FLUOR DANIEL INDIA P.LTD,NEW DELHI V. ADDL.CIT, SPECIAL RANGE-3, NEW DELHI

ITA 6581/DEL/2018

AI Insights

Fluor Daniel India Pvt Ltd appealed against the orders of the TPO and the Assessing Officer (AO) regarding adjustments made to their income due to alleged interest on delayed collection of receivables from Associated Enterprises (AEs) for the assessment years 2014-15 and 2016-17. The TPO had treated outstanding receivables as deemed loans and proposed adjustments based on the State Bank of India Prime Lending Rate. The Dispute Resolution Panel (DRP) later modified these adjustments. The Tribunal found that the TPO and AO did not thoroughly examine the issues, such as the impact of receivables on working capital and the company's debt-free status, and directed a fresh examination.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 303023 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2014-2015
• Other Referred Cases: Radha Soami Satsang vs CIT, CIT vs Neo Polypack (P) Ltd., DIT(E) vs Apparel Export Promotion Council, CIT vs Girish Mohan Ganeriwala, Kusum Healthcare Private Limited Vs. ACIT, Bechtel India Pvt Ltd. vs DCIT, PCIT vs Boeing India (P.) Ltd., Global Logic India Ltd vs DCIT, Kronos Solutions India (P.) Ltd. vs DCIT, Teradata India (P.) Ltd. vs ACIT, Optum Global Solutions (India) (P.) Ltd. vs ACIT, Motherson Sumi Infotech & Design Ltd. vs DCIT, Toshiba Technical Services International Corporation vs ACIT, Integra Software Services (P.) Ltd vs DCIT, Barco Electronic Systems (P.) Ltd. vs DCIT, Nimbus Communications Ltd vs. Asstt. Commissioner of Income Tax., CIT vs. Indo American Jewellery Ltd., MASTER Ltd. vs. Addl. CIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH
• Assessee Lawyers: VISHAL KALRA
• Keywords: Set aside; Transfer pricing; International transaction; Retrospective amendment; Rule of consistency; Notional interest; Initiation of penalty proceedings; Related party transaction
• Section: 143(3); 22; 13; 92CA; 2; 144C; 92B; 207; 20

Judgement Text

"Page 1 of 23 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘I’ BENCH, NEW DELHI BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER, AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No. 6581/DEL/2018 [A.Y 2014-15] ITA No. 525/DEL/2021 [A.Y 2016-17] Fluor Daniel India Pvt Ltd Vs. The Addl. CIT/NFAC B-9, LGF, Green Park [Main] Special Range -3, New Delhi New Delhi PAN: AAACF 0927 G (Applicant) (Respondent) Assessee By : Shri Vishal Kalra, Adv Shri Ankit Sahani, Adv Department By : Shri Om Prakash, CIT-DR Date of Hearing : 31.01.2025 Date of Pronouncement : 23.04.2025 ORDER PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:- The above two captioned separate appeals by the assessee are preferred against the order dated 28.08.2018 and 30.03.2021 framed ITA No. 6581/DEL/2018 [A.Y 2014-15] ITA No. 525/DEL/2021 [A.Y 2016-17] Fluor Daniel India Pvt Ltd Vs. The Addl. CIT Page 2 of 23 u/s 143(3)/144C of the Income-tax Act, 1961 [hereinafter referred to as 'The Act'] pertaining to A.Ys. 2014-15 and 2016-17 respectively. 2. Since both the appeals were heard together and involve common issues, they are disposed of by this common order for the sake of convenience and brevity. 3. The representatives of both the sides were heard at length, the case records carefully perused and with the assistance of the ld. Counsel, we have considered the documentary evidences brought on record in the form of Paper Book in light of Rule 18(6) of ITAT Rules. ITA No. 6581/DEL/2018 [A.Y. 2014-15] 4. The grievances of the assessee read as under: “1. The Ld. Assessing Officer (AO) / Ld. Transfer Pricing Officer (TPO') erred on facts and in the, circumstances of the case in determining an arm's length adjustment to the income of the Appellant on account of alleged interest on perceived delay in collection of receivables from the Associated Enterprises (AES'), thereby, resulting in the enhancement of returned income by INR 27,48,552; ITA No. 6581/DEL/2018 [A.Y 2014-15] ITA No. 525/DEL/2021 [A.Y 2016-17] Fluor Daniel India Pvt Ltd Vs. The Addl. CIT Page 3 of 23 2. That the reference