Case Law Details

Case Name : Nuance Transcription Services India (P.) Ltd. v Dy. CIT (ITAT Bengaluru)
Appeal Number : IT(TP)A No.307/Bang/2016
Date of Judgement/Order : 28/11/2017
Related Assessment Year : 2011-12
Courts : All ITAT (5510) ITAT Bangalore (268)
CA Reetika Agarwal

CA Reetika AgarwalITAT Bengaluru held in the case of Nuance Transcription Services India (P.) Ltd. v Dy. CIT that Outstanding Receivables from AE is an international transaction as per Explanation to Section 92B inserted by the Finance Act 2012 and non-charging of interest for a period exceeding 6 months requires ALP adjustment.

Issue:

Whether transaction of allowing excess period of credit to Associated Enterprises without charging any interest during such credit period would amount to International Transaction within the meaning of section 92B of the Act?

Hon’ble ITAT held:

1. That this issue is now covered by sub-clause (c) of clause (i) of Explanationto Section 92B inserted by the Finance Act 2012 wherein it was clarified that any receivables or any other debts arising during the course of business is International Transaction.

2. That it is trite law that Explanation, though not retrospective, was used as a Parliamentary exposition of its intent contained in the un-amended section and it should be construed that Explanationis deemed to have been there since inception of the section. Relied on following pronouncements:

a. Manickam and Co.State of Tamil Nadu AIR 1977 SC 519

b. CITP. Doraiswamy Chetty [1990] 183 ITR 559/52 Taxman 346 [SC]

c. CITJ.H. Gotla [1985] 156 ITR 323/23 Taxman 14J [SC]

3. That the decisions of the co-ordinates bench relied upon by the assessee had not considered the import of this amendment.

Therefore, held that the transaction of receivables from Associated Enterprises is International Transaction and not charging interest for a period exceeding 6 months requires ALP adjustment.

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