ACQUEON TECHNOLOGIES PIRVATE LIMITED,CHENNAI V. ITO, CORPORATE CIRLCE 1(1), CHENNAI

ITTPA 34/CHNY/2024

AI Insights

The case involves Acqueon Technologies Pvt. Ltd., which appealed against the final assessment orders passed by the Deputy Commissioner of Income Tax, Corporate Circle -1, Chennai, for the assessment years 2020-21 and 2021-22. The appeals were primarily focused on transfer pricing adjustments related to outstanding trade receivables, corporate guarantees, and short-term advances, as well as disallowances under Section 80G of the Income Tax Act. The Tribunal considered various precedents and the specific circumstances of the case, leading to the decisions mentioned in the outcome.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 397130 (ITAT-CHENNAI)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 30-05-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2020-2021
• Other Referred Cases: ACIT Vs. M/s. Saipem India Projects Private Limited, Mega Soft Ltd vs. DCIT, M/s.Source Hov India Private Limited V. DCIT, CIT vs. Everest Kanto Cylinders Ltd, PCIT v. Redington (India) Ltd
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A. SASIKUMAR
• Assessee Lawyers: S.P.CHIDAMBARAM
• Keywords: Transfer pricing; International transaction; Notional interest; Charitable institution; Working capital adjustments
• Section: 143(3); 234B; 15; 37(1); 92B; 80G

Judgement Text

"आयकर अपीलȣय अͬधकरण,‘डी’ Ûयायपीठ,चेÛनई IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH, CHENNAI ŵी मनु क ुमार िगįर ,Ɋाियक सद˟ एवं ŵी एस .आर .रघुनाथा, लेखा सद˟ क े समƗ BEFORE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRI S.R.RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./IT(TP)A Nos.: 34 & 115/CHNY/2024 िनधाᭅरण वषᭅ/Assessment Years: 2020-21 & 2021-22 Acqueon Technologies Pvt. Ltd., (formerly Serviont Global Solutions Ltd), 4/600 & 4/197, 7th Street, Dr. VSI Estate Phase II, Thiruvanmiyur, Chennai – 600 041. PAN: AAACI 0947F Vs. The Deputy Commissioner of Income Tax, Corporate Circle -1, Chennai. (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮ कᳱ ओर से/Appellant by : Shri S.P. Chidambaram, Advocate ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Shri A. Sasikumar, CIT सुनवाई कᳱ तारीख/Date of Hearing : 06.03.2025 घोषणा कᳱ तारीख/Date of Pronouncement : 30.05.2025 आदेश /O R D E R PER S.R.RAGHUNATHA, AM:- These appeals filed by the assessee are directed against final assessment orders passed by the Assessing Officer u/s. 143(3) r.w.s. 144C(13) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2020-21 and 2021-22 dated 25.06.2024 and 11.10.2024, - 2 - IT(TP)A Nos.34 & 115/CHNY/2024 pursuant to directions of the DRP issued u/s.144C(5) of the Act dated 18.06.2024 and 09.09.2024 respectively. 2. Appeal of the assessee for assessment year 2020-21 is taken up first for disposal. The assessee has raised the following grounds of appeal: “Based on the facts and circumstances of the case, Acqueon Technologies Private Limited (formerly Serviont Global Solutions Limited) [hereinafter referred to as “Acqueon” or “the Appellant”], respectfully submits that: 1. The Assessment order passed by the learned Assessing Officer (“AO”) and the order of the Dispute Resolution Panel (“DRP”) under Income tax Act, 1961 (“the Act”) are not in accordance with the law and are contrary to the facts and circumstances of the present case. Grounds on Transfer Pricing Adjustments Recharacterization of outstanding trade receivables as separate international transaction : 2. The learned AO and the Transfer Pricing Officer (“TPO”) has erred in imputing notional interest on the outstanding receivables from the Associated Enterprise (“AE”) and thereby making a TP adjustment. 3. The learned AO / TPO has erred in law and on facts in holding the alleged delay in the realization of the receivables from AE as an international transaction ignoring the fact that the same is not an international transaction in terms of Section 92B of the Act but arises only as a consequence of an international transaction with its associated enterprise. 4. Without prejudice to the above grounds that the delay in receivables is not an international transaction, the Ld. AO has erred in law and on facts by making transfer pricing adjustment on account of delay in the realization of the receivables even after accepting the primary international transactions of the Appellant to be at arm’s length based on the Transaction Net Margin Method at the entity level. 