DCIT Corporate Circle 3(2), CHENNAI V. Verizon Data Services Pvt. Ltd., CHENNAI

ITA 3090/CHNY/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6550 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 15-12-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M SRINIVASA RAO
• Assessee Lawyers: SRIRAM SESHADHRI
• Keywords: Transfer pricing; International transaction; Retrospective amendment; Question of law; Set aside
• Section: 92B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , D BENCH, CHENNAI . . . , , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ I.T.A.NO.3090/CHNY/2017 ( [ [ / ASSESSMENT YEAR: 2013-14) THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -3(2), CHENNAI 34. VS M/S. VERIZON DATA SERVICES PVT. LTD., 9 TH FLOOR, ALTIUS BLOCK, OLYMPIA TECH PARK, PLOT NO.1, SIDCO INDUSTRIAL, GUINDY, CHENNAI 600 032. PAN: AABCV 1758N ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI M. SRINIVASA RAO, CIT / RESPONDENT BY : SHRI SRIRAM SESHADHRI, CA /DATE OF HEARING : 25.07.2019 /DATE OF PRONOUNCEMENT : 22.10.2019 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE REVENUE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-11, CHENNAI IN ITA NO.4/CIT(A)-11/2016-17 DATED 31.08.2017 FOR THE ASSESSMENT YEAR 2013-14. 2 ITA NO.3090/CHNY/2017 2. M/S. VERIZON DATA SERVICES INDIA (P) LTD., THE ASSESSEE, IS ENGAGED IN DEVELOPMENT OF MAINTENANCE OF SOFTWARE FOR TELECOM OPERATIONS AND BUSINESS SUPPORT SERVICES. WHILE MAKING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2013-14, THE TRANSFER PRICING OFFICER MENTIONED IN THE TRANSFER PRICING ORDER THAT THE ASSESSEE WAS DUE TO RECEIVE REMUNERATION OF SERVICES WITHIN A SPECIFIED DUE DATE. HOWEVER, IT HAS NOT ENFORCED PAYMENT AND LEGAL RIGHT PROVIDED THEREBY. THEREFORE, THE TPO CAME TO THE CONCLUSION THAT THE ACTION OF THE ASSESSEE WAS A WILLFUL CHOICE TO KEEP THE FUNDS WITH ITS ASSOCIATED ENTERPRISES ('AES') WHICH IS NOTHING BUT AN ACT OF FINANCING OR FUNDING OF AES. THE TPO HAS ALSO DRAWN SUPPORT FROM THE AMENDMENT MADE BY WAY OF FINANCE ACT 2012 TO THE TERM, 'INTERNATIONAL TRANSACTION' WHERE THE SCOPE OF DEFINITION IS MADE WIDE ENOUGH TO INCLUDE RECEIVABLES AS SEPARATE INTERNATIONAL TRANSACTIONS. CAPITAL FINANCING INCLUDES RECEIVABLES ALSO AS PER THE AMENDMENT IN FINANCE ACT, 2012. ACCORDING TO THE TPO, THE ASSESSEE, INSTEAD OF PROVIDING LOAN OR FUNDING OUT OF SURPLUS FUNDS AVAILABLE WITH THE COMPANY, ALTERNATIVELY CHOSE NOT TO COLLECT MONEY ON DUE DATE WHICH IS NOTHING BUT INDIRECT GIVING OF LOAN OR FUNDING. HAD THE AES TAKEN LOAN FROM THE ASSESSEE, IT WOULD HAVE PAID AN INTEREST TO THE ASSESSEE BUT BY WAY OF KEEPING FUNDS THEY ARE ENJOYING AN INTEREST 3 ITA NO.3090/CHNY/2017 FREE LOAN. THEREFORE, THE TPO CONCLUDED THAT THE OVERDUE RECEIVABLES WOULD PARTAKE THE CHARACTER OF ACTIVITY OF PROVIDING LOAN OR FUNDING BY THE ASSESSEE. THE