TaxTMI 
TaxTMI 
2026 (8) TMI 458
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....nfructuous. 3. Ground Nos. 2 to 4 along with sub-grounds are interconnected and pertains to interest on delayed receivables. 4. The brief facts of the case on hand are that the assessee, a private limited company, is engaged in the business of providing Software Development Services (SWD) and Information Technology Enabled Services (ITeS) to its AEs on a cost-plus mark-up basis. 5. The Assessee company filed the return of income for the captioned AY on 30.11.2022 offering an income of Rs. 94,04,52,910/- only. Subsequently, the case of the assessee was selected for scrutiny through CASS. During the TP proceedings, the TPO treated the delay in realization of trade receivables from the AEs as unsecured loans advanced to the AEs and, accordingly, computed notional interest for the period of such delay during the year under consideration. In doing so, the Ld. TPO placed reliance on the provisions of section 92B of the Act, wherein the definition of "international transaction" has been expanded to include capital financing transactions arising in the course of business. The Ld. TPO computed notional interest on the average receivables of the assessee for the captioned AY by appl....
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....rred an appeal before us. 9. The Ld. AR before us has filed a paper book running from page Nos. 1 to 556. The assessee before us submitted that trade receivables should not be treated as a separate international transaction and no interest should be imputed on the same. It was submitted that the TPO has wrongly treated the outstanding trade receivables as if they were unsecured loans advanced to the AEs and accordingly computed interest on such receivables amounting to Rs. 3,90,28,715/-. Further, the assessee before us has filed an application u/r 29 of ITAT rules, 1963 seeking permission to file additional evidence in support of grounds filed in the appeal. The assessee submitted that invoice-wise details of receivables was sought by the Ld. TPO during the course of TP proceedings however, the Appellant could not furnish the invoice wise details owing to genuine practical constraints in collating data from multiple systems. At the relevant time, only aggregate transaction data was readily available and was duly filed. Accordingly, the Ld. TPO considered the average of opening balance and closing balance of receivables and levied interest considering LIBOR+450 basis points and m....
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....mining the arm's length price, as transfer pricing provisions require benchmarking of the transaction from the perspective of independent parties. It was also argued that the assessee failed to establish that the receivables and payables were eligible for netting-off and, therefore, the adjustment computed by the Ld. TPO was justified. The Ld. DR further supported the adoption of LIBOR plus 450 basis points and submitted that the assessee had failed to demonstrate that the rate adopted by the Ld. TPO was excessive or unreasonable. 10.2 As regards the application filed under Rule 29 of the ITAT Rules, the Ld. DR opposed the admission of additional evidence on the ground that adequate opportunities had been granted before the lower authorities and the assessee had failed to furnish the documents at the appropriate stage. It was submitted that Rule 29 cannot be invoked to fill up deficiencies in the assessee's case. Without prejudice, the Ld. DR submitted that if the additional evidence is admitted, the matter may be restored to the file of the Ld. TPO/AO for verification thereof. 11. We have heard the rival submissions of both the parties and perused the materials avail....
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....e assessee has both receivables and payables with the same AE, the impact of delay cannot be examined in isolation. If the assessee is also enjoying credit from the same AE, the real benefit, if any, has to be determined on a net basis. Ignoring the payables would result in an artificial and inflated adjustment which does not reflect the true economic substance of the transaction. The above view finds strong support from the decision of the coordinate bench of the Tribunal in the case of ACIT v. Avery Dennison (I) (P.) Ltd. [2021] 133 taxmann.com 536 (Delhi - Trib.) dated [11-10-2021], wherein it was held that where the assessee has a net balance payable to AEs, the adjustment on account of interest on receivables does not survive if payables are not factored in. The said decision has been affirmed by the Hon'ble Delhi High Court in Pr. CIT v. Avery Dennision (I) (P.) Ltd. [2023] 154 taxmann.com 454 (Delhi) dated [20-09-2022], which has further held that where debtor days of non-AEs are higher than those of AEs and no interest is charged from non-AEs, the assessee is justified in not charging interest from AEs as well. The SLP filed by the Revenue against the said judgment has ....