Appeal details
Counselvise Citation
[2019] 112 COUNSELVISE.COM (IT) 0055 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 6 month(s) 8 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
31-12-2019
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
I
Assessment Year
2013-2014
Appeal Filed On
22-06-2017
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I-2 : NEW DELHI) BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO.4132/DEL./2017 (ASSESSMENT YEAR : 2013-14) M/S. TARGET SOURCING SERVICES INDIA VS. ACIT, CIRCL E 25 (1), PRIVATE LIMITED, NEW DELHI. 2 ND FLOOR, COPIA CORPORATE SUITES, 9, NON-HIERARCHICAL COMMERCIAL CENTRE, JASOLA, NEW DELHI 110 044. (PAN : AACCT7694Q) (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. RAJNANDINI SHUKLA, ADVOCATE REVENUE BY : SHRI RAKESH KUMAR, SENIOR DR DATE OF HEARING : 18.12.2019 DATE OF ORDER : 31.12.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER APPELLANT, M/S. TARGET SOURCING SERVICES INDIA PVT . LIMITED (HEREINAFTER REFERRED TO AS THE TAXPAYER) BY FILI NG THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 20.04.2017 PASSED BY THE AO IN CONSONANCE WITH THE ORDERS PASS ED BY THE LD. DRP/TPO UNDER SECTION 143 (3) READ WITH SECTION 144 C OF THE ACT QUA THE ASSESSMENT YEAR 2013-14 ON THE GROUNDS INTE R ALIA THAT :- ITA NO.4132/DEL./2017 2 1. THAT THE HON'BLE DRP ERRED IN FACT AND LAW BY UPHOLDING AN ADJUSTMENT OF RS. 19,79,520/- PROPOSED BY THE LD. AO/ LD. TPO WITH RESPECT TO THE OUTSTANDING REC EIVABLES BEING RE-CHARACTERISED AS LOAN DEEMED TO BE EXTENDE D BY THE APPELLANT TO ITS ASSOCIATED ENTERPRISE CAE') AND ACCORDINGLY PROCEEDED TO IMPUTE AN INTEREST ON SUCH OUTSTANDING RECEIVABLES FROM AE AND IN DOING SO HAV E GROSSLY ERRED BY: 1.1. IGNORING THE FACT THAT WORKING CAPITAL ADJUST MENT TAKES INTO ACCOUNT THE IMPACT OF OUTSTANDING RECEIV ABLES ON PROFITABILITY AND THEREFORE, NO FURTHER IMPUTATION OF INTEREST IS WARRANTED; 1.2. DISREGARDING THE INTERCOMPANY PRICING ARRANGE MENT AND NOT APPRECIATING THE FACT THAT UNLIKE A LOAN OR BORROWING, OUTSTANDING RECEIVABLE IS NOT AN INDEPEN DENT TRANSACTION WHICH CAN BE VIEWED ON STANDALONE BASIS AND NEEDS TO BE EXAMINED/AGGREGATED WITH THE COMMERCIAL TRANSACTION AS A RESULT OF WHICH THE DEBIT BALANCE HAS COME INTO EXISTENCE; 1.3. IGNORING THE FACT THAT APPELLANT IS A DEBT FR EE COMPANY AND THEREFORE, IMPUTATION OF INTEREST ON AC COUNT OF BLOCKED FUNDS IS UNWARRANTED; 1.4. IGNORING THE FACT THAT APPELLANT HAS EARNED H IGHER OPERATING PROFIT TO OPERATING COST (OP/OC) MARGIN A S COMPARED TO THE COMPARABLE COMPANIES AND FURTHER TH E ADDITIONS PROPOSED FALLS WITHIN +/-3% RANGE ALLOWED UNDER THE INDIAN TRANSFER PRICING REGULATIONS; AND 1.5. IGNORING THE FACT THAT EVEN IF THE NOTIONAL I NTEREST ON THE OUTSTANDING RECEIVABLES IS BEING CHARGED, THE S AME SHOULD BE NET-OFF AGAINST THE OUTSTANDING PAYABLES. 