TPO ALSO CONTENDED THAT IMPUTING INTEREST ON THE RE-CHARACTERIZATION OF THE RECEIVABLES IS NOT NOTIONAL. IN RESPONSE TO THE ASSESSEE'S SUBMISSION THAT IT IS A ZERO DEBT COMPANY, THE TPO OBSERVED THAT WHILE THAT MAY BE TRUE BUT THE SAME CANNOT BE SAID FOR THE PARENT COMPANY. IN SUPPORT OF THE VIEW THAT THE IMPUTED INTEREST INCOME IS NOT A NOTIONAL INCOME, THE TPO RELIED UPON THE JUDGMENTS OF THE SPECIAL BENCH OF ITAT, KOLKATA, IN THE CASE OF INSTRUMENTARIUM CORPORATION LTD., IN ITA NO.1548 & 1549/KOL/2009 DATED 15/07/2016 AND ALSO THE JUDGMENT OF ITAT IN THE CASE OF TECHBOOKS INTERNATIONAL. THEREFORE, THE TPO MADE AN UPWARD ADJUSTMENT OF RS.12.14 CRORES. AGGRIEVED AGAINST THAT ORDER, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE LD.CIT(A) AFTER CONSIDERING THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF PATNI COMPUTER SYSTEMS LTD., 33 TAXMANN.COM 3 HELD THAT THE OVERDUE RECEIVABLES ARE INTERNATIONAL TRANSACTIONS. HOWEVER, SINCE THE DELHI HIGH COURT IN THE CASE OF BECHTEL INDIA PVT. LTD., IN ITA NO 379/2016 DT 21.7.2016 HELD THAT WHERE THE ASSESSEE IS A DEBT FREE COMPANY, THE QUESTION OF RECEIVING ANY INTEREST ON RECEIVABLES DID NOT ARISE, WHICH POSITION WAS ALSO CONFIRMED BY THE HONBLE SUPREME COURT WHILE DISMISSING THE 4 ITA NO.3090/CHNY/2017 SLP FILED BY THE DEPARTMENT. IN THE CIRCUMSTANCES, THE LD.CIT(A) HELD THAT THE FACT OF WHETHER THE ASSESSEE IS A DEBT FREE COMPANY IS TO BE ASCERTAINED. IF THE ASSESSEE IS A DEBT FREE COMPANY, THEN LD CIT(A) HELD THAT THE HONBLE SUPREME COURTS DISMISSAL OF SLP WILL BE A BINDING PRECEDENT AND ACCORDINGLY NO ADJUSTMENT IS REQUIRED AGAINST THE OVERDUE RECEIVABLES BY DETERMINING THE INTEREST DUE ON SUCH RECEIVABLES. THEREFORE, LD CIT(A) DIRECTED THE AO TO VERIFY WHETHER THE ASSESSEE IS A DEBT FREE COMPANY AND IF SO, THE ADJUSTMENT WILL STAND DELETED. IF THE ASSESSEE IS NOT A DEBT FREE COMPANY, THEN LD CIT(A) HELD THAT THE POSITION WILL BE DIFFERENT AFTER AMENDMENT TO EXPLANATION (1)(C) TO SECTION 92B(1) BY FINANCE ACT 2012 WITH RETROSPECTIVE EFFECT FROM 01/04/2002. SINCE, THE PROVISIONS ARE VERY CLEAR THAT RECEIVABLES OR ANY OTHER DEBT ARISING DURING THE COURSE OF BUSINESS FALLS IN THE CATEGORY OF INTERNATIONAL TRANSACTION AS HELD BY THE BOMBAY HIGH COURT IN THE CASE OF PATNI COMPUTER SYSTEMS LTD., THE INTERESTS MUST BE CHARGED ON THE OVERDUE RECEIVABLES IN ACCORDANCE WITH ARMS LENGTH PRICE (ALP). 3. AGGRIEVED AGAINST THAT ORDER, THE REVENUE FILED THIS APPEAL WITH THE FOLLOWING GROUNDS:- 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW AND FACTS AND CIRCUMSTANCES OF THE CASE. 5 ITA NO.3090/CHNY/2017 2.1 THE LEARNED CIT(A) ERRED IN HOLDING THAT NO TRANSFER PRICING ADJUSTMENT IS REQUIRED ON THE OVERDUE RECEIVABLES BY DETERMINING THE INTEREST ON SUCH RECEIVABLES, BY RELYING ON THE DISMISSAL ORDER OF THE HON'BLE SUPREME COURT IN THE CASE OF M/S. BECHTEL INDIA PRIVATE LIMITED. 