5. Without prejudice to our grounds that the delay in receivables is not an international transaction, the Ld. AO has erred in law and on facts in not appreciating that the Appellant has earned a high net margin, which has impliedly compensated the delay in realisation of outstanding receivables. - 3 - IT(TP)A Nos.34 & 115/CHNY/2024 6. The Ld. AO ought to have appreciated that the Appellant does not charge interest on outstanding receivables from Non-AE and therefore the Appellant cannot be expected to charge interest on outstanding receivables from AE’s. 7. Without prejudice to our grounds that the delay in receivables is not an international transaction, the Ld. AO has erred in law and on facts in not deducting outstanding payables to be made to the AEs while computing notional interest on outstanding receivables from AE. 8. Without prejudice to our grounds that the delay in receivables is not an international transaction, the learned AO has erred in law and on facts by considering LIBOR plus 350 BPS (i.e., 5.40%) as against LIBOR rate. 9. Without prejudice to our grounds that the delay in receivables is not an international transaction, the learned AO has erred in law and on facts by considering LIBOR plus 350 BPS (i.e. 5.40%) as against LIBOR plus 200 BPS as held by this Hon’ble Tribunal in Assessee’s own case in ITA No. 1974/Chny/2016 for AY 2009-10, I.T.(TP)A.No.22/Chny/2020 for AY 2012-13, and I.T.(TP)A.No.60/Chny/2022 for AY 2018-19. Upward revision on account of provision of corporate guarantee to AEs: 10. The Ld. AO/TPO has erred in law and on facts in considering corporate guarantee as a separate international transaction under Section 92B of the Act. 11. The Ld. AO/TPO ought to have appreciated that provisions of corporate guarantee is not in the nature of shareholder activity and as such it will cannot be regarded as international transaction. 12. The Ld. AO/TPO ought to have appreciated that the Appellant does not incur any cost for extending such guarantee and hence the transaction does not have any bearing on the profits, incomes, losses or assets of the company. 13. The Ld. AO/TPO ought to have appreciated that the issuance of corporate guarantee is a transaction of routine nature and the AE does not derive any direct benefit from such guarantee in terms of reduced interest rate, or any other benefit. 14. The Ld. AO/TPO erred in incorrectly applying the most appropriate method while attributing corporate guarantee. 15. Without prejudice to the above, the rate of 2.24% of Corporate Guarantee is very high and arbitrary. 16. Without prejudice to the above, the AO/TPO erred in imputing an ad-hoc notional fee of 2.24% on the value of corporate guarantee provided to the AEs. 17. Without prejudice to our grounds that the corporate guarantee is not an international transaction, the learned AO has erred in law and on facts by considering average fee on - 4 - IT(TP)A Nos.34 & 115/CHNY/2024 Bank Guarantee as per market rates as against 0.5% as held by this Hon’ble Tribunal in Assessee’s own case for AY 2018-19 in I.T.(TP)A.No.60/Chny/2022 for AY 2018-19. Upward adjustment on international transaction relating to short term advances given: 18. The learned AO and the Transfer Pricing Officer (“TPO”) has erred in imputing notional interest on the short-term advances from the Associated Enterprise (“AE”) and thereby making a TP adjustment. 19. Without prejudice to the above grounds that the Ld. AO has erred in imputing notional interest on the short-term advances, the Ld. AO has erred in law and on facts by making transfer pricing adjustment on the short term advances even after accepting the primary international transactions of the Appellant to be at arm’s length based on the Transaction Net Margin Method at the entity level. 20. Without prejudice to our grounds that the Ld. AO/TPO has erred in imputing notional interest on the short-term advances, the Ld. AO has erred in law and on facts in not appreciating that the Appellant has earned a high net margin, which has impliedly compensated the delay in adjustment of short-term trade advances. 21. The Ld. AO ought to have appreciated that the Appellant does not charge interest on similar transactions from non-AEs and therefore the Appellant cannot be expected to charge interest on short term advances from AE’s. 22. Without prejudice to our grounds that the AO/TPO has erred in in imputing notional interest on the short-term advances, the learned AO has erred in law and on facts by considering LIBOR plus 350 BPS (i.e., 5.40%) as against LIBOR rate. 23. Without prejudice to our grounds that the AO/TPO has erred in in imputing notional interest on the short-term advances, the learned AO has erred in law and on facts by considering LIBOR plus 350 BPS (i.e. 5.40%) as against LIBOR plus 200 BPS as held by this Hon’ble Tribunal in Assessee’s own case in ITA No. 1974/Chny/2016 for AY 2009-10, I.T.(TP)A.No.22/Chny/2020 for AY 2012-13, and I.T.(TP)A.No.60/Chny/2022 for AY 2018-19. Disallowance of deduction claimed under Section 80G of the act: 24. The learned AO erred in law and facts by disallowing the deduction claimed under Section 80G of the Act to the tune of INR 75,000 (i.e., 50 percent of INR 1,50,000/-). 