IHS GLOBAL PRIVATE LIMITED,KRISHNARAJAPURAM, BENGALURU V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 3(1)(1), BMTC BUILDING, KORAMANGALA, BENGALURU

ITTPA 1424/BANG/2024

AI Insights

The case involves M/s IHS Global Private Limited, which appealed against the order of the Assistant Commissioner of Income, Circle \\u2013 3(1)(1), Bengaluru, concerning an upward adjustment of Rs. 31,89,289 to their total income for the assessment year 2020-21. This adjustment was made due to delayed recovery of trade receivables from associated enterprises, which was considered an international transaction. The TPO had adopted the SBN/short term deposit interest rate for benchmarking this transaction. The assessee argued that there was a contractual agreement granting a credit period of 90 days, which was not considered by the AO/DRP. The Tribunal decided to set aside the issue to the TPO for fresh adjudication, emphasizing the need to verify the duration of the outstanding receivables and to apply the correct interest rate if applicable.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 24869 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 14 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 15-10-2024
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 05-09-2024
• Assessment Year: misc
• Appeal Filed On: 01-08-2024
• Other Referred Cases: DCIT Vs. Hewlett Packard India Software Operations Private Limited (2022) 149 taxmann.com 280 (Bang. Trib.)
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEERA MALHOTRA
• Assessee Lawyers: SUMIT; C.A
• Keywords: Set aside; Transfer pricing; International transaction

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI KESHAV DUBEY, JUDICIAL MEMBER IT(TP)A No.1424/Bang/2024 Assessment Years : 2020-21 M/s IHS Global Private Limited. Plot No.13, 14, 15, Tower 1 Mobius, SJR Park, Whitefield, EPIP Area, Bengaluru – 560 066. PAN – AABCI 4372 D Vs. The Asst. Commissioner of Income, Circle – 3(1)(1), Bengaluru. . APPELLANT RESPONDENT Assessee by : Shri Sumit, C.A Revenue by : Ms. Neera Malhotra, CIT (DR) Date of hearing : 05.09.2024 Date of Pronouncement : 15.10.2024 O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: This is an appeal filed by the assessee against the order passed by the ld. CIT-1,2,3, Bengaluru dated 06/06/2024 in DIN No. ITBA/AST/S/ 143(3)/2024-25/1065451410(1) for the assessment year 2020-21. 2. The only issue raised by the assessee is that the AO/DRP erred in making upward adjustment of Rs. 31,89,289/- on account of delayed recovery of the trade receivables from the associated enterprises. IT(TP)A No.1424/Bang/2024 Page 2 of 4 . 3. The TPO during the proceedings found that there was a delay in the recovery of trade receivable form the associated enterprises, which represents the international transaction and accordingly he made the upward adjustment of Rs. 31,89,289/- to the total income of the assessee. The TPO, while bench marking the impugned international transaction had adopted the SBN/short term deposit interest rate. Accordingly, the AO in the draft assessment order made the addition of Rs. 31,89,289/- to the total income of the assessee. 4. The assessee next carried the matter before the DRP, which was rejected by it vide order direction dated 29/05/2024. The AO finally in the final assessment order made the addition of Rs. 31,89,289/- to the total income of the assessee. 5. Being aggrieved by the order of the AO/DRP, the assessee is in appeal before us. 6. The ld. AR before us submitted that the assessee as per the agreement with the AE was to grant credit for 90 days, which has not been considered by the AO/DRP in his order. Accordingly, the ld. AR submitted that there cannot be any adjustment of the trade receivables from the AE within the period of 90 days. 7. On the other hand, the ld. DR contended that the assessee has nowhere raised the contention before the DRP that the trade receivables were realized from the associated enterprises within 90 days. IT(TP)A No.1424/Bang/2024 Page 3 of 4 . 8. The ld. AR in his rejoinder fairly agreed that the issue of the credit period of 90 days was not raised before the DRP and ld. AR accordingly prayed to restore the issue to the file of the DRP/TPO for necessary verification. The ld. AR also submitted that the TPO in the assessment year 2021-22 has allowed the credit period of 90 days. The ld. AR also submitted that if the credit period exceeds 90 days then such receivables can be bench marked at Libor + 200 basis points. In this regard, the ld. AR relied on the order of this Tribunal in the case of DCIT Vs. Hewlett Packard India Software Operations Private Limited (2022) 149 taxmann.com 280 (Bang. Trib.). 9. We have heard the rival contentions of both the parties and perused the materials available on record. In the light of the above discussion, we are of the view that the issue on hand needs to be revisited at the level of the TPO so as to find out whether the trade receivables are outstanding more than 90 days if yes, only such trade receivables will be made subject to the adjustment on account of interest up to the end of the financial year in dispute. The TPO is also directed to bench mark such transactions at Libor and 200 base points as held by the ITAT in the case of Hewlett Packard India Software Operations Pvt. Ltd., cited Supra, where in it was held as under: 37. Once we have held that the transaction between the assessee and AE was in foreign currency with regard to receivables and transaction was international transaction, then transaction would have to be looked upon by applying the commercial principles with regard to international transactions and accordingly proceeded to take into account interest rate in terms of London Inter Bank Offer Rate [LIBOR] and it would be appropriate to take the LIBOR rate + 2%. For this purpose, we place reliance on the judgment of the Bombay High Court in the case of CIT v. Aurionpro Solutions Ltd., 99 CCH 0070 (Mum HC). It is ordered accordingly.\" IT(TP)A No.1424/Bang/2024 Page 4 of 4 . 9.1 With the above observation, we set aside the issue to the file of the TPO for fresh adjudication as per the provisions of law in the light of the above stated discussion. Hence, ground of appeal of the assessee is hereby partly allowed for statistical purposes. 10. In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in court on 15th day of October, 2024 Sd/- Sd/- (KESHAV DUBEY) (WASEEM AHMED) Judicial Member Accountant Member Bangalore Dated, 15th October, 2024 / vms / Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore "