TaxTMI 
TaxTMI 
2025 (3) TMI 2324
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....ment to Distribution, SWD, ITES/TSS segments of the assessee. 4. The facts in brief are that the assessee in the present case is a private limited company and incorporated in India in 2005, with its headquarters in Bengaluru. It is engaged in providing services such as end-to-end connections for satellite, broadband IPTV, hybrid, OTT, and EPGs etc. The assessee entered into various international transactions with its AEs, which were broadly classified into the following segments: (a) R&D Software development services segment (SWD-segment) (b) Technical Support Services segment. (TSS-segment) (c) Marketing support and distribution services segment (MSD segment) 5. The assessee benchmarked the international transactions across different segments using the TNMM, considering it the most appropriate method. The PLI for the MSD segment was taken as the operating profit to operating revenue (OP/OR) at 4.43%, whereas the PLI for the SWD and TSS segments was taken as the operating profit to operating cost (OP/OC) at 14.22% and 3.35%, respectively. Furthermore, the assessee selected 9, 6, and 6 different companies as comparables for the SWD, TSS, and MSD segm....
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....s advanced by the ld. AR of the assessee. As such the learned DR did not raise any serious objection if the matter is set aside to the file of the TPO for fresh adjudication as per the provisions of law. 13. We have heard the rival contentions of both parties and perused the materials available on record. From the preceding discussion, we note that the assessee entered into several international transactions with its AEs, broadly classified into three segments, as discussed above. The assessee applied the TNMM to benchmark these transactions, which is not disputed. However, the TPO rejected the assessee's TP study concerning the selection of comparables and the computation of ALP. Consequently, the TPO conducted its own TP study, selected a new set of comparable companies for each segment, and made upward TP adjustments in each segment. 14. Thus, in this case, the dispute primarily revolves around the filters applied, the inclusion or exclusion of comparable companies, the computation of margins, and related adjustments concerning working capital, risk factors, etc. 15. During the hearing, the learned AR for the assessee strongly contested the approach adopted by the TPO f....
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.... that the learned DRP/AO/TPO erred in benchmarking the outstanding receivable and making TP adjustment of Rs. 19,34,93,050.00 only. 18. During the proceedings, the TPO has noticed that the assessee has outstanding receivable from its AEs beyond the agreed credit period of 15 days. The TPO opined that the delay in payment of receivables from the AEs constitutes an International Transaction under section 92B of the Act, which explicitly includes such deferred payments under the ambit of transfer pricing provisions, thereby warranting an Arm's Length Price (ALP) determination. The TPO in this regard also referred the various case laws which are part of TPO order. 19. The TPO, further rejected the assessee's contention that the receivables transaction should not be separately benchmarked as it was part of an overall business arrangement with the AE. As such the TPO noted that aggregation of transactions is permissible only when the underlying transactions are continuous, closely interlinked, and have a direct bearing on pricing. The burden of proving such linkage rests with the assessee, which, in this case, failed to provide substantial evidence to justify aggregation. Hence, th....
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.... authorities below. 27. We have heard the rival contentions of both the parties and perused the materials available on record. The first question before us arises as to whether or not the outstanding receivables from AEs are an international transaction. This issue is no longer res integra. As per the amendment to section 92B of the Act by way of Finance Act, 2012 with retrospective effect from 01/04/2002 that, the interest on outstanding receivables is an international transaction, and it certainly requires separate benchmarking. Accordingly, the extended credit period or credit allowed over and above the agreed period shall be considered as separate international transaction required to be benchmarked. In holding so, we refer the decision of this Tribunal in case of AMD India Pvt Ltd vs. DCIT reported in 95 taxmann.com 531 wherein it was held as under: "10. In our considered opinion, to the extent of agreed credit period, the sale price to AE or non AE is inclusive of possible interest on such agreed debt and therefore, for such credit allowed to AE, it cannot be said that this is an independent international transaction. But when extra credit is allowed beyond the ag....
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.... law. This is worth noting that by allowing extra credit in excess of agreed period of 30 days, profit shifting is there because if credit period is more, prices go up which is not done in the present case since, the prices are determined on the basis of 30 days credit period. 28. The above finding of the Tribunal was challenged by the revenue before the Hon'ble Jurisdictional High Court in case of PCIT vs. AMD India Pvt Ltd reported in 98 taxmann.com 512 wherein the revenue appeal was dismissed by observing as under: 5. Having heard the learned counsel for the appellants-Revenue, we are therefore of the opinion that no substantial question of law arises in the present case also. The appeal filed by the Appellants-Revenue is liable to be dismissed and it is dismissed accordingly. No costs. 29. Now, coming to the issue in respect of the rate of interest, the TPO has taken 6-months LIBOR + 450 basis point whereas the assessee on the strength of case law argued that the rate of interest should be LIBOR + 200 basis point. In this regard, we find pertinent to refer the order of this Tribunal in the case of DCIT Vs. Hewlett Packard India Software Operations Private Limited....