Case Law Details
Transfer Pricing : Impact of delayed associated enterprise receivables subsumed in working capital adjustment made by the assessee company. Delhi High Court confirms ITAT’s deletion of notional interest adjustment on delayed AE-receivables.
Operative Portion of Delhi ITAT Order Kusum Healthcare (P.) Ltd. Vs. ACIT [2015] 62 taxmann.com 79 (Delhi – Trib.)“
In view of the above, a working Capital adjustment appropriately takes into account the outstanding receivable. Therefore, the assessee has undertaken a working capital adjustment to reflect these differences by adjusting for differences in working capital and thereby, profitability of each comparable company. Accordingly, while calculating the working capital adjusted, operating margin on costs of the comparable companies, the impact of outstanding receivables on the profitability has been taken into account. If the pricing/profitability of the assessee are more than the working capital adjusted margin of the comparable, then additional imputation of interest on the outstanding receivables is not warranted.
The assessee had undertaken a working capital adjustment for the comparable companies selected in its transfer pricing report which was also submitted with the Ld. TPO. A snapshot of the result is provided below:
