C3i Support Services Private Limited, Hyderabad, Hyderabad V. DCIT, Circle-1(2), Hyderabad, Hyderabad

ITA 503/HYD/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6432 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 26-06-2018
• Assessment Year: 2012-2013
• Appeal Filed On: 17-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PALLAVI AGARWAL
• Assessee Lawyers: MRS VANDANA BHANDARI; PRASHANT KHANDELWAL ARS
• Keywords: Transfer pricing; International transaction; Wholly owned subsidiary; Notional interest
• Section: 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A. NO. 503/HYD/2017 ASSESSMENT YEAR: 2012-13 C3I SUPPORT SERVICES PRIVATE LIMITED, HYDERABAD [PAN: AACCC2082P] VS DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(2), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : MRS. VANDANA BHANDARI & MR. PRASHANT KHANDELWAL, ARS FOR REVENUE : SMT. PALLAVI AGARWAL, CIT-DR DATE OF HEARING : 26-06-2018 DATE OF PRONOUNCEMENT : 25-07-2018 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E ASSESSING OFFICER (AO) U/S. 143(3) R.W.S.144C OF THE INCOME TAX ACT [ACT], DATED 16-01-2017. ASSESSEE HAS RAISED SIX GROUNDS ON VARIOUS ISSUES, MAINLY PERTAINING TO TRAN SFER PRICING ADJUSTMENTS. 2. BRIEFLY STATED, ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF IT ENABLED SERVICES (ITES), FILED ITS RETURN OF I.T.A. NO. 503/HYD/2017 :- 2 - : INCOME ADMITTING TOTAL INCOME OF RS. 5,88,76,520/- UND ER THE NORMAL PROVISIONS AND RS. 5,77,72,106/- U/S. 115JB OF THE ACT. AS ASSESSEE HAD INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISE [AE], THE MATTER WAS REFERRED TO TH E TRANSFER PRICING OFFICER [TPO], WHO VIDE THE ORDER D T. 30-11- 2016 U/S. 92CA(3) OF THE ACT, PROPOSED ADJUSTMENT OF R S. 3,68,61,675/-. THE DISPUTE RESOLUTION PANEL [DRP] HA S REJECTED ASSESSEES OBJECTIONS ON TP ADJUSTMENT AND AR MS LENGTH PRICE [ALP] DETERMINED, HOWEVER, DIRECTED THE AO TO GIVE CREDIT OF 30 DAYS WHILE CONSIDERING THE LEVY OF INTEREST ON OUTSTANDING RECEIVABLES. AO HAS CONSEQUENTLY PASSED A REVISED ORDER, RESTRICTING THE ADJUSTMENTS ON ALP TO RS.2,30,56 ,229/-. AGGRIEVED, ASSESSEE HAS RAISED THE GROUNDS MAINLY CO NTESTING CERTAIN COMPARABLES TAKEN FOR DETERMINING THE ALP AND LEVY OF INTEREST ON THE RECEIVABLES. GROUND NO. 5 ON INITIATION OF PENALTIES AND GROUND NO.6 ON LEVY OF INTEREST WHICH IS CONSEQUENTIAL, ARE ACADEMIC IN NATURE AND NEED NOT BE ADJUDICATED. 