Target Sourcing Services India Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 6040/DEL/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6451 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I2
• Next Hearing Date: 21-03-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 25-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T M SHIVAKUMAR
• Assessee Lawyers: MANONEET DALAL
• Keywords: Transfer pricing; International transaction
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-2, NEW DELHI BEFORE SHRI J. S. REDDY, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO.6040/DEL/2016 ASSESSMENT YEAR : 2012-13 TARGET SOURCING SERVICES INDIA PVT. LTD., 2 ND FLOOR, COPIA CORPORATE SUITES, 9, NON- HIERARCHICAL COMMERCIAL CENTRE, JASOLA, NEW DELHI. VS. ACIT, CIRCLE- 25(1), NEW DELHI. PAN : AACCT 7694 Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANONEET DALAL, ADV. RESPONDENT BY : SHRI T. M. SHIVAKUMAR, CIT(DR) DATE OF HEARING : 21-03-2017 DATE OF PRONOUNCEMENT : 24-03-2017 O R D E R PER J. S. REDDY, A.M : THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE ASSESSING OFFICER PASSED U/S 143(3) R.W.S. 144C OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT), PASSED ON 2 0.10.2016 FOR THE ASSESSMENT YEAR 2012-13. 2. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS EN GAGED IN THE BUSINESS OF SOURCING OF GOODS AND PRODUCTS FROM INDIA FOR ITS A SSOCIATED ENTERPRISES (AES) AND IS REMUNERATED AT COST PLUS 15%. THE SOURCING AND FUNCTIONING INCLUDES IDENTIFICATION OF VENDORS, PROCUREMENT OF RAW MATER IAL AND PROVIDING ASSISTANCE 2 ITA NO.6040/DEL/2016 TO THE VENDORS IN DESIGNING, INSPECTION AND QUALITY CONTROL AND ENSURING DELIVERY OF GOODS. THE ASSESSING OFFICER, CONSEQUENT TO THE DRP DIRECTIONS MADE A TRANSFER PRICING ADJUSTMENT OF RS.51,00,615/- BY RE -CHARACTERING RECEIVABLES OUTSTANDING FOR THE PERIOD EXCEEDING 60 DAYS, AS UN SECURED LOANS ADVANCED BY THE ASSESSEE TO ITS AES AND IMPUTED A NOTIONAL INTE REST BASED ON SBI PRIME LENDING RATE + 300 BASIS POINTS (RESULTING IN INTER EST RATE OF 12.65%). THE DRP, WHILE UPHOLDING THE ADJUSTMENT MADE BY THE TPO, ALL OWED THE INTEREST CALCULATION FOR THE PERIOD BEYOND 90 DAYS. 3. AGGRIEVED, THE ASSESSEE IS IN APPEAL ON THE FOLL OWING GROUNDS OF APPEAL :- 1. THAT THE HON'BLE DRP ERRED IN FACT AND LAW BY UPHOL DING AN ADJUSTMENT OF RS. 51,00,615/- PROPOSED BY THE LD. A O/ LD. TPO WITH RESPECT TO THE OUTSTANDING RECEIVABLES BEING RE-CHARACTERIS ED AS LOAN DEEMED TO BE EXTENDED BY THE APPELLANT TO ITS ASSOCIATED ENTERPR ISE (AE) AND ACCORDINGLY PROCEEDED TO IMPUTE AN INTEREST ON SUCH OUTSTANDING RECEIVABLES FROM AE AND IN DOING SO HAVE GROSSLY ERRED BY: 1.1. IGNORING THE FACT THAT WORKING CAPITAL ADJUST MENT TAKES INTO ACCOUNT THE IMPACT OF OUTSTANDING RECEIVABLES ON PROFITABIL ITY 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 BORROWI NG, OUTSTANDING RECEIVABLE IS NOT AN INDEPENDENT