2. THE HON'BLE DRP HAS ERRED IN LAW BY UPHOLDING TH E REFERENCE MADE BY THE LD. AO TO THE LD. TPO BY NOT APPRECIATING THAT SUCH A REFERENCE SUFFERS FROM JURISDICTIONAL ERROR AS THE LD. AO HAS NOT RECORDED ANY REASONS IN THE ASSESSMENT ORDER BASED ON WHICH HE R EACHED THE CONCLUSION THAT IT WAS 'NECESSARY OR EXPEDIENT' TO REFER THE MATTER TO THE LD. TPO FOR COMPUTATION OF THE AR M'S LENGTH PRICE ('ALP'), AS IS REQUIRED UNDER SECTION 92CA(1) OF THE ACT. ITA NO.4132/DEL./2017 3 3. THE HON'BLE DRP HAS ERRED IN LAW BY UPHOLDING TH E ADJUSTMENT MADE BY THE LD. TPO/ LD. AO THEREBY BY N OT APPRECIATING THAT WHILE MAKING THE SAID ADJUSTMENT THE LD. TPO/LD. AO HAVE NOT SATISFIED THE CONDITIONS SET OU T IN SECTION 92C(3) OF THE ACT. 4. THAT THE LD. AO HAS ERRED BOTH IN FACTS AND IN L AW, IN CHARGING INTEREST UNDER SECTION 234A, 234B, 234C AN D 234D OF THE ACT AND WITHDRAWING INTEREST U/S 244A O F THE ACT AS APPLICABLE. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : M/S. TARGET SOURCING SERV ICES INDIA PVT. LIMITED, THE TAXPAYER WAS INCORPORATED ON 26.09.200 7 IN NEW DELHI TO FACILITATE SOURCING OF GOODS AND PRODUCTS FROM INDIA INCLUDING IDENTIFICATION OF VENDORS, AND TO PROVIDE ASSISTANCE VENDORS IN ADHERING TO DESIGN STANDARDS COMMUNICATE D TO THEM, QUALITY CONTROL AND FOLLOW UP WITH VENDOR FOR TIMEL Y DELIVERY OF THE GOODS. DURING THE YEAR UNDER ASSESSMENT, THE TAXPA YER ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTE RPRISES (AE) AS REPORTED IN FORM 3CEB AS UNDER :- S.NO. INTERNATIONAL TRANSACTIONS METHOD USED AMOUNT (IN RS.) 1 PROVISION OF SOURCING SUPPORT SERVICES TNMM 25,80,37,141 2 REIMBURSEMENT OF EXPENSE- PAID/PAYABLE TNMM 1,96,26,305 3 REIMBURSEMENT OF EXPENSE- RECEIVE/RECEIVABLE NA 1,79,57,901 3. LD. TRANSFER PRICING OFFICER (TPO) NOTICED THAT TAXPAYER HAS SUBSTANTIAL AMOUNT OF OUTSTANDING RECEIVABLES FROM THE AE WHICH ITA NO.4132/DEL./2017 4 REMAINED OUTSTANDING FOR A PROLONGED PERIOD AND NO INTEREST HAS BEEN CHARGED ON SUCH AMOUNT. LD. TPO TREATED THE TR ANSACTIONS BETWEEN THE TAXPAYER AND ITS AE AS TO OUTSTANDING R ECEIVABLES AS INTERNATIONAL TRANSACTIONS AND PROCEEDED TO BENCHMA RK THE SAME SEPARATELY BY RELYING UPON THE AMENDMENT TO SECTION 92B OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) INSERTIN G THE EXPLANATION (1)(C) TO SECTION 92B OF THE FINANCE AC T, 2012 WITH EFFECT FROM 01.04.2002. 