2.2 THE LEARNED CIT(A) FAILED TO CONSIDER THAT THE TRIBUNAL HAS REVERSED ITS OWN DECISION IN THE LATER DECISION' IN THE CASE OF M/S. BECHTEL INDIA PRIVATE LIMITED REPORTED IN 85 TAXMANN.COM 121(2017) AND FACTS OF THE CASE IN HAND IS SIMILAR TO THAT OF THE LATER DECISION REFERRED ABOVE. 2.3 THE LEARNED CIT(A) FAILED TO CONSIDER THE FACT THAT THE ASSESSEE COMPANY HAS TOTAL INTEREST LIABILITY OF RS.39,12,998/- OUT OF WHICH THE NATURE OF INTEREST EXPENDITURE OF RS.8,47,54/- IS NOT KNOWN AND HENCE THE CLAIM OF THE ASSESSEE THAT THE ASSESSEE COMPANY IS A DEBT FREE COMPANY IS NOT ACCEPTABLE. 2.4 THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT THE ASSESSEE COMPANY HAS ALLOWED ITS RECEIVABLES TO REMAIN WITH THE ASSOCIATED ENTERPRISE FOR A PERIOD OF TIME WHICH IS BEYOND THE INDUSTRY PRACTICE. 2.5 THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THE FACT THAT THE ASSESSEE COMPANY HAS NOT PROVED THAT THE DELAY IN RECEIPT OF INVOICED AMOUNT IS NOT DELIBERATE AND IT HAS NOT PROVED THAT THE ASSOCIATED ENTERPRISE IS NOT IN NEED OF THESE FUNDS AS THE ASSOCIATED ENTERPRISE ITSELF WAS DEBT FREE ENTITY AND HENCE THE ASSESSEE COMPANY HAS ALLOWED ITS ASSOCIATED ENTERPRISES TO EARN INTEREST INCOME BY DELAYING THE RECEIVABLE ALREADY INVOICED. 2.6 THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THE FACT THAT THE HON'BLE SUPREME COURT IN THE RELIED DECISION HAS DISMISSED THE APPEAL OF REVENUE BASED ON THE FACTS PRESENT IN THE PARTICULAR CASE AND THE FACTS OF THE PRESENT CASE DISTINGUISHABLE FROM THE CASE OF M/S. BECHTEL INDIA LIMITED. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT (A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 6 ITA NO.3090/CHNY/2017 4. THE LD.DR PRESENTED THE CASE ON THE ABOVE LINES AND SUBMITTED THAT THE INTEREST ON DELAYED REALIZATION OF RECEIVABLES IS A SEPARATE INTERNATIONAL TRANSACTION AND, THEREFORE, REQUIRES SEPARATE BENCHMARKING. IT HAS NOTHING TO DO WITH THE OPERATIONS OF THE ASSESSEE COMPANY BEING WITH THE DEBT FREE FUNDS ONLY. THE LD.CIT(A) FAILED TO CONSIDER THAT THE DELHI TRIBUNAL HAS REVERSED ITS OWN DECISION IN ITS LATER DECISION IN THE CASE OF M/S. BECHTEL INDIA PRIVATE LIMITED REPORTED IN 85 TAXMANN.COM 121(2017) AND FACTS OF THIS CASE IS SIMILAR TO THAT DECISION AND HENCE PLEADED TO ALLOW THE APPEAL. PER CONTRA, THE LD.AR SUBMITTED THAT THE IMPUGNED TRANSACTIONS ARE NOT INTERNATIONAL TRANSACTIONS, INVITED OUR ATTENTION TO THE DECISION OF THE ITAT IN THE CASE OF BECHTEL INDIA PVT.LTD. VS. DCIT IN ITA NO.1478/DEL/2015 FOR THE ASSESSMENT YEAR 2010-11, DATED 21.12.2015 AND THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF PCIT VS. M/S. BECHTEL INDIA PVT. LTD., IN ITA 379/2016, DATED 21.07.2016. THEREAFTER, THE LD.AR INVITED OUR ATTENTION TO THE PAPER- BOOK AND SUBMITTED THAT THE ASSESSEE WAS HAVING AS ON MARCH 31,2013, CASH AND BANK BALANCES OF RS.1,252,692,948 AND THAT THE ASSESSEE HAS NOT INCURRED INTEREST EXPENSES, THE WORKING CAPITAL ADJUSTMENT MADE SUBSUMES THEREFORE, IT WAS PLEADED THAT THE 7 ITA NO.3090/CHNY/2017 REVENUES APPEAL MAY BE DISMISSED. THE LD.DR REBUTTED BY INVITING OUR ATTENTION TO THE GROUND NO.2.3, SUPRA. 