25. The Learned AO erred in law and on facts in adding the donations made to approved institutions amounting to INR 25,000/- (i.e., 50 percent INR 50,000/-) to the total income of the Appellant as disallowances under section 80G of the Act. - 5 - IT(TP)A Nos.34 & 115/CHNY/2024 26. The Learned AO ought to have appreciated that the Appellant had disallowed the CSR donations under Section 37(1) while computing the income from business or profession and that the same has no correlation for claiming deduction under section 80G of the Act. 27. Consequent to the above disallowances/ adjustments, the AO erred in levying excess interest under Section 234B and Section 234C of the Act. 3. The brief facts of the case are that the assessee filed its Return of Income for the assessment year 2020-21 on 15.02.2021, declaring total income of Rs.18,51,66,820/-. The case was selected for scrutiny and during the course of assessment proceedings, a reference was made to Transfer Pricing Officer (TPO) in terms of section 92CA of the Act, for computing ALP in respect of International Transactions undertaken by the assessee during the financial year 2019-20 relevant to assessment year 2020-21. The TPO vide their order u/s. 92CA(3) of the Act, dated 21.07.2023 proposed an upward adjustment of Rs.3,86,70,879/-. Also, the Assessing Officer had proposed an addition towards disallowance on deduction claimed u/s.80G of the Act made by the Assessee. Subsequently, the Assessing Officer passed draft assessment order u/s.144C of the Act on 27.09.2023 making the TP adjustment. The assessee filed objections against draft assessment order before the DRP, Bangalore. The DRP, vide their directions dated 18.06.2024 issued u/s.144C(5) of the Act, upheld TP adjustments and the disallowance towards claim made u/s.80G of the Act. Thereafter, the Assessing Officer passed final assessment order u/s.143(3) r.w.s. 144C(13) of the Act for AY 2020-21 and determined total income of - 6 - IT(TP)A Nos.34 & 115/CHNY/2024 Rs.22,67,13,607/- making the following disallowances: Sl. No Nature of Disallowance Transfer Pricing Issues: 1 Notional Interest imputed on outstanding Trade Receivables 2 Notional interest imputed on Short-term advances given to AE 3 Corporate Guarantee Other: 4 Disallowance on Account of deduction u/s. 80G of the Act Aggrieved by the aforementioned order, the assessee filed this appeal which is taken up for adjudication 4. The first issue that came up for our consideration from ground No.2 to 9 of assessee’s appeal is recharacterization of outstanding trade receivables as separate international transaction. The Assessing Officer has treated outstanding receivables from AE as separate international transactions in terms of Explanation to section 92B of the Act and imputed interest. 5. The Ld. AR for the assessee, submitted that this issue is covered by various decisions of ITAT Chennai Benches including the assessee’s own case for earlier assessment years, wherein it has been held that outstanding receivables is international transactions, however when it comes to benchmarking, SBI PLR rate cannot be adopted. He submitted that the Tribunal in the earlier AYs has directed to adopt LIBOR + 200 basis point rate for imputing interest. - 7 - IT(TP)A Nos.34 & 115/CHNY/2024 The Ld. AR further submitted that this Tribunal had in subsequent decisions held that Average LIBOR was to be adopted as the appropriate rate for benchmarking the delayed receivables and placed reliance on the decision of co-ordinate bench of this tribunal in the case of “ACIT Vs. M/s. Saipem India Projects Private Limited in ITA No. 2264/CHNY/2024 and ITA 2389/CHNY/2024”. Therefore, the AR pleaded that Average LIBOR may be adopted for imputing interest. 6. Per contra, the ld. DR supported the orders of the lower authorities. 7. We have heard the rival contentions perused the material available on record gone through the orders of the lower authorities along with the paper books filed and case laws relied upon. We find that an identical issue has been considered by the Tribunal in assessee’s own case for assessment year 2014-15 in IT(TP)A No.46/Chny/2019, where under identical set of facts the Tribunal held that deferred payment or receivables arising during the course of business is international transactions and thus, outstanding receivables beyond credit period from AE is an international transactions which needs to be benchmarked and that the appropriate rate for benchmarking was LIBOR + 200 basis points. However, we find that the subsequent decision of this Tribunal on the - 8 - IT(TP)A Nos.34 & 115/CHNY/2024 same issue of benchmarking interest on outstanding receivables in the case of ACIT V. Saipem India Projects Private Limited - ITA No. 2264/CHNY/2024 and ITA No.2319/Chny/2024 dated 15.01.2025, average LIBOR rate was held appropriate for imputing interest. In this view of the matter and by following the decision of ITAT Chennai Benches in assessee’s own case and the subsequent decisions rendered by this Tribunal, we direct the Assessing Officer to compute interest by adopting Average LIBOR as the basis for imputing interest on outstanding receivables from AE. 8. The next issue that came up for our consideration from ground no.10 to 17 of the appeal is upward revision on account of provision of corporate guarantee to AEs. The AO has treated corporate guarantee extended to AE as international transaction u/s.92B of the Act and computed Rs.26,79,040 (i.e., an adjustment of 2.24%) as guarantee commission on total corporate guarantee given by the assessee. 