made by the Ld. AO to the Ld. TPO under section 92CA of the Act suffers from jurisdictional error as the Ld. AO has not recorded any reasons in the assessment order passed under section 143(3) read with section 144C of the Act, based on which the Ld. AO concluded that it was 'expedient and necessary' to refer the matter to the Ld. TPO for computation of the arm's length price ('ALP'), as required under section 92CA(1) of the Act; 3. The Ld. AO/Ld. TPO/Hon'ble Dispute Resolution Panel ('DRP') erred on facts and in law in making an upward adjustment on account of alleged interest on perceived delay in collection of receivables from the AEs in the following manner: 3.1. Not appreciating the fact that unlike a loan or borrowing, outstanding receivable is not an independent international transaction which can be viewed on standalone basis, rather it is outcome of the commercial transaction as a result of which the debit balance has come into existence. Further, the TPO / DRP exceeded the jurisdiction by changing the nature of commercial transaction to a financial transaction; 3.2. Ignoring the fact that the Appellant is a debt free company and therefore, no imputation of interest on account of outstanding receivables is warranted; 3.3. Ignoring the application of Transactional Net Margin Method and the fact that working capital adjustment takes into account the impact of outstanding receivables on profitability and therefore, no further imputation of interest on account of outstanding receivables is warranted; ITA No. 6581/DEL/2018 [A.Y 2014-15] ITA No. 525/DEL/2021 [A.Y 2016-17] Fluor Daniel India Pvt Ltd Vs. The Addl. CIT Page 4 of 23 3.4. Ignoring the correct application of Comparable Uncontrolled Price Method/Other Method that no interest is charged on delayed receivables from third parties and hence, no adjustment is warranted on the outstanding receivables from the AEs. 4. That on the facts and circumstances of the case and in law the Ld. AO/ Ld. TPO erred in not examining the validity of initiation of penalty proceedings u/s 271 (1) (c) of the Act.” 5. Briefly stated, the facts of the case are that the assessee, Fluor Daniel India Private Limited or Fluor India is engaged in providing contract design and engineering services for energy & chemicals, power, mining and industrial projects and is a key support office for Fluor facilities located in North America, Africa, the Middle East, Europe and Asia Pacific. Fluor India provides these engineering design services to Fluor Corporation, USA ('Fluor USA'). Fluor USA acts as hub, which collects work orders/request from Fluor Affiliates and afterwards subcontracts the projects to Fluor India or other Fluor Affiliates specializing in engineering design services. 6. The return of income for the year under consideration was filed on 27.04.2014 declaring an income of INR 1,38,58,37,690/-. Return was selected for scrutiny assessment and, accordingly, reference for ITA No. 6581/DEL/2018 [A.Y 2014-15] ITA No. 525/DEL/2021 [A.Y 2016-17] Fluor Daniel India Pvt Ltd Vs. The Addl. CIT Page 5 of 23 computation of Arm's Length Price was made to the Transfer Pricing Officer. 7. For the AY under consideration before us, the TPO considered the outstanding receivables as international transaction and accordingly proposed a transfer pricing adjustment on delayed receivables from AEs. He treated outstanding receivables (for more than 30 days) as deemed loan advanced by the Assessee to its AEs; considered State Bank of India (SBI) Prime Lending Rate ('PLR') @ 14.50% as the arm's length rate of interest and consequently proposed an adjustment of Rs. 1,01,32,562/-. 8. Thereafter, the Assessing Officer passed the draft assessment order dated 18.12.2017, u/s 143(3) read with section 144C of the Income tax Act, 1961 (Act) in conformity with the TPO order. 