4. LD. TPO OBSERVED THAT SINCE THE TAXPAYER HAS FAI LED TO SHOW THAT THE DELAY IN PAYMENT OF RECEIVABLES WAS COMPEN SATED BY THE AE THROUGH A SETOFF OF ANOTHER TRANSACTION BY DECLI NING A CONTENTION THAT NO SEPARATE ADJUSTMENT CAN BE MADE TOWARDS INTEREST ON OVERDUE RECEIVABLES AS THE ENTITY LEVEL RESULTS ARE ALREADY CONSIDERED BY THE TPO AND HAS ALSO DECLINED THE AGGREGATE APPROACH ADOPTED BY THE TAXPAYER. DECLINING THE CO NTENTIONS RAISED BY THE TAXPAYER, LD. TPO PROCEEDED TO HOLD T HAT NORMALLY IN UNCONTROLLED TRANSACTIONS OF BUSINESS, 30 DAYS CRED IT FACILITY IS GIVEN TO MAKE INTEREST FREE PAYMENT AND THEREAFTER INTEREST @ 4.4569% PER ANNUM THAT IS AVERAGE OF 6 MONTHS LIBOR IS CHARGEABLE ON THE OUTSTANDING AMOUNT AND CONSEQUENT LY, CALCULATED THE INTEREST AMOUNT ON THE OUTSTANDING RECEIVABLES AT ITA NO.4132/DEL./2017 5 RS.54,09,237/- AS PER DETAILED COMPUTATION MADE IN ANENXURE-1 ANNEXED WITH THE ORDER. 5. THE TAXPAYER CARRIED THE MATTER BEFORE THE LD. D RP BY WAY OF FILING OBJECTIONS, WHO HAS UPHELD THE PROPOSED A DDITIONS BY REJECTING THE OBJECTIONS. FEELING AGGRIEVED, THE T AXPAYER HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 6. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. LD. AR FOR THE TAXPAYER CHALLENGING THE IMPUGNED ORDER CONTENDED INTER ALIA THAT RE-CHARACTERIZATION OF OU TSTANDING RECEIVABLES AS LOAN BY THE TPO EXTENDED BY THE TAXP AYER TO ITS AE AND THEREBY IMPUTING INTEREST ON SUCH OUTSTANDING R ECEIVABLES IS NOT SUSTAINABLE IN THE EYES OF LAWS; THAT WHEN WORK ING CAPITAL ADJUSTMENT HAS ALREADY TAKEN INTO ACCOUNT THE IMPAC T OF RECEIVABLES ON THE PROFITABILITY, NO FURTHER CHARGING OF INTERE ST IS WARRANTED; THAT TRANSACTION OF OUTSTANDING RECEIVABLES IS NOT AN INDEPENDENT TRANSACTION TO BE EXAMINED ON STANDALONE BASIS; THA T THE TAXPAYER IS A DEBT FREE COMPANY AND AS SUCH, IMPUTATION OF INT EREST ON ACCOUNT OF BLOCKED FUND IS UNWARRANTED; THAT WHEN TAXPAYER HAS EARNED HIGHER OPERATING PROFIT TO OPERATING COST MARGIN AS COMPARED TO ITA NO.4132/DEL./2017 6 COMPARABLE COMPANIES, FURTHER ADDITION PROPOSED FAL LS WITHIN +/- 3% RANGE ALLOWED UNDER THE INDIAN PRICING REGULATIO N; AND THAT NOTIONAL INTEREST ON OUTSTANDING RECEIVABLES SHOULD BE NET-OFF AGAINST THE OUTSTANDING PAYABLES. LD. AR FOR THE T AXPAYER RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN CASE OF PR. CIT VS. KUSUM HEALTH CARE PVT. LTD. IN ITA 765/2016 ORD ER DATED 25.04.2017. 8. ON THE OTHER HAND, LD. DR FOR THE REVENUE RELIED UPON THE ORDERS OF THE LOWER REVENUE AUTHORITIES. 