TRANSACTION WHICH CAN BE VIEWED ON STANDALONE BASIS AND NEEDS TO BE EXAMINED/AGGREGATE D WITH THE COMMERCIAL TRANSACTION AS A RESULT OF WHICH THE DEB IT BALANCE HAS COME INTO EXISTENCE; 1.3. IGNORING THE FACT THAT APPELLANT IS A DEBT FRE E COMPANY AND THEREFORE, IMPUTATION OF INTEREST ON ACCOUNT OF BLOCKED FUNDS IS UNWARRANTED; 1.4. IGNORING THE FACT THAT APPELLANT HAS EARNED H IGHER OPERATING PROFIT TO OPERATING COST (OP/OC) MARGIN AS COMPARED TO THE CO MPARABLE COMPANIES AND FURTHER THE ADDITIONS PROPOSED FALLS WITHIN +/- 5% RANGE ALLOWED UNDER THE INDIAN TRANSFER PRICING REG ULATIONS; 1.5. IGNORING THE FACT THAT PROVISION REGARDING ACC OUNT RECEIVABLES AS A SEPARATE INTERNATIONAL TRANSACTION WITH RETROSPECTI VE EFFECT FROM APRIL 1, 2002 IS UNCONSTITUTIONAL. FURTHER, DEBIT BALANCE IS NOT AN 3 ITA NO.6040/DEL/2016 INTERNATIONAL TRANSACTION AND ONLY REAL INCOME CAN BE SUBJECTED TO TAX; AND 1.6. IGNORING THE APPELLANT'S CONTENTION, WITHOUT PREJUDICE TO OTHER CONTENTIONS, THAT IF AT ALL INTEREST IS TO BE IMPUT ED, INSTEAD OF AN AD- HOC RATE OF SBI PLR PLUS 300 BASIS POINTS, THE LIBO R RATE FOR THE AY 2012-13 SHOULD BE APPLIED FOR IMPUTING INTEREST SIN CE RECEIVABLES OUTSTANDING WERE IN FOREIGN CURRENCY. 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 TH AT SUCH A REFERENCE SUFFERS FROM JURISDICTIONAL ERROR AS THE LD. AO HAS NOT RECORDED ANY REASONS IN THE ASSESSMENT ORDER BASED ON WHICH HE REACHED T HE CONCLUSION THAT IT WAS 'NECESSARY OR EXPEDIENT' TO REFER THE MATTER TO THE LD. TPO FOR COMPUTATION OF THE ARM'S LENGTH PRICE ('ALP'), AS I S REQUIRED UNDER SECTION 92CA(1) OF THE ACT. 3. THE HON'BLE DRP HAS ERRED IN LAW BY UPHOLDING THE A DJUSTMENT MADE BY THE LD. TPO/ LD. AO THEREBY BY NOT APPRECIATING THA T WHILE MAKING THE SAID ADJUSTMENT THE LD. TPO/LD. AO HAVE NOT SATISFIED TH E CONDITIONS SET OUT IN SECTION 92C(3) OF THE ACT. 4. THAT THE LD. AO HAS ERRED BOTH IN FACTS AND IN LAW , IN CHARGING INTEREST UNDER SECTION 234B AND 234C. 5. THAT THE LD. AO HAS ERRED BOTH IN FACTS AND IN LAW , IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271. THE ABOVE GROUNDS OF APPEAL ARE MUTUALLY EXCLUSIVE & WITHOUT PREJUDICE TO EACH OTHER. THE APPELLANT PRAYS FOR LEAVE TO ADD, ALTER, AMEND AND /OR MODIFY ANY GROUND OF APPEAL AT OR BEFORE THE HEARING OF THE AP PEAL. THE APPELLANT PRAYS FOR APPROPRIATE RELIEF BASED ON THE SAID GROUND OF APPEAL AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. SHRI MANONEET DALAL, LD. COUNSEL FOR THE ASSESSE E SUBMITTED THAT, ONLY ONE ISSUE IS BEING PRESSED IN THIS APPEAL AND THIS RELA TES TO TRANSFER PRICING ADJUSTMENT MADE ON TRADE RECEIVABLES. HE SUBMITTED THAT GROUND NOS.2, 3, 4 AND 5 ARE NOT PRESSED BY HIM AND THAT GROUND NO.1.5 CAN NOT BE AGITATED BEFORE THE TRIBUNAL. ON GROUND NOS.1.1 TO 1.4 AND 1.6 HE SUBM ITTED AS FOLLOWS :- (A) RE-CHARACTERIZATION OF OUTSTANDING RECEIVABLES IS WRONG AS THIS IS NOT AN INDEPENDENT