3. LD. COUNSEL REFERRING TO THE AES BUSINESS ACTIVITY, SUBMITTED THAT C3I INC, USA IS A SPECIALIZED S ALES FORCE AUTOMATION SERVICE PROVIDER AND IT PROVIDES SER VICES RANGING FROM CUSTOMER MANAGEMENT INTEGRATION AND ONGO ING SUPPORT SOLUTIONS. C3I INC, USA OFFERS WIDE RANGE OF OUTSOURCING AND INTEGRATION SERVICES, WHICH INCLUDES PROFESSIONAL SERVICES, MANAGED SERVICES, END USER S UPPORT SERVICES AND HARDWARE SERVICES. THE PROFESSIONAL SE RVICES INCLUDE BUSINESS CONSULTING, E-BUSINESS IMPLEMENTATIO N AND I.T.A. NO. 503/HYD/2017 :- 3 - : END USER TRAINING ETC. IT WAS FURTHER SUBMITTED THAT C3I INDIA I.E., ASSESSEE-COMPANY IS A WHOLLY OWNED SUBSIDIARY OF C3I INC, USA AND PROVIDES TECHNICAL SUPPORT SERVICES, GENERAL LY CATEGORIZED AS ITES TO C3I INC. C3I INDIA IS A CAPTI VE SERVICE PROVIDER AND IS COMPENSATED ON COST+17% AND BILLING I S ON COST PLUS BASIS. IT WAS ADMITTED THAT FOR THE PURPOSE OF BENCH MARKING THE ALP TRANSACTIONS, ASSESSEE CHOSE TRANSACTIO NAL NET MARGIN METHOD [TNMM] AS THE BASIS AND PLI IS CALC ULATED AS A RATIO OF OPERATING PROFIT/OPERATING COST. IT WAS FURTHER SUBMITTED THAT ASSESSEE HAS OBJECTED TO INCLUSION OF CER TAIN COMPARABLES AND REJECTING OBJECTIONS TPO HAS SELECTED 10 COMPANIES, WHOSE AVERAGE ALP HAS COME TO 24.96% AND AFTER MAKING WORKING CAPITAL ADJUSTMENT OF (-) 1.69%, THE AD JUSTED MARGIN WAS DETERMINED AS 26.65%, AS AGAINST ASSESSEE S PLI OF 20.49%. LD. COUNSEL MADE A DETAILED SUBMISSIONS ON TH E COMPARABLES OBJECTED TO AND ALSO ON THE ISSUE OF INTER EST LEVIED ON RECEIVABLES. THESE CONTENTIONS ARE DEALT WITH AT THE RELEVANT POINT OF TIME, HOWEVER, THE OBJECTION WITH REFERENCE TO TR EATING ASSESSEE AS KPO, WHEREAS IT WAS TREATED AS ORDINARY B PO IN EARLIER YEARS, HAS BEEN DEALT WITH BEFORE DEALING WIT H OTHER ISSUES. 4. LD. COUNSEL REFERRED TO THE ORDER OF DRP TO SUBMIT THAT THE DRP HAS WRONGLY CONSIDERED THE ACTIVITIE S OF THE C3I INC, USA WHICH WERE EXTRACTED IN PARA V(B) BY THE AO, TO STATE THAT ASSESSEE IS INVOLVED IN A MIXED ACTIVITY OF HIGH END AND LOW END BPO SERVICES, WHEREAS ASSESSEE IS O NLY RENDERING LOW END BPO SERVICES AS IN EARLIER YEARS. IT WAS I.T.A. NO. 503/HYD/2017 :- 4 - : SUBMITTED THAT CLASSIFICATION TAKEN BY THE TPO AND DRP ARE BASICALLY NOT CORRECT AND SUBMITTED THAT ASSESSEE SHOULD BE TREATED AS ORDINARY BPO IN ANALYZING THE COMPARABLES. 5. WE HAVE CONSIDERED THE ABOVE. BEFORE ADVERTING TO THE ISSUE OF COMPARABLES, IT IS NECESSARY TO EXAMINE THE FUNCTIONAL PROFILE OF ASSESSEE. AS SEEN FROM THE F UNCTIONAL PROFILE STATED BY THE TPO IN THE ORDER U/S. 92CA(3), TH E FUNCTIONAL PROFILE OF ASSESSEE IS AS UNDER: M/S. C3I SUPPORT SERVICES P LTD., IS ENGAGED IN PR OVIDING TECHNICAL SUPPORT TO THE END USER OF PARENT COMPANY. IT IS H AVING TECHNICAL KNOWLEDGE AND CAPABILITIES FOR PROVIDING SUPPORT SE RVICES TO CLIENTS OF C3I INC. THE AE IS A SPECIALIZED SALES