9. UNDISPUTEDLY, PERUSAL OF THE CALCULATION CHART, ANNEXURE-1, TO ARRIVE AT THE INTEREST ON THE OUTSTANDING RECEIV ABLES SHOW THAT MINIMUM AND MAXIMUM DELAY IN PAYMENT ON OUTSTANDING RECEIVABLES ARE WITHIN THE RANGE OF 189 DAYS AND 25 0 DAYS RESPECTIVELY. GROUND NUMBER 1 10. UNDISPUTEDLY WORKING CAPITAL ADJUSTMENT IN THIS CASE ABSORBS IMPACT OF OUTSTANDING RECEIVABLES ON PROFITABILITY. ALL THESE ARGUMENTS HAVE BEEN ADDRESSED BY THE TAXPAYER BEFOR E THE LD. DRP BY WAY OF SUBMISSIONS AVAILABLE AT PAGES 29 TO 53, OPERATIVE PART OF ORDER AT PAGES 33 & 34 IS EXTRACTED AS UNDER:- 2.1.7 ACCORDINGLY, A WORKING CAPITAL ADJUSTMENT W AS UNDERTAKEN BY THE ASSESSEE FOR THE COMPARABLE COMPA NIES SELECTED IN THE TP REPORT AND A SNAPSHOT OF THE RES ULT IS PROVIDED ITA NO.4132/DEL./2017 7 BELOW FOR YOUR HONOUR KIND PERUSAL (PLEASE REFER TO PAGE 277 TO PAGE 281 FOR DETAILED WORKING): S. NO. NAME OF COMPANY WORKING CAPITAL ADJUSTED MARGINS 1 ASIAN EXHIBITION AND CONFERENCE LIMITED 25.83% 2 CONCEPT COMMUNICATION LIMITED 8.82% 3 GRADIENTE INFOTAINMENT LIMITED (207.01%) 4 QUADRANT COMMUNICATIONS LIMITED 11.14% 5 TIMES INNOVATIVE MEDIA LIM ITED 13.19% AVERAGE (29.61%) PLI TSS INDIAS MARGIN WORKING CAPITAL ADJUSTED MARGINS OF COMPARABLES OP/OC 19.48% (29.61%) 2.1.8 THE ABOVE ANALYSIS EMPIRICALLY DEMONSTRATES THAT THE DIFFERENTIAL IMPACT OF WORKING CAPITAL OF THE TESTE D PARTY VIS-A-VIS ITS COMPARABLES HAS ALREADY BEEN FACTORED IN THE PR OFITABILITY OF THE ASSESSEE WHICH IS LESS THAN WORKING CAPITAL ADJ USTED MARGIN OF THE COMPARABLES. HENCE, THE ASSESSEE HUMBLY SUBM ITS THAT KEEPING IN VIEW THE ABOVE FACTUAL POSITION ANY FURT HER ADJUSTMENT ON THE PRETEXT OF OUTSTANDING RECEIVABLES IS UNECON OMICAL, UNWARRANTED AND WHOLLY UNJUSTIFIED. 2.1.8.1 FURTHER, THE ASSESSEE WOULD LIKE TO PLACE R ELIANCE ON THE CASE OF KUSUM HEALTHCARE PRIVATE LIMITED VS. ACIT (ITA NO. 6814/DEL/2014)], WHEREIN THE HON'BLE ITAT HAS EVALUATED THE NEED TO UNDERTAKE WORKING CAPITAL ADJUSTMENT AND CONCURRED WITH THE CONTENTIO NS OF THE ASSESSEE THAT WORKING CAPITAL ADJUSTMENT TAKES INTO ACCOUNT THE IMPACT OF OUTSTANDING RECEIVABLES ON TH E PROFITABILITY. THE RELEVANT EXTRACT HAS BEEN REPROD UCED BELOW FOR YOUR HONOUR REFERENCE: QUOTE PARA 7 ...... THE APPROPRIATE ADJUSTMENTS NEED TO BE CONSI DERED TO BRING PARITY IN THE WORKING CAPITAL INVESTMENT OF T HE ASSESSEE AND THE COMPARABLES RATHER THAN LOOKING AT THE RECEIVABLE INDEPENDENTLY. SUCH WORKING CAPITAL ADJUSTMENT TAKES INTO ACCOUNT THE IMPACT OF OUTSTAN DING RECEIVABLES ON THE PROFITABILITY .... PARA 8 ITA NO.4132/DEL./2017 8 ..... ACCORDINGLY, WHILE CALCULATING THE WORKING CA PITAL ADJUSTED, OPERATING MARGIN ON COSTS OF THE COMPARAB LE COMPANIES, THE IMPACT OF OUTSTANDING RECEIVABLES ON THE PROFITABILITY HAS BEEN TAKEN INTO ACCOUNT. IF THE P RICING/ PROFITABILITY OF THE ASSESSEE ARE MORE THAN THE WOR KING CAPITAL ADJUSTED MARGIN OF THE COMPARABLES, THEN ADDITIONAL IMPUTATION OF INTEREST ON THE OUTSTANDIN G RECEIVABLES IS NOT WARRANTED. PARA 10 10. THE ABOVE ANALYSIS DEMONSTRATES THAT THE DIFFER ENTIAL IMPACT OF WORKING