Parle Biscuits Private Limited Vs Assessment Unit (ITAT Mumbai)
ITAT Mumbai held that TPO rightly treated interest receivables as a loan outstanding given by assessee to its Associated Enterprises (AE) and charging interest on the same.
Facts- The assessee company was established in 1974 in Mumbai and is 100% subsidiary of Parle Products Pvt Ltd. The assessee manufactures wide range of biscuits, confectionary, snacks and bakery products. During the year under consideration, the assessee has entered into various international transactions. TPO made adjustments to interest on accounts receivables and interest on interest receivables.
AO passed a draft assessment order incorporating the said TP adjustment. AO also made an addition of Rs.3,26,32,245/- being the amount which the assessee had declared as any other addition u/s.28 to 44DA in the tax audit report, failed to add the same in the income tax return filed. AO also made an addition of Rs.98,17,464/- u/s. 40(a)(ia).
Aggrieved, the assessee filed its objections before the DRP, who confirmed the TP addition and gave certain directions with regard to the other additions made by AO. The assessee is in appeal before the Tribunal against the final order of assessment passed by AO.
Conclusion- The interest on a loan is a compensation received towards the utilisation of funds given by the assessee to its AE and the interest element on the said loan if not paid improves the liquidity position of the AEs and become part and parcel of the said loan transaction. Therefore, we see no infirmity in the action of the TPO in treating the interest receivable as a loan outstanding and charging interest on the same accordingly. In view of this discussion, we confirm the TP adjustment made and dismiss the ground raised by the assessee.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal is against the final order of assessment passed by the Assessment Unit, Income-tax Department dated 28/07/2022 for A.Y.2018-19 under section 143(3) read with section 143(3) read with section 144C(13) of the I.T. Act.
2. The assessee company was established in 1974 in Mumbai and is 100% subsidiary of Parle Products Pvt Ltd. The assessee manufactures wide range of biscuits, confectionary, snacks and bakery products. During the year under consideration, the assessee has entered into various international transactions as listed below:-