5. WE HEARD THE RIVAL SUBMISSIONS. BASED ON THE HONBLE DELHI HIGH COURTS DECISION IN THE CASE OF BECHTEL INDIA PVT. LTD., SUPRA, WHICH WAS UPHELD BY THE HONBLE SUPREME COURT, THE ASSESSEE IS PLEADING THAT THE REVENUES APPEAL BE DISMISSED, IF IT IS A DEBT FREE COMPANY. HOWEVER, THE REVENUE PLEADS THAT THE HONBLE DELHI ITAT IN THE CASE OF BECHTEL INDIA PVT. LTD., ITSELF, IN ITS SUBSEQUENT DECISION, UPHELD THE REVENUES STAND, THEREFORE IRRESPECTIVE OF WHETHER THE ASSESSEE IS A DEBT FREE COMPANY OR NOT, INTEREST ON DELAYED REALIZATION OF RECEIVABLES IS A SEPARATE INTERNATIONAL TRANSACTION AND, THEREFORE, IT REQUIRES SEPARATE BENCHMARKING, IT HAS NOTHING TO DO WITH THE OPERATIONS OF THE ASSESSEE COMPANY BEING WITH THE DEBT FREE FUNDS ONLY. IN ORDER TO APPRECIATE THE ISSUE, THE RELEVANT PORTION OF THE ORDER OF THE DELHI BENCH OF THIS TRIBUNAL IN ITA NO.6530/DEL/2016, ORDER DATED 16.05.2017 IS EXTRACTED AS UNDER : 17. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE RECORD OF THE CASE. THE ASSESSEES GRIEVANCE IS TWO-FOLD. FIRSTLY, WHEN WORKING CAPITAL ADJUSTMENT HAS BEEN MADE, THEN, NO SEPARATE ADJUSTMENT IS REQUIRED TO BE MADE IN RESPECT OF ACCOUNTS RECEIVABLES BECAUSE THE SAME GETS SUBSUMED IN THE WORKING CAPITAL ADJUSTMENT. THE SECOND PLEA OF THE ASSESSEE IS THAT SINCE ITS FUNDS ARE ENTIRELY DEBT FREE, THEREFORE, NO ADJUSTMENT IS WARRANTED IN REGARD TO LATE REALISATION OF 8 ITA NO.3090/CHNY/2017 PROCEEDINGS FROM RECEIVABLES. THE ASSESSEES RELIANCE AS NOTED EARLIER, IS ON THE DECISIONS IN ITS OWN CASES FOR ASSESSMENT YEAR 2010-11 AND 2011-12. THE ISSUE HAS BEEN ELABORATELY CONSIDERED IN THE CASE OF AMERIPRISE INDIA PVT. LTD. (SUPRA) AND, AGAIN, IN THE CASE OF MCKINSEY KNWLEDGE CENTRE PVT. LTD. (SUPRA). IN THE CASE OF TECHBOOKS INDIA INTERNATIONAL PVT. LTD. VS. DCIT (SUPRA), TAKING NOTE OF THE EXPLANATION INSERTED BY THE FINANCE ACT, 2012 TO SECTION 92B, IT WAS OBSERVED THAT THERE REMAINED NO DOUBT THAT APART FROM ANY SHORT-TERM OR LONG-TERM BORROWING, ETC., OR EVEN ADVANCE PAYMENTS OR DEFERRED PAYMENTS, ANY OTHER DEBT ARISING DURING THE COURSE OF BUSINESS HAD ALSO BEEN EXPRESSLY RECOGNIZED AS AN INTERNATIONAL TRANSACTION. IN THE SAID DECISION, THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PATNI COMPUTER SYSTEMS WAS ALSO CONSIDERED, WHEREIN HON'BLE BOMBAY HIGH COURT SET ASIDE THE VIEW TAKEN BY THE TRIBUNAL IN VIEW OF AMENDMENT TO SECTION 92B. THE DECISION IN THE CASE OF KUSUM HEALTHCARE PVT. LTD. WAS DULY CONSIDERED IN THE CASE OF AMERIPRISE INDIA PVT. LTD. AND IT WAS OBSERVED FROM