9. The Ld. AR submitted that this issue is also covered by the decision of ITAT Chennai Benches in the case of Mega Soft Ltd vs. DCIT [2012] 145 Taxmann.com 111 (Chennai Trib) and by the Assessee’s own case for AY 2018-19, where it has been held that corporate guarantee given by the assessee to its AE falls under the definition of international - 9 - IT(TP)A Nos.34 & 115/CHNY/2024 transactions which needs to be benchmarked. But, when it comes to rate at which said guarantee needs to be benchmarked, the Tribunal has adopted 0.5% as appropriate rate for bench marking guarantee commission. 10. The Ld. DR strongly supported the orders and directions of the lower authorities. 11. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. We find that an identical issue has been considered by the Tribunal in assessee’s own case for assessment year 2019-20 in IT(TP)A No.60/Chny/2022 where it has been held that corporate guarantee given to its AE falls under the definition of international transactions guarantee needs to be benchmarked and the Tribunal has adopted 0.5% as appropriate rate for bench marking guarantee commission. The relevant findings of the Tribunal are as under: 14. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. We find that an identical issue has been considered by the coordinate bench of ITAT Chennai in the case of Mega Soft Ltd vs DCIT (Supra), where it has been held that corporate guarantee given by entity to its AE falls under the definition of international transactions in terms of section 92B of the Act and same needs to be benchmarked. The Tribunal further held that when it comes to rate on which said guarantee needs to be benchmarked, rate adopted by the commercial bank is not appropriate rate because corporate guarantee given by the assessee’s and guarantee given by commercial banks are different and thus, by following the decision of Hon’ble Bombay High Court in the case of CIT vs Everest Kanto Cylinders Ltd [2015] 378 ITR 57 (Bom), held that 0.5% is appropriate rate for benchmarking corporate guarantee. The relevant findings of the Tribunal are as under: - 10 - IT(TP)A Nos.34 & 115/CHNY/2024 “9. We have considered relevant materials on record. As regards the arguments of the Ld.AR for the assessee that corporate guarantee per se itself is not an international transaction, we find that after amendment of definition of international transaction, corporate guarantee given by any entity to its AE falls under the definition of international transactions in terms of sec.92B of the Act and thus, any corporate guarantee given by the assessee to its AE is an international transaction, which needs to be bench marked. Further, when it comes to rate, at which, such guarantee commission needs to be benchmarked, then bank guarantee given by the commercial banks cannot be ayardstick to apply to corporate guarantees given by an entity. Further, the guarantee commission rate is depending upon the facts of each case and the risk involved in the transactions between the assessee and its AE. The Hon’ble Madras High Court in the case of PCIT v. Redington (India) Ltd. ,reported in [2021] 430 ITR 298 (Mad) had considered the issue of corporate guarantee given by an entity to AEs and after considering relevant facts held that rate adopted by the TPO on the basis of internal comparable uncontrolled price charged by the bank @0.85% is reasonable for benchmarking corporate guarantee. The Hon’ble Bombay High Court in the case of CIT v. Everest Kanto Cylinder Ltd. reported in (2015) 378 ITR 57 (Bom.) had considered an identical transaction and held that 0.5% is appropriate rate for bench marking corporate guarantee given by the assessee to its AE. Therefore, considering the facts and circumstances of the case and also by following the decision of the Hon’ble Bombay High Court in the case of Everest Kanto Cylinder Ltd. (supra), we direct the TPO to benchmark corporate guarantee fees @ 0.5% on total corporate guarantee given by the assessee to its AE.” 15. In this view of the matter and by following the decision of coordinate bench of ITAT, in the case of Mega Soft Ltd vs DCIT (Supra), we direct the Assessing Officer to benchmark corporate guarantee commission @ 0.5% on total corporate guarantee given by the assessee to its AE. 12. In the present facts and circumstances of the case and by following the decision of coordinate bench of ITAT in Assessee’s own case for AY 2019-20 we direct the Assessing Officer to adopt corporate guarantee commission @ 0.5% on total corporate guarantee given by the assessee to its AE. 13. Further, Ground Nos. 18 to 23 of the appeal deal with the recharacterization of short-term advances as loan given to its AEs. We notice from the TPO order, the TPO after allowing adjustment of the trade payables against short term advances had computed interest on - 11 - IT(TP)A Nos.34 & 115/CHNY/2024 short term advances. Further, the DRP also upheld the computation of the upward adjustment by the TPO on short term advances dismissing the objections of the Assessee. 