TRANSACTION WHICH CAN BE VIEWED ON STANDALONE 4 ITA NO.6040/DEL/2016 BASIS AND NEEDS TO BE EXAMINED/AGGREGATED WITH THE COMMERCIAL TRANSACTION AS A RESULT ON WHICH THE DEBIT BALANCES HAVE COME INTO EXISTENCE. THE TPO AND DRP HAVE IGNORED THE INTERC OMPANY PRICING ARRANGEMENT. (B) THAT THE ASSESSEE IS A DEBT FREE COMPANY AND TH EREFORE, IMPUTATION OF INTEREST ON ACCOUNT OF BLOCKED FUNDS IS UNWARRAN TED. HE RELIED ON THE ORDER OF THE TRIBUNAL IN THE CASE OF BECHTEL INDIA PRIVATE LIMITED (ITA NO.1478/DEL/2015) WHICH WAS CONFIRMED BY THE HONBLE DELHI HIGH COURT IN ITA NO.379 OF 2016. (C) THAT THE AVERAGE DAYS OF REALIZATION PERIOD OF RECEIVABLES OF THE ASSESSEE IS 206.95 DAYS AS COMPARED TO THE AVERAGE REALIZATION PERIOD OF 446.71 DAYS OF THE COMPARABLES COMPANIES. A CHART WAS SUBMITTED IN SUPPORT OF THIS ARGUMENT WHEREIN AVERA GES WERE DEPICTED. HE RELIED ON THE DECISION OF THE HYDERAB AD BENCH OF THE TRIBUNAL IN THE CASE OF OAKTON GLOBAL TECHNOLOGY SE RVICES CENTRE (INDIA) PVT. LTD. VS. ACIT (ITA NO.434/HYD/2015). (D) THAT WORKING CAPITAL ADJUSTMENT TAKES INTO ACCO UNT THE IMPACT OF OUTSTANDING RECEIVABLES ON PROFITABILITY AND THEREF ORE NO FURTHER IMPUTATION OF INTEREST IS WARRANTED. RELIANCE WAS PLACED ON THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF KUSUM HEALTHCARE PRIVATE LIMITED VS. ACIT (ITA NO.6814/DE L/2014). 5 ITA NO.6040/DEL/2016 (E) THAT THE ASSESSEE HAS EARNED HIGHER OPERATING P ROFIT TO OPERATING COST (OP/OC) MARGIN AS COMPARED TO THE COMPARABLE C OMPANIES AND FURTHER THE ADDITIONS PROPOSED FALLS WITHIN + 5 % RANGE ALLOWED UNDER THE INDIAN TRANSFER PRICING REGULATIONS AND H ENCE NO TRANSFER PRICING ADJUSTMENT WAS WARRANTED. (F) THAT THE ASSESSING OFFICER HAS COMMITTED AN ERR OR IN ITS TP REPORT AND THAT THE PAYMENTS WERE ALWAYS RECEIVED IN FOREI GN CURRENCY AND WHEREAS IT WAS THE WRONGLY RECORDED THAT IT WAS RECEIVED IN INDIAN CURRENCY. THIS FACTUAL MISTAKE DONE IN THE TRANSFER PRICING REPORT LEAD TO THE TPO ADOPTING SBI PRIME LENDING R ATE + 300 BASIS POINTS. (G) THAT AS THE RECEIPTS OF THE ASSESSEE WAS IN FOR EIGN CURRENCY LIBOR RATE HAS TO BE APPLIED FOR IMPUTING INTEREST AND NO T SBI PLR PLUS 300 BASIS POINTS. HE RELIED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF COTTON NATURALS (I) PVT. LTD. (TS-117- HC-2015). (H) THAT IN ALL THE SUBSEQUENT YEARS THE TPO HAS HI MSELF APPLIED LIBOR RATE ACCEPTING THE CONTENTION OF THE ASSESSEE . 6 ITA NO.6040/DEL/2016 5. LD. DEPARTMENTAL REPRESENTATIVE (DR), ON THE OTH ER HAND, OPPOSED THE CONTENTIONS OF THE ASSESSEE AND SUBMITTED THAT, WIT HOUT EXAMINING THE FACTS, THE CLAIM OF THE ASSESSEE CANNOT BE ACCEPTED. HE ARGUE D AS FOLLOWS :- 1. THE WORKING OF NUMBER OF DAYS OF CREDIT PERIOD A LLOWED BY DIFFERENT COMPARABLES AS GIVEN BY LD.AR IN TABULAR FORM IS IN CORRECT. THE NUMBER OF DAYS TAKEN FOR REALISATION OF DEBTS CANNOT BE WORKE D OUT BY USING THE AVERAGES OF OPENING AND CLOSING