Milacron India Private Limited Vs DCIT (ITAT Ahmedabad)
The Income Tax Appellate Tribunal (ITAT), Ahmedabad, partly allowed the assessee’s appeal for Assessment Year 2020-21 and addressed issues relating to transfer pricing adjustment on outstanding receivables, deduction under Section 80G for CSR-related donations, penalty proceedings, and refund of excess Dividend Distribution Tax (DDT).
The assessee, engaged in manufacturing plastic processing machinery, filed its return declaring total income of ₹130.75 crore. During scrutiny, the Transfer Pricing Officer (TPO) proposed an adjustment of ₹45.19 lakh on account of notional interest on outstanding receivables from Associated Enterprises (AEs). The Assessing Officer also disallowed a deduction of ₹83.20 lakh claimed under Section 80G in respect of CSR-related donations. The objections raised before the Dispute Resolution Panel (DRP) were rejected, leading to the final assessment order.
On the transfer pricing issue, the Tribunal noted that an identical issue had already been decided in the assessee’s own case for Assessment Year 2021-22. The earlier decision held that where international transactions are benchmarked under the Transactional Net Margin Method (TNMM) and working capital adjustment has been granted, the effect of delayed receivables is already subsumed in the profitability analysis. The Tribunal further noted that the assessee followed a uniform policy of not charging interest from both AEs and non-AEs and that the Revenue had not established the existence of any separate financing arrangement. Since the receivables arose from the principal transaction of sale of goods and were not independent financing transactions, the Tribunal held that the transfer pricing adjustment of ₹45.19 lakh towards notional interest was unsustainable and directed its deletion.
