Teradata India Pvt. Ltd. Vs DCIT (ITAT Delhi)
The appeals for Assessment Years (AYs) 2017-18 and 2018-19, along with the Revenue’s appeal for AY 2018-19, arose from assessment orders passed under Sections 143(3) read with 144C(13) of the Income-tax Act. The primary issues concerned transfer pricing adjustments on delayed receivables from Associated Enterprises (AEs), deduction under Section 80G for donations made as part of Corporate Social Responsibility (CSR) obligations, computation-related issues, and disallowance of employees’ contribution to provident fund and labour welfare fund.
With regard to transfer pricing, the assessee challenged adjustments made on account of interest on outstanding receivables from AEs. The Transfer Pricing Officer (TPO) treated delayed receivables as a separate international transaction and computed notional interest using LIBOR plus 400 basis points. The assessee argued that such adjustments were not warranted, especially since working capital adjustments had already been granted and similar additions had been deleted in earlier years by the Tribunal.
The Tribunal observed that outstanding receivables can constitute an international transaction under the Explanation to Section 92B. However, relying on the principles laid down by the Delhi High Court in Kusum Healthcare, it held that a proper inquiry is required to analyse the pattern of receivables over a period of time and determine whether the arrangement was intended to benefit the AE. The Tribunal noted that this aspect had not been adequately examined. It also took note of the assessee’s alternative contention that any shortfall arising from delayed receivables was offset by excess margins earned from AEs. Since these contentions required factual verification, the Tribunal restored the issue to the Assessing Officer/TPO for fresh examination, including the applicability of Kusum Healthcare, the pattern of receivables, the assessee’s alternative calculations, and the appropriate rate of interest. The grounds were allowed for statistical purposes.