FORCE AUTOM ATION SERVICE PROVIDER AND A TRUSTED SERVICE PROVIDER FOR CUSTOME R MANAGEMENT INTEGRATION AND ONGOING SUPPORT SOLUTIONS WITH MANY LEADING LIFE SCIENCE COMPANIES AS ITS CLIENTS. THE TAXPAYER IS THE WHOLLY OWNED SUBSIDIARY OF C3I INC., USA. 5.1. WHEREAS IN PARA V(B), IN PG. NO. 24 OF THE TPO ORDER, THE FUNCTIONAL PROFILE OF THE C3I INC HAS BEEN STATED AS UNDER: C3I INC HAS BEEN ENTRUSTED WITH THE RESPONSIBILITY OF BUSINESS DEVELOPMENT INCLUDING ADDITION TO THE CUSTOMER BASE . THE PARENT COMPANY DEALS WITH THE CLIENTS, WHICH ARE THEN SUPP ORTED BY C3I INDIA FOR TECHNICAL PROBLEM RESOLUTION. THE NATURE OF WORK INVOLVES DEALING WITH THE SALES REPRESENTATIVE OF DIFFERENT COUNTRIES WITH DIFFERENT SPEAKING ACCENTS. A TEAM OF TRAINED PEOP LE DOES BACK END JOB AND KEEP TRACKS OF VOLUME OF CALLS ATTENDED, TI ME TAKEN TO RESOLVE THE PROBLEM, PROBLEMS REMAINING UNSOLVED ETC 5.2. DRP HAS RELIED ON THIS PROFILE OF AE TO CONSIDER ASSESSEE AS A KPO. IN OUR OPINION, THE DRP HAS MIS-R EAD ITSELF IN DETERMINING ASSESSEE AS A HIGH END SERVICE PROVI DER, I.T.A. NO. 503/HYD/2017 :- 5 - : WHEREAS ASSESSEE IS ONLY PROVIDING ORDINARY TECHNICA L SUPPORT WHICH IS CATEGORIZED AS ITES BPO SERVICES PROVIDER I N EARLIER YEARS. WE ARE OF THE FIRM OPINION THAT THERE IS NO CH ANGE IN ASSESSEES PROFILE AND SO IT HAS TO BE TREATED AS A BP O PROVIDING ORDINARY SUPPORT SERVICES TO ITS AE, WHOSE S ERVICES MAY BE HIGH END AT THEIR END BUT NOT BY ASSESSEE. ACCORDINGLY, THE ANALYSIS OF THE COMPANYS FUNCTIONAL PROFILE AND OBJECTIONS ON THE COMPARABLES IS CONSIDERED TREATI NG ASSESSEE AS ONLY BPO. 6. WE HAVE HEARD THE LD. COUNSEL AS WELL AS THE LD.DR ON THE ISSUES OF COMPARABLES AND THE ISSUE OF L EVY OF INTEREST ON RECEIVABLES. TPO HAS SELECTED THE FOLLOWIN G 10 COMPARABLES IN DETERMINING THE ALP: SNO. COMPANY NAME OP/OC % 1 ACCENTIA TECHNOLOGIES LTD., 11.16 2 DATAMATICS GLOBAL SERVICES LTD., 16.84 3 ECLERX SERVICES LTD., 61.37 4 E4E HEALTH CARE 13.73 5 INFORMED TECHNOLOGIES INDIA LTD., 7.10 6 INFOSYS BPO LTD., 34.68 7 JINDAL INTELLICOM LTD., 1.98 8 MICROGENETIC SYSTEMS LTD., 7.01 9 TCS E - SERVE LTD., (MERGED) 65.82 10 CROSS DOMAIN SOLUTIONS PVT. LTD., 29.88 TOTAL 249.59 AVERAGE 24.96 OUT OF THESE COMPARABLES, ASSESSEE HAS OBJECTED TO TC S E- SERVE LTD., INFOSYS BPO LTD., ECLERX SERVICES LTD., AN D ACCENTIA TECHNOLOGIES LTD. THESE ARE CONSIDERED AS UN DER: I.T.A. NO. 503/HYD/2017 :- 6 - : TCS E-SERVE LTD: 7. THE ABOVE COMPARABLE IS OBJECTED TO ON THE REASON OF FUNCTIONAL DISSIMILARITY AS THAT COMPANY IS PROVIDING IT CONSULTING, KPO SERVICES AND OTHER BUSINESS PROCE SS MANAGEMENT SERVICES AND DUE TO DIVERSIFIED