PARA 20 TO 23AS UNDER: 20. THE LD. AR SUPPORTED THE IMPUGNED ORDER BY RELYING ON A TRIBUNAL ORDER DATED 31.3.2015 PASSED IN KUSUM HEALTHCARE PVT. LTD. VS. ACIT (ITA NO.6814/DEL/2014) IN WHICH IT HAS BEEN HELD THAT NO ADDITIONAL IMPUTATION OF INTEREST ON THE OUTSTANDING RECEIVABLES IS WARRANTED IF THE PRICING/PROFITABILITY IS MORE THAN THE WORKING CAPITAL ADJUSTED MARGIN OF THE COMPARABLES. IN THE OPPOSITION, THE LD. DR RELIED ON A LATER ORDER DATED 6.7.2015 PASSED BY THE TRIBUNAL IN THE CASE OF TECHBOOKS INTERNATIONAL PVT. LTD. (SUPRA), IN WHICH THE TRANSFER PRICING ADJUSTMENT ON ACCOUNT OF THE DELAYED REALIZATION OF INVOICES FROM AES HAS BEEN UPHELD. THE LD. DR CONTENDED THAT THE ORDER IN THE CASE OF KUSUM HEALTHCARE PVT. LTD. (SUPRA), HAS BEEN PASSED WITHOUT CONSIDERING THE AMENDMENT TO SECTION 92B CARRIED OUT BY THE FINANCE ACT, 2012 WITH RETROSPECTIVE EFFECT FROM 1.4.2002, WHICH HAS BEEN DULY TAKEN INTO ACCOUNT BY THE TRIBUNAL IN ITS LATER ORDER IN TECHBOOKS INTERNATIONAL PVT. LTD. (SUPRA). 21. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING THE RELEVANT MATERIAL ON RECORD, IT IS NOTICED AS HIGHLIGHTED ABOVE, THAT THE ASSESSEE ARGUED BEFORE THE TPO THAT INTEREST ON RECEIVABLES IS NOT AN INTERNATIONAL TRANSACTION. AT THIS STAGE, IT WOULD BE APPOSITE 9 ITA NO.3090/CHNY/2017 TO NOTE THAT THE FINANCE ACT, 2012 HAS INSERTED EXPLANATION TO SECTION 92B WITH RETROSPECTIVE EFFECT FROM 1.4.2002. CLAUSE (I) OF THIS EXPLANATION, WHICH IS OTHERWISE ALSO FOR REMOVAL OF DOUBTS, GIVES MEANING TO THE EXPRESSION INTERNATIONAL TRANSACTION IN AN INCLUSIVE MANNER. SUB-CLAUSE (C) OF CLAUSE (I) OF THIS EXPLANATION, WHICH IS RELEVANT FOR OUR PURPOSE, PROVIDES AS UNDER:- ` EXPLANATION.FOR THE REMOVAL OF DOUBTS, IT IS HEREBY CLARIFIED THAT (I) THE EXPRESSION 'INTERNATIONAL TRANSACTION' SHALL INCLUDE (A) (B) .. (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;. 22. ON GOING THROUGH THE RELEVANT PART OF THE EXPLANATION INSERTED WITH RETROSPECTIVE EFFECT FROM 1.4.2002, THEREBY ALSO COVERING THE ASSESSMENT YEAR UNDER CONSIDERATION, THERE REMAINS NO DOUBT THAT APART FROM ANY LONG-TERM OR SHORT-TERM LENDING OR BORROWING, ETC., OR ANY TYPE OF ADVANCE PAYMENTS OR DEFERRED PAYMENTS, ANY OTHER DEBT ARISING DURING THE COURSE OF BUSINESS HAS ALSO BEEN EXPRESSLY RECOGNIZED AS AN INTERNATIONAL TRANSACTION. THAT BEING SO, THE PAYMENT/NON-PAYMENT OF INTEREST OR RECEIPT/NON- RECEIPT OF INTEREST ON THE LOANS ACCEPTED OR ALLOWED IN THE CIRCUMSTANCES AS MENTIONED IN THIS CLAUSE OF THE EXPLANATION, ALSO BECOME INTERNATIONAL TRANSACTIONS, REQUIRING THE DETERMINATION OF THEIR ALP. IF THE PAYMENT OF INTEREST IS EXCESSIVE OR THERE IS NO OR LOW RECEIPT OF INTEREST, THEN SUCH INTEREST EXPENSE/INCOME NEED TO BE BROUGHT TO ITS ALP. THE EXPRESSION DEBT ARISING DURING THE COURSE OF BUSINESS IN COMMON PARLANCE ENCOMPASSES, INTER ALIA, ANY