9. Being aggrieved by the draft order, the assessee filed objections before the Dispute Resolution Panel (DRP). The DRP, vide directions dated 20.06.2018, directed the TPO to recompute the adjustment using interest rate of six months LIBOR plus 400 basis points on receivables where repayment is to be made in USD and to apply SBI ITA No. 6581/DEL/2018 [A.Y 2014-15] ITA No. 525/DEL/2021 [A.Y 2016-17] Fluor Daniel India Pvt Ltd Vs. The Addl. CIT Page 6 of 23 PLR of 14.5% (as applied in TPO order) where loan is to be repaid in INR. Further, the DRP directed to allow the credit period as per agreement or 60 days in case no such period is mentioned in the agreement. Consequently, the adjustment was reduced from Rs. 1,01,32,562/- to Rs. 27,48,552/- by the TPO in its order giving effect to DRP directions. The Assessing Officer, thereafter, passed the final assessment order 28.08.2018, wherein the income of the assessee was assessed at Rs 138,85,86,242/- as against returned income of Rs 138,58,37,690/-. 10. Aggrieved, the assessee has come in appeal before us. 11. Ground No. 1 is General in nature and hence not adjudicated. Ground No. 2 has not been pressed. The same is dismissed as not pressed. 12. Ground Nos. 3 to 3.4 relates to adjustment on outstanding receivables. It is say of the ld. counsel for the assessee that during the assessment proceedings, TPO did not issue any show-cause notice for proposing the above adjustment and only requested to submit certain details with respect to receivables/payables vide notice dated 14.09.2021. The TPO, vide order dated 25.10.2017, made an ITA No. 6581/DEL/2018 [A.Y 2014-15] ITA No. 525/DEL/2021 [A.Y 2016-17] Fluor Daniel India Pvt Ltd Vs. The Addl. CIT Page 7 of 23 adjustment of Rs 1,01,32,562 alleging the outstanding receivables as an international transaction and benchmarked the same by applying SBI PLR rate after allowing the credit period of 30 days. The ld AR further submitted that in the DRP proceedings, the TPO recomputed the adjustment using interest rate of six months LIBOR plus 400 basis points on receivables where repayment is to be made in USD and to apply SBI PLR of 14.5% (as applied in TPO order) where loan is to be repaid in INR. Further, the TPO as per direction of DRP allowed the credit period as per agreement or 60 days in case no such period is mentioned in the agreement. 13. It is the say of the Ld AR that international transactions being identical in other years, no addition on account of outstanding receivables had been proposed by TPO in the preceding as well as subsequent AYs. It was submitted that the facts and circumstances, as prevalent in the present A.Y have remained unchanged in other AYs and therefore, applying the rule of consistency, it should not be open for revenue to adopt a divergent position. Reliance in this regard, is placed on the following decisions: i) Radha Soami Satsang vs CIT 193 ITR 321 (SC) ii) CIT vs Neo Polypack (P) Ltd. 245 ITR 492 (Del) iii) DIT(E) vs Apparel Export Promotion Council 244 ITR 734 (Del) ITA No. 6581/DEL/2018 [A.Y 2014-15] ITA No. 525/DEL/2021 [A.Y 2016-17] Fluor Daniel India Pvt Ltd Vs. The Addl. CIT Page 8 of 23 iv) CIT vs Girish Mohan Ganeriwala 260 ITR 417 (P&H) 14. The ld counsel for the assessee further submitted that the appropriate adjustments need to be considered to bring parity in the working capital investment of the tested party and the comparables rather than looking at the receivable independently. It is argued that such working capital adjustment takes into account the impact of outstanding receivables on the profitability. 15. The ld. counsel for the assessee further submitted that the assessee undertook working capital adjustment in its TP study. Further, the ld AR stated that the revised computation of adjusted margins was also submitted before DRP. The ld AR submitted that the arm's length price determination for the said consequential receivables is subsumed within the arm's length price determination of the principal international transaction itself and therefore no separate arm's length price determination is required once the principal international transactions are tested (which has not been disputed by the TPO). ITA No. 6581/DEL/2018 [A.Y 2014-15] ITA No. 525/DEL/2021 [A.Y 2016-17] Fluor Daniel India Pvt Ltd Vs. The Addl. CIT Page 9 of 23 16. Reliance was placed on the decision in the case of Kusum Healthcare Private Limited Vs. ACIT (ITA No. 765/2016 dated 25.04.2017 wherein the hon’ble Delhi High Court has held that the such adjustment is impermissible where the assessee has factored in the impact of receivables on the working capital. 