NATURE OF BUSINESS, THE COMPANY WAS EXCLUDED BY THE DRP IN THE AY. 2011-12 IN ASSESSEES OWN CASE. FURTHER IT WAS SUBMI TTED THAT THE FUNCTIONAL PROFILE OF THE TCS E-SERVE LTD., WAS ALSO ANALYSED BY THE CO-ORDINATE BENCH AT DELHI IN THE CASE OF PR.CIT VS. B.C. MANAGEMENT SERVICES (P) LTD., (IT APP EAL NOS. 1064 & 1083 OF 2017) AY. 2011-12, WHEREIN THE CO-ORD INATE BENCH HAS EXCLUDED THE ABOVE COMPANY ON THE REASON OF FUNCTIONAL DISSIMILARITY. IT WAS FURTHER SUBMITTED THAT THE COMPANY HAD REAPED THE BENEFITS OF TATA BRAND AND BRA ND EQUITY CONTRIBUTION TO BUSINESS WAS TO THE TUNE OF RS. 3.67 CRORES. THE HON'BLE DELHI HIGH COURT IN THE CASE OF PR.CIT VS. B.C. MANAGEMENT SERVICES (P) LTD., (IT APPEAL NOS. 1 064 & 1083 OF 2017) FOR THE AY. 2011-12 HAS UPHELD THE VIEW TAKEN BY THE ITAT THAT TCS E-SERVE LTD., CANNOT BE TAKEN AS A COMPARABLE DUE TO HUGE BRAND VALUE. IT WAS FURTHER S UBMITTED THAT THE CO-ORDINATE BENCH HAS EXCLUDED TCS E-SERVE L TD., DURING THE AY. 2010-11 IN ASSESSEES OWN CASE ON TH E REASON THAT IT WAS DERIVING BENEFIT OF HUGE TATA BRAND VALUE RE SULTING IN EXTRAORDINARY HIGH MARGINS. IT WAS FURTHER SUBMITTED THAT SCALE OF OPERATIONS, ASSETS AND EMPLOYEES BASE RESULTS IN DIFFERENCE IN FAR PROFILE AS THAT COMPANY HAS HUGE TU RNOVER OF RS. 1578.44 CRORES AS AGAINST RS. 34 CRORES OF ASSES SEE. I.T.A. NO. 503/HYD/2017 :- 7 - : 7.1. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE ARE OF THE OPINION THAT THIS COMPANY HAS TO BE EXCLUDED ON THE BASIS OF FUNCTIONAL PROFILE OF COMPARABLE COMPANY WITH THAT OF ASSESSEE. SIMILAR VIEW WAS TAKEN BY THE DRP ITSELF IN THE EARLIER YEAR I.E., AY. 2011-12 AND IN AY. 2010-11 I TAT ALSO EXCLUDED THE SAME. FOLLOWING CASE LAW ALSO SUPPORT T HE VIEW THAT TCS E-SERVE LTD., CANNOT BE COMPARED TO ORDINARY BP O SERVICES BEING RENDERED BY ASSESSEE-COMPANY: I. PR.CIT VS. B.C. MANAGEMENT SERVICES (P) LTD., (IT APP EAL NOS. 1064 & 1083 OF 2017) AY. 2011-12 HON'BLE HIG H COURT OF DELHI; II. S&P CAPITAL IQ (INDIA) PVT LTD., (200/HYD/2016) & (435/HYD/2016) AY. 2011-12; III. INFOR (INDIA) (P.) LTD., (IT APPEAL NO. 113(HYD) OF 2016); IV. BAXTER INDIA PVT. LTD., (6158/DEL/2016); V. BC MANAGEMENT SERVICES PVT. LTD., (ITA NO. 6134/DEL/2015); 7.2. AO/TPO IS DIRECTED TO EXCLUDE THE ABOVE COMPANY FROM THE LIST OF COMPARABLES. INFOSYS BPO LTD., 8. THE OBJECTIONS ON INCLUSION OF THIS COMPANY IS THAT THE SAID COMPANY IS PROVIDING DIVERSIFIED SERVIC ES I.T.A. NO. 503/HYD/2017 :- 8 - : INCLUDING HIGH END KPO AND LPO, PRODUCT BASED SOLUTI ONS AND BPO SERVICES AND THEREFORE, FUNCTIONALLY NOT COMPARABL E TO ASSESSEE. IT ALSO HAD EXTRAORDINARY SCALE OF OPERATIO NS RUNNING TO RS. 1129.11 CRORES AND IT HAS ACQUIRED AN OTHER COMPANY DURING THE YEAR WHICH MAKES IT TO PECULIAR EC ONOMIC CIRCUMSTANCES. PRESENCE OF INFOSYS BRAND VALUE AND S IGNIFICANT EXPENDITURE ON SELLING AND MARKETING PROVIDES FOR A D IFFERENT FAR ANALYSIS AND THEREFORE, THE COMPANY IS NOT COMPAR ABLE TO ASSESSEE. 