Case Law Details
Axis Risk Consulting Services Private Limited. Vs DCIT (ITAT Delhi)
the only dispute before us is with regard to the adjustment by way of imputing interest @ 17.22% by the TPO on account of receivables from the AE. Here in this case, it is an undisputed fact that the assessee has also rendered similar services to non AEs/unrelated parties and on receivables from the non AEs also, there have been delays on receivables on which no interest has been charged by the assessee. Before us, invoice wise details have been furnished highlighting the details of amount of the invoice date; date of receipt and the number of outstanding days for the payment has been given. From such details, it is seen that in the case of unrelated party transaction, there are huge delays and in some cases it has gone up more than 1700 days. The period of outstanding receivables is ranging between 38 days to 1718 days and in most of the invoices, average delay is more that 300 days. If there are similar nature of transaction with comparable uncontrolled transactions and also with related parties, then there is an internal CUP to bench mark the controlled transaction with comparable uncontrolled transaction. Under CUP price charged or paid for the services provided in a comparable uncontrolled transaction is taken into consideration and it is the adjusted price paid for availing services which constitutes the benchmark for comparison with the price paid for availing of any services in an international transaction. If there are similar transactions of services with related parties as well as unrelated parties and the price charged or paid are comparable, then it is taken to be at arm’s length price. Thus, if under both the scenarios, no interest has been charged on similar nature of receivables, then it has to be reckoned that the transaction with the related party meets the arm’s length requirement vis-à-vis, the transactions with the unrelated third parties. Accordingly, we hold that no interest can be imputed on receivables with the AE and accordingly, the addition made by the TPO is directed to be deleted.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
The aforesaid appeal has been filed by the assessee against impugned order dated 06.01.2014, passed by Ld. Assessing Officer u/s 143(3)/ 144C(13) in pursuance of the directions given by the DRP u/s. 144C(5) dated 27.11.2013.
2. The only issue raised by the assessee in various grounds of appeal relates to Transfer Pricing Adjustment of Rs.79,89,255/- on account of re-characterizing of the outstanding receivables from overseas AEs as loan facility and thereby imputing interest at the rate equal to annual average yield of 5 year ‘BB’ rated bond by considering all the receivables to be outstanding for over 365 days.
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