BALANCE IN DEBTOR'S ACCOUNTS AND TOTAL SALE DURING THE YEAR. THE VERY POINT HAS BEEN ADJUD ICATED IN THE CASE OF MCKINSEY KNOWLEDGE CENTRE PVT. LTD. & ANR. VS. DCIT (2016) 48 CCH 0252 DELTRIB. THE RELEVANT SENTENCES FROM PARA 63 A RE REPRODUCED BELOW: 'A TRANSFER PRICING ADJUSTMENT ON ACCOUNT OF INTERE ST ON DELAYED REALISATION OF INVOICE VALUE HAS NOTHING TO DO WITH THE CLOSING OR OPENING VALUES. IT DEPENDS ON THE PERIOD OF REALISA TION ON TRANSACTION TO TRANSACTION BASIS. TO PUT IT DIFFERENTLY, SUPPOS E AN INVOICE IS RAISED ON 1 ST MAY; PERIOD ALLOWED FOR REALIZATION IS TWO MONTHS; AND THE INVOICE IS ACTUALLY REALISE ON 31 ST DECEMBER. NOTWITHSTANDING THE FACT THAT INTEREST ON SUCH LATE REALISATION WOULD B ECOME CHARGEABLE FOR A PERIOD OF 6 MONTHS (FROM 1 ST JULY TO 31 ST DECEMBER), BUT THE AMOUNT OF INVOICE WILL NOT BE RECEIVABLE AS AT THE END OF THE FINANCIAL YEAR ON 31 ST MARCH'. THE TABLE OF NUMBER OF DAYS WORKED OUT BY THE LD. A R, GIVES VERY ABSURD VIEW OF THE FACTS. THE AVERAGE CREDIT PERIOD ALLOWED BY ONE OF THE FOUR COMPARABLES COMES TO ALMOST 3 YEARS AND IN OTH ER CASE ALMOST 1 YEARS. THE INTEREST BURDEN ITSELF WOULD BE MORE THA N 36% AND 24% RESPECTIVELY IN THOSE ABOVE CASES WHICH IS JUST NOT POSSIBLE IN THE REAL COMMERCIAL SITUATION. FURTHER IF THE A PARTY RAISES ITS INVOICES AT THE FAG END OF THE YEAR, THE RATIOS WILL BE TOTALLY DIFFERE NT FROM THE CASES WHERE THE INVOICES HAS BEEN RAISED IN THE BEGINNING OF THE YEAR AND DULY COLLECTED BEFORE THE END OF THE YEAR. AS POINTED OU T IN THE ORDER OF MCKINSEY KNOWLEDGE CENTRE PVT. LTD. (SUPRA), THE AV ERAGING OF OPENING AND CLOSING BALANCE AND USING THE RATIO OF SALES TO AVERAGE DEBTOR HAS INHERENT FALLACY IN IT AS SHOWN ABOVE. 2. AS REGARDS AR'S SUBMISSION THAT THERE IS A MISTA KE IN THE TRANSFER PRICING STUDY WITH REGARD TO BILLING, IT IS SUBMITT ED THAT THE SAME IS NOT CORRECT. KIND ATTENTION IS INVITED TO PAGES 107 TO 118 OF THE ASSESSEE'S PAPER BOOK WHEREIN THE INVOICES HAVE BEEN RAISED WI TH CLEARLY MENTIONING THE AMOUNT OF INDIAN RUPEES AS WELL AS I N US DOLLARS. THERE IS NO DOUBT THAT ANY FOREIGN ENTITY WILL BE TRANSFE RRING AMOUNT IN FOREIGN CURRENCY ONLY. HOWEVER, WHAT IS TO BE SEEN IS WHETH ER THE FOREIGN ENTITY IS PAYING THE AMOUNT BY APPLYING THE FOREIGN EXCHAN GE CONVERSION RATE AS ON THE DATE OF PAYMENT OR IS SIMPLY PAYING THE A MOUNT IN FOREIGN EXCHANGE AS PER THE FIGURES MENTIONED IN THE INVOIC E. FROM THE BALANCE 7 ITA NO.6040/DEL/2016 SHEET OF THE ASSESSEE IT IS EVIDENT THAT THE ASSESS EE IS BILLING IN INDIAN CURRENCY AS POINTED OUT IN THE TRANSFER PRICING STU DY AND THAT IS WHY IT IS ACCOUNTING FOREIGN EXCHANGE GAIN OF RS.1,99,63,866/- AS PER NOTE-II OF FINANCIAL STATEMENTS AT PAGE 35 OF THE PAPER BOOK. IT IS ALSO VERY CLEARLY WRITTEN IN THE TRANSFER PRICING STUDY ON PA GE 34 THAT THIS FOREIGN EXCHANGE GAIN IS ALSO TAKEN INTO ACCOUNT FOR CHARGI NG THE MARK UP TO ITS AE. IT IS