8.1. AFTER CONSIDERING THE RIVAL CONTENTIONS AND ALSO ON NOTICING THAT THE DRP ITSELF HAD EXCLUDED THE ABOVE COMPANY IN AY. 2010-11 AND ITAT ALSO EXCLUDED IN TH E AYS. 2008-09 AND 2009-10, WE ARE OF THE OPINION THAT INFOSY S BPO LTD., CANNOT BE COMPARED TO THE ASSESSEE-COMPANY ON FUNCTIONAL PROFILE AS WELL AS ON EXTRAORDINARY CIRCU MSTANCES. SIMILAR VIEW WAS ALSO TAKEN IN THE FOLLOWING CASES: I. AGNITY INDIA TECHNOLOGIES (ITA NO. 1204/2011) HON 'BLE HIGH COURT OF DELHI; II. AGNITY INDIA TECHNOLOGIES (ITA NO. 3856 (DEL)/2010) ; III. MONSTER.COM (INDIA) (P.) LTD., (IT APPEAL NOS. 1425 ( HYD) OF 2015 AND 5, 1175 & 1509 (HYD) OF 2016); IV. AGNITY INDIA TECHNOLOGIES (ITA NO. 955/DEL/2015); I.T.A. NO. 503/HYD/2017 :- 9 - : 8.2. AO/TPO IS DIRECTED TO EXCLUDE THE ABOVE COMPANY FROM THE LIST OF COMPARABLES. ECLERX SERVICES LTD., 9. THE OBJECTIONS ABOUT THIS COMPANY ARE THAT THIS COMPANY IS FULL-FLEDGED RISK BEARING HIGH END KPO, WHEREAS ASSESSEE IS A CAPTIVE SERVICE PROVIDER AND PROVIDES ROUTINE ITES SERVICES TO ITS AE. 9.1. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE ARE OF THE OPINION THAT THIS COMPANY CANNOT BE INCLUDED IN THE LIST OF COMPARABLES AS THE FUNCTIONAL PROFILE OF THAT COMPANY IS ENTIRELY DIFFERENT FROM THAT OF ASSESSEE-COMPANY. WE NO TICED THAT TPO AS WELL AS THE DRP HAVE RECONSIDERED ASSESSEE AS KPO, WHICH ASPECT HAS BEEN DECIDED EARLIER AND CONSI DERED THAT ASSESSEE IS ONLY CAPTIVE SERVICE PROVIDED WITH RO UTINE ITES SERVICES BEING ORDINARY BPO. WE ALSO NOTICE THAT DRP ITSELF HAS EXCLUDED THE ACCENTIA TECHNOLOGIES LTD., AND ECLER X SERVICES LTD., ON THE OBJECTIONS RAISED BY ASSESSEE IN AY. 2011-12 AND ITAT HAS EXCLUDED CONSISTENTLY THE ABOVE COMPANY FROM AYS. 2007-08 TO 2010-11 IN ASSESSEES OWN CASE. THE ONLY REASON FOR INCLUSION IN THIS YEAR IS THAT ASSESSEE WAS RE-CATEGORISED AS KPO BY THE TPO AND DRP, WHEN TH ERE IS NO CHANGE IN THE FUNCTIONAL PROFILE, COMPARED TO EARLI ER YEARS. SINCE WE HAVE ALREADY HELD THAT ASSESSEE IS ONLY AN ORDINARY BPO, CONSISTENT TO THE DECISION TAKEN IN EARLIER YEARS, WE DIRECT THE AO/TPO TO EXCLUDE THE ABOVE COMPANY FROM THE LIST OF COMPARABLES. I.T.A. NO. 503/HYD/2017 :- 10 -: ACCENTIA TECHNOLOGIES LTD., 10. THIS COMPANY IS ALSO OBJECTED TO ON THE REASON O F FUNCTIONAL DIS-SIMILARITY AS IN THE CASE OF ECLERX SERVICES LTD ABOVE AND DRP ITSELF EXCLUDED IN EARLIER ASSESSMENT Y EAR I.E., AY. 2011-12. CONSISTENT TO THE STAND TAKEN BY THE ITAT FR OM AYS. 2007-08 TO 2010-11 AND BY THE DRP IN AY. 2011- 12, WE DIRECT THE AO TO EXCLUDE THE ABOVE COMPANY FROM THE LI ST OF COMPARABLES. 