14. The Ld. AR submitted that this issue is similar to the issue of outstanding receivables and that short term advances to AEs is not an international transaction. Alternatively, the AR further pleaded that even if the short-term advances were considered an international transaction, average LIBOR is to be considered as the appropriate rate for benchmarking interest for such short term advances. The learned AR once again placed his reliance on the decision of this Tribunal in the case of ACIT V. Saipem India Projects Private Limited- ITA No. 2264/CHNY/2024 and ITA No.2319/Chny/2024 dated 15.01.2025 and Plintron Global Technology Solutions (102 Taxmann.com 684) in ITA No.532/Chny/2017. 15. Per contra, the Ld. CIT(DR) strongly supported the order of the lower authorities. 16. We have heard the rival contentions perused the material available on record gone through the orders of the lower authorities along with the paper books filed and case laws relied upon. Since, the issue - 12 - IT(TP)A Nos.34 & 115/CHNY/2024 involved and the arguments advanced are similar to ground no.2 to 9 discussed above, by following the decision of ITAT Chennai Benches in assessee’s own case and the subsequent decisions rendered by this Tribunal, we direct the Assessing Officer to compute interest by adopting average LIBOR as the basis for imputing interest on short term advances to AE. 17. Apart from the above grounds, for the appeal of AY 2020-21, the Assessee had raised grounds 24 to 27 which are on the issue of disallowance of donation claimed under Section 80G of the Act. 18. We have perused the order of the AO, and find that the AO had disallowed a sum of Rs.1,00,000/- out of the total claim of the assessee by adopting the following rationale: i. That The amount of donation claimed has not been paid by the Assessee to the eligible entity specified in Section 80G of the Act on a “voluntary basis” and that it was to fulfil a mandatory requirement of law on account of CSR spend under the Companies Act, 2013 for activities benefiting the society. ii. The AO held that the Assessee could also have very well-made payment to an entity not covered by Section 80G or it could - 13 - IT(TP)A Nos.34 & 115/CHNY/2024 have directly incurred the expenditure for the specified purpose, but it chose to spend only on those areas where they knew that they could comfortably claim deduction u/s.80G of the Act. iii. Accordingly, the AO held that the sum paid by the Assessee cannot be considered as a ‘donation’ for the purpose of Section 80G of the Act as the element of charity is missing and proceeded to disallow the claim and added it back to the total income of the Assessee. Further, the DRP also upheld the disallowance made by the AO. 19. In support of his arguments, the Ld. DR had further filed elaborate written submissions which have been placed on record and duly considered. 20. Against the submissions, the Ld. AR filed counter arguments. The Ld. AR also placed his reliance on the decision of this Tribunal in the case of M/s.Source Hov India Private Limited V. DCIT - ITA No.2454/Chny/2024 wherein this issue has been adjudicated. - 14 - IT(TP)A Nos.34 & 115/CHNY/2024 21. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. We find that an identical issue has been considered by the coordinate bench of ITAT Chennai in the case of M/s.Source Hov India Private Limited V. DCIT - ITA No.2454/Chny/2024, wherein it has been held that CSR expenditure, made to eligible donee apart from Swachh Bharat Kosh and Clean Ganga Fund would be eligible to claim the deduction under Section 80G of the Act. The relevant findings of the Hon’ble Tribunal are as follows: “5. We further find that bouquet of activities that have been permitted under CSR Scheme, inter-alia, include contribution to Prime Minister’s National Relief Fund or any other fund set up by the Government for socio economic development. The impugned donation as made by the assessee is one of the prescribed modes of CSR Activities. 