17. Further, reliance was also placed on the following cases wherein, by placing reliance on the High Court decision of Kusum Healthcare, it has been held that working capital adjustment subsumes the impact of receivables and further adjustment is not required: • CPA Global Support Services [1] Pvt Ltd vs ITO: TS-527-ITAT- 2021(DEL)-TP o Kronos Solutions India (P.) Ltd. vs DCIT [2023] 149 taxmann.com 194 (Delhi Tribunal) Alcatel Lucent India Ltd, vs ACIT [2023] 149 taxmann.com 150 (Delhi Tribunal) o DCIT vs EXL Service.com (India) (P.) Ltd. [2021] 126 taxmann.com 364 (Delhi Trib.) o DCIT vs IQOR India Services (P.) Ltd. [2022] 140 taxmann.com 629 (Delhi - Trib.) o Optum Global Solutions (India) (P.) Ltd. vs ACIT [2021] 126 taxmann.com 329 (Delhi Tribunal) o Teradata India (P.) Ltd. vs ACIT [2019] 109 taxmann.com 296 (Delhi - Trib.) 18. The ld AR further vehemently argued that during the year under consideration, the assessee has provided services to both its AE as well as third parties amounting to INR 438.85 crores and INR 41.61 crores respectively, however no interest has been charged on the outstanding ITA No. 6581/DEL/2018 [A.Y 2014-15] ITA No. 525/DEL/2021 [A.Y 2016-17] Fluor Daniel India Pvt Ltd Vs. The Addl. CIT Page 10 of 23 receivable balances from third parties. Computation of period of delay from third parties has been furnished on record. 19. It was argued that the weighted average period of realisation in case of third-party transactions is calculated at 88 days as compared to 96 days in case of related party transactions (refer page 44-47 of PB). Additionally, the average realisation period of comparable companies selected in TP study (duly accepted by TPO) has also been calculated at 120 days (refer pages 42-43 of PB). For this, the ld AR relied on the following cases:  Fujitsu Consulting India (P.) Ltd. vs ACIT [2022] 145 taxmann.com 380 (Delhi Trib.)  ACIT vs Axis Risk Consulting Services (P.) Ltd. [2020] 114 taxmann.com 696 (Delhi Trib.)  Axis Risk Consulting Services (P.) Ltd. vs DCIT [2018] 92 taxmann.com 103 (Delhi Trib.) Barco Electronic Systems (P.) Ltd. vs DCIT Trib.) [2021] 187 ITD 249 (Delhi - Trib.)  Motherson Sumi Infotech & Design Ltd. vs DCIT [2018] 91 taxmann.com 443 (Delhi -Trib.) Pepsico India Holdings (P.) Ltd. vs ACIT [2018] 100 taxmann.com 159 (Delhi - Trib.)  Coim India (P.) Ltd. vs DCIT [2021] 132 taxmann.com 207 (Delhi - Trib.) ITA No. 6581/DEL/2018 [A.Y 2014-15] ITA No. 525/DEL/2021 [A.Y 2016-17] Fluor Daniel India Pvt Ltd Vs. The Addl. CIT Page 11 of 23  Toshiba Technical Services International Corporation vs ACIT: [2022] 145 taxmann.com 474 (Ahmedabad - Trib.)  Integra Software Services (P.) Ltd vs DCIT: [2022] 145 taxmann.com 460 (Chennai - Trib.) 20. Another argument forwarded by the ld AR was that the assessee is a debt free company and is not paying interest on any funds utilized by it in its business activities and placed reliance on the decision of the ITAT Delhi in the case of Bechtel India Pvt Ltd. vs DCIT (ITA No. 1478/Del/2015) (refer page 108 of case law compilation). Further, the above decision of the ITAT has also been upheld by the Hon'ble Delhi High Court (ITA 379/2016) (refer page 87 of case law compilation). The judgement has further been upheld by the Hon'ble Supreme Court (SLP (CC) No. 4956/2017). (refer page 85 of case law compilation) 21. Reliance was also placed on the following judicial pronouncements:  Bechtel India Pvt. Ltd. vs ACIT (ITA No. 7234/Del/2017)  PCIT vs Boeing India (P.) Ltd. [2023] 146 taxmann.com 131 (Delhi)  Global Logic India Ltd vs DCIT: ITA No. 1104/Del/2015  Kadimi Tool Manufacturing Co (P) Ltd vs DCIT [2017] 87 taxmann.com 42 (Del-Trib.) ITA No. 6581/DEL/2018 [A.Y 2014-15] ITA No. 525/DEL/2021 [A.Y 2016-17] Fluor Daniel India Pvt Ltd Vs. The Addl. CIT Page 12 of 23  Bain Capability Centre India (P) Ltd vs DCIT [2018] 89 taxmann.com 69 (Del-Trib.)  