11. TPO IS DIRECTED TO RE-WORKOUT THE ALP BY TAKING THE OTHER SIX COMPANIES AND MAKE NECESSARY ADJUSTMENT IF ANY, AS PER THE PROVISIONS OF THE ACT. GROUNDS ARE CO NSIDERED ALLOWED ON THIS ISSUE. ADDITION ON ACCOUNT OF THE INTEREST ON RECEIVABLES: 12. ANOTHER ISSUE WHICH IS CONTESTED BY ASSESSEE IS ON THE LEVY OF INTEREST TO AN EXTENT OF RS. 57,20,073/- ON THE REASON THAT RECEIVABLES ARE SEPARATE INTERNATIONAL TRAN SACTION AND THE CLOSING BALANCE OF RECEIVABLES WAS TO THE TUNE OF RS. 14.44 CRORES THERE BY PROVIDING CAPITAL FINANCING. TPO APPLIED THE RATE OF 14.75% ON CLOSING BALANCE OF RECEIVABLES AND PROPOSED ADDITION OF RS. 1,95,25,119/-. WHEN ASSESSE E OBJECTED TO THE SAME, THE DRP ALLOWED PART RELIEF DIRECTI NG THE AO TO APPLY SPECIFIED INTEREST RATES AS CONFIRMED IN EARLIER YEARS AFTER ALLOWING CREDIT PERIOD OF THIRTY DAYS. 12.1. IT WAS THE OBJECTION OF ASSESSEE THAT CREDIT PERIOD OF 180 (ONE HUNDRED AND EIGHTY) DAYS IS LAID FOR CO LLECTION OF I.T.A. NO. 503/HYD/2017 :- 11 -: RECEIVABLES AS PER WORK ORDERS BETWEEN ASSESSEE AND ITS AE AND FURTHER WHEN WORKING CAPITAL ADJUSTMENT HAS BEEN MA DE, WHEREIN IMPACT OF RECEIVABLES WAS ALREADY BEEN FACTO RED IN, SEPARATE ADDITION ON ACCOUNT OF RECEIVABLES DOES NOT A RISE. LD. COUNSEL RELIED ON THE FOLLOWING CASE LAW IN SUPPORT: I. PR. CIT VS. KUSUM HEALTHCARE PVT LTD., (ITA NO. 765/2016, DT. 25-04-2017) HON'BLE HIGH COURT OF DELHI; II. KUSUM HEALTHCARE (DELHI ITAT); III. XCHANGING SOLUTIONS LTD (BANGALORE ITAT ITA NO. 129 4 (BANG) OF 2012 & 166 (BANG) OF 2014); IV. DELL INTERNATIONAL SERVICES PVT LTD., (ITA (TP) NO. 308/BANG/2015); 12.2. IT WAS FURTHER CONTENDED THAT ASSESSEE HAS NO BORROWED FUNDS AND IT HAS NO ACTUAL INTEREST LIABILIT Y AND HAS NOT PAID ANY INTEREST TO CREDITORS. THEREFORE, DISALLOWI NG OF NOTIONAL INTEREST DOES NOT ARISE. IT RELIED ON THE FO LLOWING CASE LAW: I. BECHTEL INDIA PVT LTD., (SC); II. BECHTEL INDIA PVT LTD., (HON'BLE DELHI HIGH COURT); III. BECHTEL INDIA PVT LTD., (DELHI-ITAT) (ITA NO. 1478/DEL/2015); I.T.A. NO. 503/HYD/2017 :- 12 -: IV. BAIN CAPABILITY CENTRE INDIA (P) LTD., (IT APPEAL NO. 404 (DELHI) OF 2017); 12.3. IT WAS FURTHER SUBMITTED THAT ALLOWANCE OF THIRTY DAYS CREDIT PERIOD BY THE DRP IS ARBITRARY WHEN RBI A LLOWS ONE YEAR PERIOD FOR REALIZATION OF RECEIVABLES IF FOREIG N EXCHANGE IS INVOLVED. LD. COUNSEL RELIED ON THE DECISION OF TH E CO-ORDINATE