6. We also find that Finance Act, 2015 has allowed tax benefits u/s.80G for donations made to Swachh Bharat Kosh and Clean Ganga Fund. The amendment and explanatory statement read as under: - Tax benefits for Swachh Bharat Kosh and Clean Ganga Fund Under the existing provisions of section 80G of the Income-tax Act, a deduction is allowed in computing the total income of a person in respect of donations made to certain funds and charitable institutions. The deduction is allowed at the rate of fifty percent of the amount of donations made except in the case of donations made to certain funds and institutions formed for a social purpose of national importance, where it is allowed at the rate of one hundred percent, such as the National Defence Fund set up by the Central Government, the Prime Minister's National Relief Fund, the Prime Minister's Armenia Earthquake Relief Fund, the Africa (Public Contributions-India) Fund, the National Children's Fund, the National Foundation for Communal Harmony etc. \"Swachh Bharat Kosh\" has been set up by the Central Government to mobilize resources for improving sanitation facilities in rural and urban areas and school premises through the Swachh Bharat Abhiyan. Similarly, Clean Ganga Fund has been established by the Central Government to attract voluntary contributions to rejuvenate river Ganga. With a view to encourage and enhance people's participation in the national effort to improve sanitation facilities and rejuvenation of river Ganga, it is proposed to amend section 80G of the Act so as - 15 - IT(TP)A Nos.34 & 115/CHNY/2024 to incentivise donations to the two funds. It is proposed to provide that donations made by any donor to the Swachh Bharat Kosh and donations made by domestic donors to Clean Ganga Fund will be eligible for a deduction of hundred per cent from the total income. However, any sum spent in pursuance of Corporate Social Responsibility under sub-section (5) of section 135 of the Companies Act, 2013, will not be eligible for deduction from the total income of the donor. The existing provisions of section 10(23C) of the Act provide for exemption from tax in respect of the income of certain charitable funds or institutions like the Prime Minister's National Relief Fund ; the Prime Minister's Fund (Promotion of Folk Art); the Prime Minister's Aid to Students Fund; the National Foundation for Communal Harmony. Considering the importance of Swachh Bharat Kosh and Clean Ganga Fund, it is also proposed to amend section 10(23C) of the Act so as to exempt the income of Swachh Bharat Kosh and Clean Ganga Fund from income-tax. These amendments will take effect retrospectively from 1st April, 2015 and will, accordingly, apply in relation to assessment year 2015-16 and subsequent assessment years. It could be seen that though deduction has been granted for donation to these funds, however, it has specifically been made clear that any sum spent in pursuance of Corporate Social Responsibility under sub-section (5) of section 135 of the Companies Act, 2013 towards these funds will not be eligible for deduction from the total income of the donor. We find that there is no such restriction for donation out of CSR funds to Prime Minister’s National Relief Fund.” 22. In view of the above, we are of the considered opinion that the impugned deduction u/s.80G would be available to the assessee. Accordingly following the decision of the co-ordinate bench in Source Hov Vs. DCIT(Supra), we direct AO to allow impugned deduction u/s.80G of the Act. IT (TP) No. 115/CHY/2024 for the A.Y. 2021-22: 23. We now take up the Appeal of the assessee for AY 2021-22 for disposal: - 16 - IT(TP)A Nos.34 & 115/CHNY/2024 24. The assessee has raised the following grounds of appeal: “Based on the facts and circumstances of the case, Acqueon Technologies Private Limited (formerly Serviont Global Solutions Limited) [hereinafter referred to as “Acqueon” or “the Appellant”], respectfully submits that: 1. The Assessment order passed by the learned Assessing Officer (“AO”) and the order of the Dispute Resolution Panel (“DRP”) under Income tax Act, 1961 (“the Act”) are not in accordance with the law and are contrary to the facts and circumstances of the present case. Grounds on Transfer Pricing Adjustments Recharacterization of outstanding trade receivables as separate international transaction : 2. The learned AO and the Transfer Pricing Officer (“TPO”) has erred in imputing notional interest on the outstanding receivables from the Associated Enterprise (“AE”) and thereby making a Transfer Pricing (“TP”) adjustment. 3. The learned AO / TPO has erred in law and on facts in holding the alleged delay in the realization of the receivables from AE as an international transaction ignoring the fact that the same is not an international transaction in terms of Section 92B of the Act but arises only as a consequence of an international transaction with its associated enterprise. 4. Without prejudice to the above grounds that the delay in receivables is not an international transaction, the Ld. AO has erred in law and on facts by making transfer pricing adjustment on account of delay in the realization of the receivables even after accepting the primary international transactions of the Appellant to be at arm’s length based on the Transaction Net Margin Method at the entity level. 5. Without prejudice to our grounds that the delay in receivables is not an international transaction, the Ld. AO has erred in law and on facts in not appreciating that the Appellant has earned a high net margin, which has impliedly compensated the delay in realisation of outstanding receivables. 