Inductis (India) (P) Ltd vs. ITO: 99 taxmann.com 167 (Del)  Teradata India (P) Ltd vs. ACIT: ITA No 87/D/2017  Evonik Degussa India (P) Ltd: ITA No. 7653/MUM/2011  MASTER Ltd. vs. Addl. CIT: ITA No.3120/Ahd/2010  CIT vs. Indo American Jewellery Ltd.: ITA No. 1053 of 2012 (Bom)  Nimbus Communications Ltd vs. Asstt. Commissioner of Income Tax.: ITA No. 6597/Mum/09 22. The ld AR presented another argument, without prejudice to the contentions that no adjustment is warranted on account of non- charging of interest on outstanding receivables, as the receivables cannot be considered on a standalone basis without considering amount payable to AEs as both receivables and payables are components of working capital. The ld AR argued that the receivables outstanding from AEs ought to netted-off with payable transactions with AEs. Accordingly, both receivables as well payables should be considered before computing the notional interest i.e., the receivables and payables have to be netted off. Details of payables are furnished at page 59 of PB. Reliance in this regard was placed on the decision of ITA No. 6581/DEL/2018 [A.Y 2014-15] ITA No. 525/DEL/2021 [A.Y 2016-17] Fluor Daniel India Pvt Ltd Vs. The Addl. CIT Page 13 of 23 PCIT vs Mckinsey Knowledge Centre India (P.) Ltd. [2021] 131 taxmann.com 253 (Delhi). 23. On the other hand, the ld. DR relied upon the orders of the ld. TPO and the DRP. The ld DR vehemently submitted that Chapter X of the Income Tax Act contains special provisions. The outstanding receivables are International Transaction as per Explanation (i) (c) of section 92B and that TP study should be conducted by the assessee on the outstanding receivables relying on the decision of Bechtel India Pvt Ltd 85 taxmann.com 121 (Del-Tri) dated 16.05.2017. The ld DR relied on the above said case for the proposition that being a debt free company is not relevant factor as interest on delayed realisation of receivables is a separate International transaction and therefore requires separate benchmarking. Relying on the decision of Bechtel India Pvt Ltd (supra), the ld DR asserted that if an invoice is raised during the year and the proceeds are realised within the year but beyond the stipulated period of agreement, then, the same will not come within the working capital adjustment because working capital adjustment is made with reference to the opening and closing balances as on 1st April and 31st March. The ld. DR further stated that therefore, interest on delayed payments of receivables do not get subsumed in ITA No. 6581/DEL/2018 [A.Y 2014-15] ITA No. 525/DEL/2021 [A.Y 2016-17] Fluor Daniel India Pvt Ltd Vs. The Addl. CIT Page 14 of 23 the working capital adjustment allowed to the assessee. The ld DR relied on the decision of CIT Vs Cotton Naturals I P Ltd (2015) 55 taxmann.com 523(Delhi) for the proposition that where in case of credit allowed to a customer on sale of goods, lending rate would apply. The ld DR further argued that not charging interest from non- related company are not relevant factor. The ld. DR also argued margin of 30% is also not relevant while considering calculation of interest on delayed realisation of receivables because interest on outstanding receivables are separate international transaction. 24. In its rejoinder the ld AR stated that all the details regarding receivables are furnished before the DRP and remand report was called for by the DRP. The ld AR further submitted that the AO and the DRP have not commented adversely about the benchmarking. The ld AR argued that the decision of Bechtel India (supra) is not followed in assessee’s case. 25. We have heard the rival submissions and have perused the relevant material on record. The issue before us for adjudication is whether adjustment on account of interest on outstanding receivables made by the AO is valid or not. First of all, we have to determine ITA No. 6581/DEL/2018 [A.Y 2014-15] ITA No. 525/DEL/2021 [A.Y 2016-17] Fluor Daniel India Pvt Ltd Vs. The Addl. CIT Page 15 of 23 whether interest on outstanding ‘receivable’ is an international transaction or not. The Finance Act, 2012 inserted a clause (c) in Explanation (i) of section 92B of the Income Tax Act with retrospective effect from 01.04.2002 which reads as follows: (i) the expression “international transaction” shall include- “(c) 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 payment or receivable or any other debt arising during the course of business.” The Finance Act 2012 brought this amendment with effect from 1.4.2002 which essentially expands the definition of international transaction encompassing payments or deferred payments or receivable as international transaction. 