CAPITAL OF THE VIS-A-VIS ITS COMP ARABLES HAS ALREADY BEEN FACTORED IN THE PRICING/PROFITABIL ITY OF THE ASSESSEE WHICH IS MORE THAN THAT WORKING CAPITA L ADJUSTED MARGIN OF THE COMPARABLES. HENCE, ANY FURT HER ADJUSTMENT TO THE MARGINS OF THE ASSESSEE ON THE PR ETEXT OF OUTSTANDING RECEIVABLES IS UNWARRANTED AND WHOLL Y UNJUSTIFIED. UNQUOTE [EMPHASIS SUPPLIED] FROM THE ABOVE, YOUR HONOUR WOULD APPRECIATE THAT T HE HON'BLE ITAT HAS CLEARLY ACKNOWLEDGED THE NEED TO UNDERTAKE WORKING CAPITAL ADJUSTMENT TO BRING PARITY IN THE WORKING C APITAL INVESTMENT OF THE TESTED PARTY AND THE COMPARABLES RATHER THAN LOOKING AT THE RECEIVABLE INDEPENDENTLY. 11. SO, WHEN UNDISPUTEDLY IMPACT OF WORKING CAPITAL OF TESTED PARTY VIS-A-VIS ITS COMPARABLES HAS BEEN FACTORED I N THE PROFITABILITY OF THE TAXPAYER WHICH IS OTHERWISE LESS THAN WORKIN G CAPITAL ADJUSTED OF MARGIN OF COMPARABLE, THERE IS NO NEED TO IMPUTE THE INTEREST ON OUTSTANDING RECEIVABLES FROM AE. 12. FURTHERMORE, WHEN ASSESSEE IS A DEBT FREE COMPA NY IMPUTATION OF INTEREST ON ACCOUNT OF BLOCKED FUNDS THAT IS DELAY IN MAKING PAYMENT OF OUTSTANDING RECEIVABLES FROM AE I S NOT WARRANTED. MOREOVER, WHEN UNDISPUTEDLY THE TAXPAYER HAS EARNED HIGHER OPERATING PROFIT TO OPERATING COST (OP/OC), MARGIN AS ITA NO.4132/DEL./2017 9 COMPARED TO COMPARABLE COMPANIES FURTHER PROPOSED A DDITION FALLS WITHIN +/- 3% RANGE ALLOWED UNDER THE INDIAN TRANSF ER PRICING REGULATION. 13. HONBLE HIGH COURT OF DELHI IN CASE OF KUSUM HEALTH CARE PVT. LTD. (SUPRA) CONFIRMED THE FINDINGS RETURNED BY THE TRI BUNAL ON THIS ISSUE OF DEFERRED PAYMENT OF RECEIVABLES BY RETURNING FOLLOWING FINDINGS :- 9. MR. RAGHVENDRA SINGH, LEARNED COUNSEL APPEARING FOR THE REVENUE SUBMITTED THAT THE ITAT OVERLOOKED THE FACT THAT THE EXPRESSION INTERNATIONAL TRANSACTION AS DEFINED I N EXPLANATION (I)(C) TO SECTION 92B OF THE ACT INCLUDED PAYMENTS OR DEFERRED PAYMENT OR RECEIVABLE OR ANY OTHER DEBT ARISING DUR ING THE COURSE OF BUSINESS, AND THEREFORE, THE OUTSTANDING RECEIV ABLES COULD BY THEMSELVES CONSTITUTE AN INTERNATIONAL TRANSACTION. HE FURTHER REFERRED TO THE OCED TRANSFER PRICING GUIDELINES FO R MULTINATIONAL ENTERPRISES AND TAX ADMINISTRATIONS. PARAS 3.48 & 3.49 UNDER CHAPTER III PARA A.6.1 OF THE SAID GUI DELINES TITLED DIFFERENT TYPES OF COMPARABILITY ADJUSTMENTS SPOK E OF THE NEED TO ELIMINATE DIFFERENCES THAT MAY ARISE FROM DIFFER ENT ACCOUNTING PRACTICES BETWEEN CONTROLLED AND UNCONTROLLED TRANS ACTIONS. IN PARTICULAR, IT WAS NOTED UNDER PARA 3.49 THAT A SI GNIFICANTLY DIFFERENT LEVEL OF RELATIVE WORKING CAPITAL BETWEEN THE CONTROLLED AND UNCONTROLLED PARTIES MAY RESULT IN FURTHER INVE STIGATION OF THE COMPARABILITY CHARACTERISTICS OF THE POTENTIAL COMPARABLE.MR. SINGH SUBMITTED THAT THE ITAT ERRED IN DISAGREEING WITH THE TPO, WHO HAD CHARACTERISED THE OUTSTANDING RECEIVABLES AS AN INTERNATIONAL TRANSAC TION BY ITSELF WHICH REQUIRED BENCHMARKING. 