6. The Learned AO and TPO ought to have appreciated that the Appellant’s margin is higher than the comparable companies margin even after considering the working capital adjustments and therefore, separate adjustments in respect of outstanding receivables are not warranted. 7. The Ld. AO ought to have appreciated that the Appellant does not charge interest on outstanding receivables from non-AE and therefore the Appellant cannot be expected to charge interest on outstanding receivables from AE’s. 8. The Ld. AO ought to have appreciated that the Appellant does not pay interest on outstanding payables to AE and therefore the Appellant cannot be expected to charge interest on outstanding receivables from AE’s. 9. Without prejudice to our grounds that the delay in receivables is not an international transaction, the Ld. AO has erred in law and on facts while computing notional interest on outstanding receivables from AE by not deducting notional interest on outstanding payables to be made to the AEs. - 17 - IT(TP)A Nos.34 & 115/CHNY/2024 10. Without prejudice to our grounds that the delay in receivables is not an international transaction, the learned AO has erred in law and on facts by considering LIBOR plus 350 BPS (i.e. 4.19%) as against LIBOR Rate. 11. Without prejudice to our grounds that the delay in receivables is not an international transaction, the learned AO has erred in law and on facts by considering LIBOR plus 350 BPS (i.e. 4.19%) as against LIBOR plus 200 BPS as held by this Hon’ble Tribunal in Assessee’ s own case in ITA No. 1974/Chny/2016 for AY 2009-10 and I.T.(TP)A.No.22/Chny/2020 for AY 2012-13, and IT(TPA) No.60/Chny/2022 for AY 2018-19 Upward revision on account of provision of corporate guarantee to AEs: 12. The Ld. AO/TPO has erred in law and on facts in considering corporate guarantee as a separate international transaction under Section 92B of the Act. 13. The Ld. AO/TPO ought to have appreciated that provisions of corporate guarantee is not in the nature of shareholder activity and as such it will cannot be regarded as international transaction. 14. The Ld. AO/TPO ought to have appreciated that the Appellant does not incur any cost for extending such guarantee and hence the transaction does not have any bearing on the profits, incomes, losses or assets of the company. 15. The Ld. AO/TPO ought to have appreciated that the issuance of corporate guarantee is a transaction of routine nature and the AE does not derive any direct benefit from such guarantee in terms of reduced interest rate, or any other benefit. 16. The Ld. AO/TPO erred in incorrectly applying the most appropriate method while attributing corporate guarantee. 17. Without prejudice to the above, the rate of 2.58 % of Corporate Guarantee is very high and arbitrary. 18. Without prejudice to the above, the AO/TPO erred in imputing an ad-hoc notional fee of 2.58% on the value of corporate guarantee provided to the AEs. 19. Without prejudice to our grounds that the corporate guarantee is not an international transaction, the learned AO has erred in law and on facts by considering average fee on Bank Guarantee as per market rates as against 0.5% as held by this Hon’ble Tribunal in Assessee’ s own case for AY 2018-19 in I.T.(TP)A.No.60/Chny/2022 for AY 2018-19. Upward Adjustment on international transaction relating to short term advances given: 20. The learned AO and the Transfer pricing officer (“TPO”) have erred in imputing notional interest on the short-term advances to Associated Enterprises (AE’s) and thereby making a Transfer Pricing Adjustment. 21. Without prejudice to the above grounds that the Ld.AO has erred in imputing notional interest on the short-term advances, the Ld.AO has erred in law and on facts by making transfer pricing adjustment on the short-term advances even after accepting the primary international transactions of the Appellant to be at arm’s length based on the Transaction Net Margin Method at the entity level. - 18 - IT(TP)A Nos.34 & 115/CHNY/2024 22. Without prejudice to the above grounds that the Ld.AO has erred in imputing notional interest on the short-term advances, the Ld.AO has erred in law and on facts in not appreciating that the Appellant has earned a high net margin, which has impliedly compensated the delay in adjustment of short-term advances. 23. The Learned AO and TPO ought to have appreciated that the Appellant’s margin is higher than the comparable companies margin even after considering the working capital adjustments and therefore, separate adjustments in respect of short-term advances are not warranted. 24. The Ld. AO ought to have appreciated that the appellant does not charge interest on similar transactions from non-AEs and therefore the Appellant cannot be expected to charge interest on short-term advances from AE’s. 25. Without prejudice to the above grounds that the Ld.AO has erred in imputing notional interest on the short-term advances, trade payables has not been considered when arriving at the quantum of short term advances resulting in incorrect transfer pricing adjustment. 