26. The provision of explanation (i)(c) of Section 92B of the Income Tax Act was elaborated by the Delhi ITAT in the case of Jubliant Pharmaova Ltd Vs ACIT ITA no 526/Del/2022 dated 05.03.2024 for AY 2017-18, which after analysing a catena of cases on the subject held as follows: ITA No. 6581/DEL/2018 [A.Y 2014-15] ITA No. 525/DEL/2021 [A.Y 2016-17] Fluor Daniel India Pvt Ltd Vs. The Addl. CIT Page 16 of 23 26. We have examined the provisions of the Act and judgments on this issue. 27. As per explanation (i)(c) of Section 92B of the Income Tax Act as amended by Finance Act, 2012 w.r..f. 01.04.2002, the interest receivables is an international transaction. Section 92B(i)(c) reads “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 payment or receivable or any other debt arising during the course of business. 28. In CIT Vs. EKL Appliances (209 Taxmann 200), it was held that the delay in receipt of the amounts has to be investigated on case to case basis and examination has to be conducted by the TPO/AO by analyzing the statistics over a period of time and to find out a pattern intended to benefit its AE. In Kusum Healthcare Pvt. Ltd. (ITA 6814/Del/2014), the Hon’ble Court held that the entire focus of the AO was on one Assessment Year and hence the pattern to justify undue benefit accorded could not be discerned. 29. In the case of Bechtel India Pvt. Ltd. Vs. ACIT (85 Taxman 121), after analyzing the case of Ameriprise India Pvt. Ltd (62 Taxman 237) and Mckinsey Knowledge Centre Pvt. Ltd. (77 Taxman 164) held that the interest on delayed payment of receivables cannot be subsumed in the working capital adjustment allowed to the assessee. In the case of Albany Molecular Research Hyderabad Research Center (P.) Ltd. vs. DCIT (126 taxmann.com 289), the Co-ordinate Bench of Hyderabad Tribunal held that interest on outstanding receivables is a separate international transaction and directed to charge interest by applying ITA No. 6581/DEL/2018 [A.Y 2014-15] ITA No. 525/DEL/2021 [A.Y 2016-17] Fluor Daniel India Pvt Ltd Vs. The Addl. CIT Page 17 of 23 LIBOR + 200 Points. In the case of Apache Footwear India Pvt. Ltd. vs. ACIT (148 taxmann.com 371), the Co-ordinate Bench of Tribunal concluded that interest on outstanding receivables from the AE is required to be separately benchmarked and interest should be charged on the delayed period @ 6% on the receivables. 30. We also make it clear that interest cannot be charged on each and every receivable and has to be examined on case to case basis and the TPO has to enquire and analyze the statistics over a period of time to discern a pattern to come to a conclusion that the arrangement reflects an international transaction. The AO has to examine the transactions of similar in nature with non-AEs to come to a conclusion to charge interest and also to determine the basis of interest to be charged. 31. We have also examined the order in the case of Orange Business Services India Solutions (P.) Ltd. vs. DCIT (141 taxman 167) and Global Logic India Ltd [TS-810-ITAT 2022(DEL)-TP] and also the order of the Tribunal for the earlier years. Each year has to be looked into separately based on the facts of the each case. In this case, the inter company services agreement provides for charging of interest on delay of receivables after 60 days. 32. Hence, we direct that the adjustment on account of receivables be computed after following the directions of the ld. DRP. The AO has considered each and every transaction and arrived at