TRADING DEBT ARISING FROM THE SALE OF GOODS OR SERVICES RENDERED IN THE COURSE OF CARRYING ON THE BUSINESS. ONCE ANY DEBT ARISING DURING THE COURSE OF BUSINESS HAS BEEN ORDAINED BY THE LEGISLATURE AS AN INTERNATIONAL TRANSACTION, IT IS, BUT, NATURAL THAT IF THERE IS ANY DELAY IN THE REALIZATION OF SUCH DEBT ARISING DURING THE COURSE OF BUSINESS, IT IS LIABLE TO BE VISITED WITH THE TP ADJUSTMENT ON ACCOUNT 10 ITA NO.3090/CHNY/2017 OF INTEREST INCOME SHORT CHARGED OR UNCHARGED. UNDER SUCH CIRCUMSTANCES, THE CONTENTION TAKEN BY THE ASSESSEE BEFORE THE TPO THAT IT IS NOT AN INTERNATIONAL TRANSACTION, TURNS OUT TO BE BEREFT OF ANY FORCE. 23. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PATNI COMPUTER SYSTEMS LTD., (2013) 215 TAXMANN 108 (BOM.) DEALT, INTER ALIA, WITH THE FOLLOWING QUESTION OF LAW:- (C) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL DID NOT ERR IN HOLDING THAT THE LOSS SUFFERED BY THE ASSESSEE BY ALLOWING EXCESS PERIOD OF CREDIT TO THE ASSOCIATED ENTERPRISES WITHOUT CHARGING AN INTEREST DURING SUCH CREDIT PERIOD WOULD NOT AMOUNT TO INTERNATIONAL TRANSACTION WHEREAS SECTION 92B(1) OF THE INCOME-TAX ACT, 1961 REFERS TO ANY OTHER TRANSACTION HAVING A BEARING ON THE PROFITS, INCOME, LOSSES OR ASSETS OF SUCH ENTERPRISES? 24. WHILE ANSWERING THE ABOVE QUESTION, THE HONBLE HIGH COURT NOTICED THAT AN AMENDMENT TO SECTION 92B HAS BEEN CARRIED OUT BY THE FINANCE ACT, 2012 WITH RETROSPECTIVE EFFECT FROM 1.4.2002. SETTING ASIDE THE VIEW TAKEN BY THE TRIBUNAL, THE HONBLE HIGH COURT RESTORED THIS ISSUE TO THE FILE OF THE TRIBUNAL FOR FRESH DECISION IN THE LIGHT OF THE LEGISLATIVE AMENDMENT. 25. THE FOREGOING DISCUSSION DISCLOSES THAT NON-CHARGING OR UNDERCHARGING OF INTEREST ON THE EXCESS PERIOD OF CREDIT ALLOWED TO THE AE FOR THE REALIZATION OF INVOICES AMOUNTS TO AN INTERNATIONAL TRANSACTION AND THE ALP OF SUCH AN INTERNATIONAL TRANSACTION IS REQUIRED TO BE DETERMINED. 18. IN VIEW OF THE ABOVE OBSERVATIONS, THE RELIANCE PLACED BY THE LD. COUNSEL FOR THE ASSESSEE ON EARLIER DECISIONS CANNOT BE ACCEPTED. 19. IN THE CASE OF AMERIPRISE (SUPRA), IT HAS BEEN OBSERVED THAT THE WORKING CAPITAL ADJUSTMENT IS IN RESPECT OF INTERNATIONAL TRANSACTION OF RENDERING SERVICES TO THE AE. INTEREST FOR CREDIT PERIOD ALLOWED AS PER THE AGREEMENT IS GIVEN IN THE PRICE CHARGED FOR RENDERING OF SERVICES. WHEREAS THE NON-REALISATION OF INVOICE VALUE BEYOND THE STIPULATED PERIOD IS A SEPARATE INTERNATIONAL TRANSACTION WHOSE ALP IS REQUIRED TO 11 ITA NO.3090/CHNY/2017 BE DETERMINED. GRANTING OF WORKING CAPITAL ADJUSTMENT IS CONFINED TO THE INTERNATIONAL TRANSACTION OF RENDERING OF SERVICES, WHOSE ALP IS SEPARATELY DETERMINABLE. ON THE OTHER HAND, THE INTERNATIONAL TRANSACTION OF INTEREST RECEIVABLE FROM ITS AES FOR LATE REALIZATION OF INVOICES BEYOND SUCH STIPULATED PERIOD IS A SEPARATE INTERNATIONAL