26. Without prejudice to the above grounds, the Ld. TPO/ AO has erred in law and on facts in not following consistent positions (allowed/ adopted during AY 2020-21) by not deducting outstanding payables to be made to the AEs while computing notional interest on short term advances. 27. Without prejudice to the above grounds that the Ld.AO has erred in imputing notional interest on the short-term advances, the Ld.AO has erred in law and on facts by considering LIBOR plus 350 BPS (i.e 4.19%) as against LIBOR Rate. 28. Without prejudice to the above grounds that the Ld.AO has erred in imputing notional interest on the short-term advances, the Ld.AO has erred in law and on facts by considering LIBOR plus 350 BPS (i.e 4.19 % ) as against LIBOR plus 200 BPS as held by this Hon’ble Tribunal in Assessee’ s own case in ITA No. 1974/Chny/2016 for AY 2009-10 and I.T.(TP)A.No.22/Chny/2020 for AY 2012-13, and IT(TPA) No.60/Chny/2022 for AY 2018-19.” 25. The brief facts of the case are that, the assessee filed its Return of Income for the assessment year 2021-22 on 14.03.2022, declaring total income of Rs.28,95,98,090/-. The case was selected for scrutiny and during the course of assessment proceedings, a reference was made to Transfer Pricing Officer (TPO) in terms of section 92CA of the Act, for computing ALP in respect of International Transactions undertaken by the assessee during the financial year 2020-21 relevant - 19 - IT(TP)A Nos.34 & 115/CHNY/2024 to assessment year 2021-22. The TPO vide their order u/s.92CA(3) of the Act, dated 05.10.2023 proposing an adjustment of Rs.Rs.4,46,24,289/-. Subsequently, the AO passed draft assessment order u/s.144C of the Act on 18.12.2023 and had proposed TP adjustment as suggested by the TPO. The assessee filed objections against draft assessment order before the DRP, Bangalore. The DRP, vide their directions dated 09.09.2024 issued u/s.144C(5) of the Act, upheld TP adjustment as proposed by the TPO and AO. Thereafter, the AO passed final assessment order u/s.143(3) r.w.s. 144C(13) of the Act for AY 2021-22 dated 11.10.2024 and determined total income of Rs.32,80,73,950/- making the following disallowances: S. No Nature of Disallowance Transfer Pricing Issues: 1 Notional Interest imputed on outstanding Trade Receivables 2 Notional interest imputed on Short-term advances given to AE 3 Corporate Guarantee 26. The first issue that came up for our consideration from ground no.2 to 11 of this appeal is recharacterization of outstanding trade receivables as separate international transaction. Since this issue has already been adjudicated in ITA No.34/CHY/2024(supra) for the A.Y.2020-21, by following the same, we direct the Assessing Officer to recompute interest by adopting Average LIBOR as the basis for imputing interest on outstanding Trade Receivables. - 20 - IT(TP)A Nos.34 & 115/CHNY/2024 27. The next issue in this appeal that came up for our consideration from ground no. 12 to 19 is upward revision on account of provision of corporate guarantee to AEs. Since this issue has already been adjudicated in ITA. No.34/CHY/2024(supra) for the A.Y.2020-21, by following the same, we direct the Assessing Officer to adopt corporate guarantee commission @ 0.5% on total corporate guarantee given by the assessee to its AE. 28. The next issue in Ground 20 to 28 of this appeal deal with the recharacterization of short-term advances as loan given to its AEs. In addition to the arguments advanced in ITA No.34/CHY/2024(supra) for the A.Y.2020-21, the AR submitted that the TPO had not granted the adjustment towards trade payables which was earlier granted in AY 2020-21. 29. Per contra, the ld. DR supported the orders of the lower authorities 30. We have heard the rival contentions perused the material available on record gone through the orders of the lower authorities along with the paper books filed and case laws relied upon. We notice from the TPO order that the TPO after allowing adjustment of the trade payables against short term advances had computed interest on short term advances for AY 2020-21. - 21 - IT(TP)A Nos.34 & 115/CHNY/2024 30.1 Since, the issue involved and the arguments advanced are similar, we direct the Assessing Officer to compute interest by adopting Average LIBOR as the basis for imputing interest on the short-term advances after adjustment of trade payables similar to AY 2020-21. We order accordingly. 31. In the result both the appeals for the A.Y. 2020-21 and 2021-22 filed by the assessee are partly allowed. Order pronounced in the open court on 30th May, 2025 at Chennai. Sd/- Sd/- (मनु क ुमार िगįर) (MANU KUMAR GIRI) Ɋाियक सद˟/Judicial Member (एस.आर. रघुनाथा) (S.R. RAGHUNATHA) लेखा सदèय/ACCOUNTANT MEMBER चेÛनई/Chennai, Ǒदनांक/Dated, the 30th May, 2025 RSR आदेश कȧ ĤǓतͧलͪप अĒेͪषत/Copy to: 1. अपीलाथȸ/Appellant 2. Ĥ×यथȸ/Respondent 3. आयकरआयुÈत /CIT, Chennai 4. ͪवभागीय ĤǓतǓनͬध/DR 5. गाड[ फाईल/GF. "