right conclusion to determine the adjustment. While computing so, it is directed that the AO shall set off the receivables cleared by the AEs in less than 30 days or received in advance as ordered by the ld. DRP. These directions are applicable to the year in question as the chargeability on interest ITA No. 6581/DEL/2018 [A.Y 2014-15] ITA No. 525/DEL/2021 [A.Y 2016-17] Fluor Daniel India Pvt Ltd Vs. The Addl. CIT Page 18 of 23 receivables varies from year to year. The LIBOR is an internationally recognized rate which is appropriate to benchmark and to determine ALP on receivables. The mark-up decided by the ld. DRP is held to be reasonable. In the result, the appeal of the assessee on this ground is partly allowed.” 27. The Hon’ble Delhi High Court in PCIT v. Kusum Health Care Pvt. Ltd. ITA 765/2016 dated 25.04.2017 \"10. The Court is unable to agree with the above submissions. The inclusion in the Explanation to Section 92B of the Act of the expression \"receivables\" does not mean that de hors the context every item of \"receivables\" appearing in the accounts of an entity, which may have dealings with foreign associated enterprises would automatically be characterised as an international transaction. There may be a delay in collection of monies for supplies made, even beyond the agreed limit, due to a variety of factors which will have to be investigated on a case to case basis. Importantly, the impact this would have on the working capital of the assessee will have to be studied. In other words, there has to be a proper inquiry by the Transfer Pricing Officer by analysing the statistics over a period of time to discern a pattern which would indicate that vis-a-vis the receivables for the supplies made to an associated enterprise, the arrangement reflects an international transaction intended to benefit the associated enterprise in some way. ITA No. 6581/DEL/2018 [A.Y 2014-15] ITA No. 525/DEL/2021 [A.Y 2016-17] Fluor Daniel India Pvt Ltd Vs. The Addl. CIT Page 19 of 23 11. The Court finds that the entire focus of the Assessing Officer was on just one assessment year and the figure of receivables in relation to that assessment year can hardly reflect a pattern that would justify a Transfer Pricing Officer concluding that the figure of receivables beyond 180 days constitutes an international transaction by itself. With the Assessee having already factored in the impact of the receivables on the working capital and thereby on its pricing/profitability vis-a-vis that of its comparables, any further adjustment only on the basis of the outstanding receivables would have distorted the picture and recharacterised the transaction. This was clearly impermissible in law as explained by this Court in CIT v. EKL Appliances Ltd. [2012] 24 taxmann.com 199/209 Taxman 200/345 ITR 241 (Delhi).\" 28. Applying the legal perspectives delineated by the above decision of hon’ble Delhi Court, we find from the facts of the case that the TPO has not examined the issue of receivables thoroughly. As per the directives in the Kusum Healthcare (supra) case that TPO has to examine the issue on case to case basis and to analyse the statistics over a period of time to discern a pattern which would indicate that vis-à-vis that of the receivables for supplies made to an associated enterprise, the arrangement reflects an international transaction intended to benefit the associate enterprise in some way. We also note ITA No. 6581/DEL/2018 [A.Y 2014-15] ITA No. 525/DEL/2021 [A.Y 2016-17] Fluor Daniel India Pvt Ltd Vs. The Addl. CIT Page 20 of 23 that the TPO has also not factored in the impact of receivables on the working capital and thereby on its pricing/profitability vis-à-vis that of its comparables. The AO has to examine whether the adjustment only on the basis of outstanding receivables has distorted the picture and recharacterised the transaction or not. We find that each assessment year has its own facts and circumstances and the TPO has to examine the facts of the case for each year separately. 