Case Law Details
Value Labs Vs ACIT (ITAT Hyderabad)
The issue which arises in the present appeal is against the adjustment made in the hands of the assessee on account of interest due on outstanding Receivables by treating the same as international transaction. Much reliance is placed on the explanation inserted under section 92B of the Act with retrospective effect from 1.4.2002.
Expression added in Explanation to section 92B does not mean that de hors the context, every item of receivables appearing in the accounts of an entity, which may have dealing with foreign AE, would automatically be characterized as an international transaction
No adjustment is to be made on account of notional interest on receivables by relying upon Explanation (i), (a) & (c) of section 92B of the Act by treating the continued debit balance as an international transaction. Moreover when the taxpayer is debt free company, there is no question of charging any interest on receivables.
The assessee during the year under consideration had not availed any loan from AEs or unrelated third parties and was not incurring any interest cost. The agreement between the assessee and its AE vis-à-vis terms of payment within stipulated period of 90 days cannot form basis for holding the existence of International transaction between assessee and its AE, where outstanding is not received within stipulated period. Such is the proposition laid down by Hon’ble Delhi High Court in Pr. CIT-V vs Kusum Health Care Pvt.Ltd. (supra) especially where working capital adjustment has been allowed to assessee. In any case, the credit period of 90 days is less than credit period of 90 to 120 days of comparables and no adjustment is warranted.
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