TRANSACTION. ALLOWING WORKING CAPITAL ADJUSTMENT IN THE INTERNATIONAL TRANSACTION OF RENDERING OF SERVICES CAN HAVE NO IMPACT ON THE DETERMINATION OF ALP OF THE INTERNATIONAL TRANSACTION OF INTEREST ON RECEIVABLES FROM AES BEYOND THE STIPULATED PERIOD ALLOWED AS PER AGREEMENT. IN THE CASE OF MCKINSEY KNWLEDGE CENTRE PVT. LTD. (SUPRA), AGAIN, THE TRIBUNAL REITERATED THIS REASONING AND, INTER ALIA, OBSERVED THAT: . IN OUR CONSIDERED OPINION, WHEREAS, THE INTERNATIONAL TRANSACTION OF PURCHASE/SALE OF GOODS FROM/TO AE CONTEMPLATES COMPARISON OF THE PRICE CHARGED/PAID FOR SUCH GOODS BY IMPLIEDLY INCLUDING THE INTEREST FOR THE PERIOD ALLOWED FOR REALIZATION OF INVOICES AS PER THE TERMS OF THE AGREEMENT, THE INTERNATIONAL TRANSACTION OF CHARGING INTEREST ON LATE RECOVERY OF TRADE RECEIVABLE COVERS THE PERIOD WHICH STARTS WITH THE TERMINATION OF THE PERIOD OF CREDIT ALLOWED UNDER THE AGREEMENT, WHICH IS SUBJECT MATTER OF THE INTERNATIONAL TRANSACTION OF PURCHASE/SALE OF GOODS. 20. THE TRIBUNAL ALSO EXPLAINED THAT IF AN INVOICE IS RAISED DURING THE YEAR AND THE PROCEEDS ARE REALIZED 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. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL NOTED ABOVE, WE REJECT THE ASSESSEES CONTENTION THAT THE INTEREST ON DELAYED PAYMENT OF RECEIVABLES GET SUBSUMED IN THE WORKING CAPITAL ADJUSTMENT ALLOWED TO THE ASSESSEE. THE LD. COUNSEL HAS ALSO ADVANCED AN ARGUMENT THAT SINCE IT WAS DEBT FREE FUND COMPANY, WHICH FINDING IS NOT DISPUTED, THEREFORE, NO INTEREST COULD BE ATTRIBUTABLE ON THE LATE REALIZATION OF RECEIVABLES. IN OUR OPINION, THIS PLEA IS TO BE REJECTED AT THE THRESHOLD BECAUSE, AS NOTED EARLIER, INTEREST ON DELAYED REALIZATION OF RECEIVABLES IS A SEPARATE INTERNATIONAL TRANSACTION AND, THEREFORE, REQUIRES SEPARATE BENCHMARKING. IT HAS NOTHING TO DO WITH THE OPERATIONS OF THE ASSESSEE COMPANY BEING WITH THE DEBT FREE FUNDS ONLY. 12 ITA NO.3090/CHNY/2017 THE DELHI BENCH OF THIS TRIBUNAL ARRIVED TO THE ABOVE CONCLUSION FOR THE ASSESSMENT YEAR 2012-13, AFTER CONSIDERING VARIOUS DECISIONS RELIED ON BY THE ASSESSEE INCLUDING THE DECISION OF THE HONBLE DELHI HIGH COURT. THUS, IT IS CLEAR THAT THE REVENUE HAS MADE OUT A CASE IN ITS FAVOUR FOR THIS ASSESSMENT YEAR, I.E., 2013-14. FOLLOWING THE ABOVE DECISION, WE HOLD THAT THE INTEREST ON DELAYED REALIZATION OF RECEIVABLES IS A SEPARATE INTERNATIONAL TRANSACTION AND, THEREFORE, REQUIRES SEPARATE BENCHMARKING. IT HAS NOTHING TO DO WITH THE OPERATIONS OF THE ASSESSEE COMPANY BEING WITH THE DEBT FREE FUNDS ALONE. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 22 ND OCTOBER, 2019 AT CHENNAI. SD/- SD/- /CHENNAI, /DATED 22 ND OCTOBER, 2019 RSR /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( ) /CIT(A) 4. /CIT 5. /DR 6. [ /GF ( . . . ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( ) (S. JAYARAMAN) /ACCOUNTANT MEMBER