29. We also are of the considered view that the TPO has not examined whether the assessee is a debt free company and whether the assessee has utilized any borrowed funds for extending the benefit to its AEs. The TPO has to examine if the assessee is a debt free company, what is the impact of the assessee on its outstanding receivables. We also find that the TPO has not examined the assessee’s assertion that it is not charging interest from unrelated 3rd party/non- AE in case of such delay. The TPO shall also take into account the assessee submission with respect to the effect of its assertion that the weighted average period of realization in case of third-party transactions as compared with that in the case of related party transactions is more. We also find force in the assessee argument that the receivables outstanding from AEs ought to netted-off with payable ITA No. 6581/DEL/2018 [A.Y 2014-15] ITA No. 525/DEL/2021 [A.Y 2016-17] Fluor Daniel India Pvt Ltd Vs. The Addl. CIT Page 21 of 23 transactions with AEs. The TPO shall consider the factor of both receivables as well payables while deciding the issue at hand. 30. In view of the above discussion, the order of the TPO/AO/DRP is set aside with a direction to the TPO to examine the issues afresh in the light of discussion made in para 28 and 29 as above. In view of these findings, we are of the considered view that the case may be remitted to the file of TPO for a fresh examination of the outstanding receivables considering all the aspects as discussed above and in the light of the decisions referred to above. We are also fortified in our view of remitting the matter to the TPO considering the assertion of the assessee that the Assessing Officer did not issue any show-cause notice for proposing the adjustment on outstanding receivable and had merely sought details. The ground 3 and its sub- ground are allowed for statistical purposes. 31. Ground no 4 regarding penalty is premature. ITA No. 6581/DEL/2018 [A.Y 2014-15] ITA No. 525/DEL/2021 [A.Y 2016-17] Fluor Daniel India Pvt Ltd Vs. The Addl. CIT Page 22 of 23 ITA No.525/DEL/2021 [A.Y 2016-17] 32. Facts and circumstances of AY 2016-17 are identical except for the quantum. Finding parity of facts, following our discussion and conclusion given in A.Y 2014-15 hereinabove, the orders of the TPO/DRP/AO is set aside for fresh examination as discussed for AY 2013-14. The grounds of appeal taken by the assessee are accordingly allowed for statistical purposes. 33. In the result, the appeals of the assessee in ITA Nos. 6581/DEL/2018 and 525/DEL/2021 are allowed for statistical purposes. The order is pronounced in the open court on 23.04.2025. Sd/- Sd/- [ANUBHAV SHARMA] [NAVEEN CHANDRA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 23rd April, 2025. VL/ ITA No. 6581/DEL/2018 [A.Y 2014-15] ITA No. 525/DEL/2021 [A.Y 2016-17] Fluor Daniel India Pvt Ltd Vs. The Addl. CIT Page 23 of 23 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) Asst. Registrar, 5. DR ITAT, New Delhi Sl No. PARTICULARS DATES 1. Date of dictation of Tribunal Order .04.2025 2. Date on which the typed draft Tribunal Order is placed before the Dictation Member .04.2025 3. Date on which the typed draft Tribunal Order is placed before the other Member 4. Date on which the approved draft Tribunal Order comes to the Sr. P.S./P.S. 5. Date on which the fair Tribunal Order is placed before the Dictating Member for pronouncement 6. Date on which the signed order comes back to the Sr. P.S./P.S 7. Date on which the final Tribunal Order is uploaded by the Sr. P.S./P.S. on official website 8. Date on which the file goes to the Bench Clerk alongwith Tribunal Order 9. Date of killing off the disposed of files on the judiSIS portal of ITAT by the Bench Clerks 10. Date on which the file goes to the Supervisor (Judicial) 11. The date on which the file goes for xerox 12. The date on which the file goes for endorsement 13. The date on which the file goes to the Superintendent for checking 14. The date on which the file goes to the Assistant Registrar for signature on the Tribunal order 15. Date on which the file goes to the dispatch section 16. Date of Dispatch of the Order "