Phoenix Lamps Ltd Vs DCIT (Allahabad High Court)
On September 10, 2024, the Allahabad High Court addressed the appeal in Phoenix Lamps Ltd Vs DCIT, focusing on the treatment of delayed receivables from Associated Enterprises (AEs). The Court noted that the Income Tax Appellate Tribunal (ITAT) had previously ruled that working capital adjustments typically account for interest on outstanding receivables, based on a precedent set by the Delhi High Court in Kusum Health Care Pvt. Ltd. The Tribunal directed the Transfer Pricing Officer (TPO) to reassess whether interest should be applied to receivables not settled within the 70-day credit period. The Allahabad High Court agreed that the TPO’s review was appropriate but emphasized that interest imputation beyond what was covered by working capital adjustments might not be necessary. The Court thus modified the Tribunal’s order, instructing the TPO to re-evaluate the situation in light of the Kusum Health Care judgment and issue a revised decision. This ruling underscores the principle that once working capital adjustments are made, additional interest on delayed receivables may not be required.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. Heard Sri Shashwat Bajpai, learned counsel appearing on behalf of appellant and Sri Gaurav Mahajan, learned counsel appearing on behalf of Respondent.
