×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
These are the appea s filed by the assessee against the separate directions of the Dispute Resolution Panel-2, Mumbai (In short, the DRP) dated 18/11/2016 and 20/03/2017 for the A.Y. 2012-13 and 2013-14 respectively which were given effect by the order passed U/s 143(3)/144C(5) of the Income Tax Act, 1961 (in short, the Act).
2. At the outset, the ld AR of the assessee placed on record order of the Tribunal in assessee’s own case for the A.Y. 2009-10 in ITA No. 487/Mum/2014 wherein main issue with regard to charging of notional interest pertaining to outstanding balance of receivables from AEs of the assessee was decided in favour of assessee vide order dated 08/07/2015.
3. We have considered the rival contentions and found that one of the common issue in both the years pertain to charging of notional interest on the outstanding balance of receivables of the assessee from its AEs. From the record we found that the TPO has computed adjustment on the interest that should have been charged to the AE on receivables that remained unpaid even the period of 90 days. The TPO has applied LIBOR of 4.8% in making the adjustment which was confirmed by the DRP. Grounds No. 1 to 10 in the A.Y. 2012-13 pertains to the said addition.
4. It was argued by the ld AR of the assessee that the issue under consideration is covered by the order of the Tribunal in assessee’s own case for the A.Y. 2009-10. He has further contended that no adjustmen was made on account of notional interest on AE receivable for AY 2010-11 and AY 2011-12. Copy of the TPO order are enclosed at pages 237 to 244 and page 245 of the paper book respectively. As per the ld AR, the interest is already factored in while pricing the contracts undertaken with AEs. Further, since the assessee’s margin from its AE transactions is higher vis a vis non-AEs as well as single year working capital adjustment margin of independent comparables, interest element for delayed payment is subsumed in higher mark up charged.
5. On the other hand, the ld DR has relied on the orders of the lowr authorities.
6. We have gone through the orders of the authorities below as well as the order of the Tribunal in assessee’s own case dated 08/07/2015 for the A.Y. 2009-10 wherein the Tribunal have given certain directions to the TPO with regard to interest to be charged on outstanding receivables. The precise observation of the Tribunal was as under:
“7. We have considered rival contentions, carefully gone through the orders of the authorities below. We have also deliberated on the judicial pronouncements cited at bar by ld. AR and ld. DR in the factual matrix of instant case. From the record we found that the assessee company had provided EPC services to its AEs, and as the concerned AEs were going through financial difficulties certain payments by the AEs to the assessee company were delayed beyond the normal credit period. Similarly, the assessee company had incurred certain expenses on behalf of its AEs. These were recovered from the AEs. Some such expenses were recovered beyond the normal credit period. The TPO, on these facts, computed the interest chargeable by adopting the SBI PLR rate of 12.25% as the bench mark rate for delay in receipt of export receivables beyond the normal credit period of 60 days and the similar interest was charged on delayed recovery of expenses. Thus, a total adjustment of Rs.10,36,49,646/- was proposed by the TPO and incorporated in the assessment order.