AO for analyzing the statistics over a period of time to find out the pattern which would indicate that viz-a-viz the receivables for the supplies made to its AE, the arrangement reflects an international transaction intended to benefit the AE in some way. It means that the Hon'ble High Court has recognized the concept but since ....