| The Tax Publishers2021 TaxPub(DT) 1563 (Chen-Trib) INCOME TAX ACT, 1961
Section 92B Section 92C
Delay in realization of receivables from AE beyond credit period constituted a separate international transaction with effect from assessment year 2013-14 onwards. Hence, there was no merit in the arguments taken by assessee that delay in realization of AE receivables was not an international transaction. However, TPO was directed to adopt LIBOR + 300 basis point for imputing interest on overdue receivables, instead of PLR as the base rate adopted by TPO.
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Transfer pricing - International transaction - Delay in realization of AE receivables -
TPO considered outstanding receivables from AEs as a separate international transaction and accordingly determining ALP of impugned international transaction. Assessee further submitted that outstanding receivables as a result of its international transactions with AEs were not separate international transaction as per section 92B, when principal transaction giving rise to receivable had been accepted to be at arm's length and consequently, no separate adjustment was warranted on account of notional interest on outstanding receivables. Held: Definition of 'international transaction' has been amended by insertion of clause (c) to Explanation to section 92B by the Finance Act, 2012 with retrospective effect from 1-4-2002, where 'capital financing, including any type of long-term or short-term borrowing, lending or guarantee; purchase or sale of marketable securities or any type of advance, payments or deferred payments or receivables or any other debt arising during the course of business' are international transactions and hence, delay in realization of receivables from AE beyond credit period constituted a separate international transaction with effect from assessment year 2013-14 onwards. Hence, there was no merit in the arguments taken by assessee that delay in realization of AE receivables was not an international transaction. However, TPO was directed to adopt LIBOR + 300 basis point for imputing interest on overdue receivables, instead of PLR as the base rate adopted by TPO.
Relied on:Dalmia Jain & Co. Ltd. v. CIT (1971) 81 ITR 754 (SC) : 1971 TaxPub(DT) 0350 (SC), CIT West Bengal-1 Calcutta v. DE Luxe Film Distributors Ltd. (1978) 114 ITR 434 (Cal) : 1978 TaxPub(DT) 0856 (Cal-HC), Mettur Industries Ltd. v. CIT (1978) 114 ITR 438 (Mad) : 1978 TaxPub(DT) 0430 (Mad-HC), S.A. Builders v. CIT (A) & Anr. (2007) 288 ITR 1 (SC) : 2007 TaxPub(DT) 0833 (SC), and Dy. CIT v. B Kumar Gowda (2017) 396 ITR 386 (Kar) : 2017 TaxPub(DT) 2026 (Karn-HC)
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2011-12
INCOME TAX ACT, 1961
Section 36(1)(va)
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