10. THE COURT IS UNABLE TO AGREE WITH THE ABOVE SU BMISSIONS. 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 ACCOUN TS OF AN ENTITY, WHICH MAY HAVE DEALINGS WITH FOREIGN AES WO ULD AUTOMATICALLY BE CHARACTERISED AS AN INTERNATIONAL TRANSACTION. THERE MAY BE A DELAY IN COLLECTION OF MONIES FOR SU PPLIES MADE, EVEN BEYOND THE AGREED LIMIT, DUE TO A VARIETY OF F ACTORS WHICH WILL HAVE TO BE INVESTIGATED ON A CASE TO CASE BASI S. IMPORTANTLY, THE IMPACT THIS WOULD HAVE ON THE WORKING CAPITAL O F THE ASSESSEE WILL HAVE TO BE STUDIED. IN OTHER WORDS, THERE HAS TO BE A PROPER ITA NO.4132/DEL./2017 10 INQUIRY BY THE TPO BY ANALYSING THE STATISTICS OVER A PERIOD OF TIME TO DISCERN A PATTERN WHICH WOULD INDICATE THAT VIS--VIS THE RECEIVABLES FOR THE SUPPLIES MADE TO AN AE, THE ARR ANGEMENT REFLECTS AN INTERNATIONAL TRANSACTION INTENDED TO B ENEFIT THE AE IN SOME WAY. 14. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE AND FO LLOWING THE AFORESAID DECISION RENDERED BY THE HONBLE DELHI HI GH COURT, WE ARE OF THE CONSIDERED VIEW THAT WHEN THE TAXPAYER H AS ALREADY TAKEN INTO ACCOUNT THE IMPACT OF OUTSTANDING RECEIVABLES ON PROFITABILITY WHILE MAKING WORKING CAPITAL ADJUSTMENTS OF THE TAX PAYER VIS-A-VIS ITS COMPARABLES WHICH IS LESS THAN THE WORKING CAPI TAL ADJUSTED MARGIN OF THE COMPARABLES ANY FURTHER ADJUSTMENT ON ACCOUNT OF DELAYED PAYMENT OF OUTSTANDING RECEIVABLES FROM AE WOULD DISTORT THE ENTIRE PICTURE OF RE-CHARACTERIZATION T HE TRANSACTIONS. IN OTHER WORDS, TRANSACTIONS AS TO OUTSTANDING RECEIVA BLES CANNOT BE RE-CHARACTERIZED AS LOAN DEEMED TO BE ADVANCED BY T HE TAXPAYER TO ITS AE. WE ARE OF THE CONSIDERED VIEW THAT AO/DRP HAVE ERRED IN MAKING ADDITION OF RS.19,79,520/- ON ACCOUNT OF INT EREST ON OUTSTANDING RECEIVABLES FROM AE, HENCE ORDERED TO B E DELETED. GROUND NO.1 IS DETERMINED IN FAVOUR OF THE TAXPAYER . GROUND NO.2 15. GROUND NO.2 IS DISMISSED HAVING NOT BEEN PRESSE D DURING THE COURSE OF ARGUMENTS. ITA NO.4132/DEL./2017 11 GROUND NO.3 16. GROUND NO.3 BEING CONSEQUENTIAL IN NATURE NEEDS NO SPECIFIC FINDINGS. GROUND NO.4 17. GROUND NO.8 BEING PREMATURE NEEDS NO SPECIFIC F INDINGS. 18. RESULTANTLY, THE APPEAL FILED BY THE TAXPAYER I S PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 31 ST DAY OF DECEMBER, 2019. SD/- SD/- (PRASHANT MAHARISHI) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 31 ST DAY OF DECEMBER , 2019 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A) 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.
