No TP adjustment for Overdue Receivables which already been considered in working capital adjustment

Bertelsmann Marketing Services India Pvt. Ltd. Vs DCIT (ITAT Delhi)

The issue under consideration is whether overdue receivables from AEs is considered as an international transaction?

ITAT states that ground is with respect to treating the overdue receivable from associated enterprise as an international transactions however looking to the order of the learned transfer pricing officer after the direction of the learned Dispute Resolution Panel that working capital adjusted margin were considered with respect to all the comparables, therefore, ITAT do not find any reason to further sustain any adjustment on account of interest on outstanding receivables from its associated enterprise. As the outstanding of associated enterprise is shown as debtors and is covered in the working capital adjustment itself, it amounts to double addition. Had the working capital adjusted margin were not taken in case of comparable company, this addition/adjustment would have been worth considering. In view of this, ITAT direct the learned transfer pricing officer to delete the addition on account of interest on overdue receivable from associated enterprise. Accordingly ground of the appeal is allowed.

FULL TEXT OF THE ITAT JUDGEMENT

1. This is an appeal filed by Bertelsmann Marketing Services India Private Limited (The Assessee/ Appellant) against the order of the ld Deputy Commissioner Of Income Tax, Circle 4 (2), New Delhi (the learned AO) dated 9/10/2015 passed u/s 143 (3) read with Section 144C of The Income Tax Act, 1961 (The Act)dated 09/10/2015 for the Assessment Year 2010-11 determining the total income of the assessee at Rs Nil against the returned income at a loss of ₹ 7,323,902/– as per return of income filed on 29/11/2011. The returned income has one adjustment of Rs 195,70,892/– on account of the order of the learned Asst Commissioner Of Income Tax, Transfer Pricing Officer –I (1) (1), New Delhi [ The Ld TPO] passed u/s 92CA of the act on 7/1/2015 where the total adjustment was proposed at ₹ 21,113,342/– comprising of arm’s-length price of the ITeS services of ₹ 21,053,389 and another adjustment on account of outstanding receivable of ₹ 59,953/– which was subject to the direction of the Dispute Resolution Panel – 1, New Delhi (the learned DRP) dated 9/9/2015 after which the ALP of provision of ITeS services of ₹ 141,969, 072/– was determined at ₹ 135,208,614/– which resulted into an adjustment of Rs 1 95,10,939/– and interest on outstanding receivable was retained at ₹ 59,953/–. Thereby, assessee is aggrieved and has preferred this appeal.

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