BENCH AT HYDERABAD IN THE CASE OF GSS INFOTECH LTD., V S. ACIT IN IT APPEAL NO. 497/HYD/2015. IT WAS FURTHER SUBMITT ED THAT OUTSTANDING RECEIVABLES ON ACCOUNT OF THE SERVICES CANN OT BE EQUATED WITH CAPITAL FINANCING AS PROVIDED FOR IN EXPLANATION BY THE AMENDMENT ACT, 2012 AND RELIED ON THE CASE OF P EGA SYSTEMS WORLDWIDE INDIA PVT. LTD., VS. ACIT IN ITA NO. 1758/HYD/2014, DT. 16-10-2015. 12.4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. AS SEEN FROM ASSESSEES CONTENTIONS, ASSESSEE IS NOT CHAR GING INTEREST OF ANY OF THE RECEIVABLES OUTSTANDING. ASSESSEE IS PROVIDING 180 (ONE HUNDRED AND EIGHTY) DAYS CREDIT P ERIOD ON THE AMOUNT RECEIVABLE AND IS CONSISTENT WITH THE RBI G UIDE LINES ON FOREIGN EXCHANGE RECEIVABLES. RBI ALLOWS A PERIOD OF ONE YEAR FOR THE AMOUNTS TO BE REALIZED IF THEY ARE IN FOREIGN EXCHANGE. IN OUR VIEW, PUTTING A LIMIT OF ONE MONTH OF CREDIT ITSELF BY THE DRP IS ARBITRARY. FURTHER, AS SEEN FROM TH E CALCULATION, AO ALSO CALCULATED THE INTEREST WRONGLY PARTICULARLY FROM SR. NO. 34 ONWARDS. UPTO SERIAL NO . 1 TO 33 IN THE TABLE GIVEN IN ASSESSMENT ORDER, AO HAS CORREC TLY GAVE THIRTY DAYS CREDIT PERIOD, WHEREAS SUBSEQUENTLY, THE CR EDIT I.T.A. NO. 503/HYD/2017 :- 13 -: PERIOD VARIED AND IT HAS ARBITRARILY DETERMINED, THE R ATIONALE OF WHICH IS NOT FORTHCOMING FROM THE ORDER. MOREOVER, AS RELIED UPON BY THE LD. COUNSEL, THE IMPACT OF RECEIVABLES IS ALREADY BEEN FACTORED IN THE WORKING CAPITAL ADJUSTMENT BY THE T PO AND AS THERE ARE NO BORROWED FUNDS OR ACTUAL INTERES T LIABILITY CHARGING OF INTEREST DOES NOT ARISE. WE ARE OF THE OPI NION THAT THE SIX MONTHS PERIOD GRANTED BY ASSESSEE IS REASONAB LE AND SO NO INTEREST CAN BE LEVIED JUST BECAUSE THE AMOUNTS A RE SHOWN AS OUTSTANDING IN THE BALANCE SHEET AT THE END OF THE YEAR. THE VARIOUS CASE LAW STATED ABOVE WILL SUPPORT A SSESSEE CONTENTIONS. CONSEQUENTLY, WE CANCEL THE INTEREST LEVIE D AND ALLOW ASSESSEES CONTENTIONS. GROUNDS ARE CONSIDERED ALLOWED. 13. IN THE RESULT, THE APPEAL OF ASSESSEE IS CONSIDERED ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JULY, 2018 SD/- SD/- (V. DURGA RAO) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 25 TH JULY, 2018 TNMM I.T.A. NO. 503/HYD/2017 :- 14 -: COPY TO : 1. C3I SUPPORT SERVICES PRIVATE LIMITED, 2 ND FLOOR, ORION BLOCK, PLOT NO. 17, VANENBURG IT PARK, SOFTWARE UNI TS LAYOUT, MADHAPUR, HYDERABAD. 2. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(2), HYDERABAD. 3. DISPUTE RESOLUTION PANEL (DRP) 4. DIRECTOR OF INCOME TAX (IT & TP), HYDERABAD. 5. ADDL. COMMISSIONER OF INCOME TAX (TRANSFER PRICI NG), HYDERABAD. 6. D.R. ITAT, HYDERABAD. 7. GUARD FILE.