No separate notional interest adjustment when working capital adjustment made under TNMM

ACIT Vs Intas Pharmaceuticals Ltd (ITAT Ahmedabad)

ITAT Ahmedabad held that upward adjustment on account of notional interest on outstanding receivables rightly deleted since TNMM has been applied and working capital adjustment has been given while benchmarking the main international transaction.

Facts- The present appeal has been filed by the revenue. It is mainly contested the deletion of upward adjustment of Rs.1,27,16,929/- made by the TPO/A0 by applying LIBOR with a different mark­up and further addition of 100 basis points towards alleged forex risk adjustment in respect of loans advanced to Associated Enterprises (AEs). The Revenue has also challenged the rejection of the external CUP method adopted by the TPO.

Revenue also contested the deletion of upward adjustment made by the TPO/AO by charging notional interest on outstanding receivables from AEs beyond the stipulated credit period.

Conclusion- In assessee’s own case, it was held that the internal CUP adopted by the assessee, based on the quotation received from Bank of Nova Scotia, Singapore, constituted a valid and authentic comparable. Accordingly, the Bench accepted the assessee’s internal CUP benchmarking and rejected the external CUPs relied upon by the TPO. It was further held that no ad-hoc addition of 100 basis points towards forex risk was warranted, as there was no evidence of significant forex risk affecting the assessee’s transactions.