FURTHER SUBMITTED THAT ONCE THE BILLING I S DONE IN INDIAN CURRENCY AS PER THE RATIO OF DECISION OF HON'BLE HIGH COURT IN THE CASE OF CIT VS. COTTON NATURALS (I) P. LTD. HIGH COURT OF DELHI ITA NO.233/2014, THE INTEREST OF TRADE RECEIVABLE HAS TO BE COMPUTED BY APPLYING PLR OF SBI + 300 POINTS AS DONE BY THE AO. 3. SEGREGATION AND AGGREGATION: THE ASSESSEE HAS NO T DONE ANY BENCHMARKING OF INTERNATIONAL TRANSACTION OF INTERE ST ON TRADE RECEIVABLE. WHEN THE TRANSACTION OF SUPPORT SERVICES SEGMENT IS BENCHMARKED, WHAT IS INCLUDED IS THE USUAL CREDIT PERIOD THAT IS NORMALL Y ALLOWED BY A SELLER. BUT IT CANNOT BE PRESUMED THAT SUCH BENCHMARKING EXERCI SE HAS ALSO TAKEN INTO ACCOUNT THE ABNORMAL DELAYS, IF ANY, EITHER IN THE CASE OF TESTED PARTY OR IN THE CASE OF COMPARABLES. THE DELAY IN RECOVERY HAS NOTHING TO DO WITH THE FUNCTION PERFORMED BY SUPPORT SERVICES SEGMENT. IT IS A FUNCTION TO BE PERFORMED BY DIRECTOR (FIN.) OF THE ASSESSEE COMPAN Y AND NOTHING TO DO WITH THE OPERATIONAL PEOPLE. THIS VIEW IS ALSO SUPP ORTED BY THE FINDING OF HON'BLE ITAT IN THE CASE OF MCKINSEY KNOWLEDGE CENT RE PVT. LTD (SUPRA) WHICH HAS HELD THAT EVEN WORKING CAPITAL AD JUSTMENTS WOULD NOT TAKE CARE OF BENCH MARKING OF THIS INTERNATIONAL TR ANSACTION. THE ISSUE REGARDING WHETHER INTEREST ON RECEIVABLES IS AN INTERNATIONAL TRANSACTION IS NOT AT ALL DISPUTE AS HELD AT PARA 60 & 61 OF THE DECISION HON'BLE ITAT IN THE CASE OF MCKINSEY K NOWLEDGE CENTRE PVT. LTD (SUPRA). FURTHER, THE WORKING CAPITAL ADJUSTMEN T WILL NOT TAKE CARE OF THE BENCHMARKING OF INTEREST ON RECEIVABLE HAS ALSO BEEN DEALT WITH IN DETAIL AT PAGE 63 OF THE SAID ORDER OF HON'BLE ITAT IN MCKINSEY KNOWLEDGE CENTRE PVT. LTD (SUPRA). 6. AFTER HEARING THE RIVAL CONTENTIONS AND PERUSING THE PAPERS ON RECORD AS WELL AS THE CASE LAWS CITED, WE HOLD AS FOLLOWS :- 6.1 THE ASSESSEE HAS CLAIMED THAT IT COMMITTED A FA CTUAL MISTAKE IN ITS TP REPORT. THE REALIZATION WERE CLAIMED TO HAVE BEEN RECEIVED BY IT IN FOREIGN CURRENCY AND WHERE AS IT WAS STATED AS HAVING BEEN RECEIVED IN INDIAN CURRENCY. WE AGREE WITH THE SUBMISSIONS OF THE LD. DR THAT TH IS FACT NEEDS TO BE VERIFIED. 8 ITA NO.6040/DEL/2016 FURTHER, WE ALSO FIND THAT THE ARGUMENTS OF THE ASS ESSEE MADE ON THE PROPOSITION OF LAW LAID DOWN BY THE HONBLE DELHI HIGH COURT AN D BY DIFFERENT BENCHES OF THE TRIBUNAL COULD NOT BE FOLLOWED BY THE TPO OR BY THE DRP AS THERE PROPOSITIONS WERE NOT AVAILABLE TO THEM AT THAT POI NT OF TIME. 6.2 IN THE CASE OF BECHTEL INDIA PRIVATE LIMITED (S UPRA), THE TRIBUNAL HAD HELD AS FOLLOWS: - 15.1 IT IS BROUGHT TO OUR NOTICE THAT THE ASSESSEE IS A DEBT FREE COMPANY. IN SUCH CIRCUMSTANCES IT IS NOT JUSTIFIABLE TO PRESUME THAT , BORROWED FUNDS HAVE BEEN UTILIZED TO PASS ON THE FACILITY TO ITS AE'S. THE REVENUE HA S ALSO NOT BROUGHT ON RECORD THAT THE ASSESSEE HAS BEEN FOUND PAYING INTEREST TO ITS CRED ITORS OR SUPPLIERS ON DELAYED PAYMENTS. 16. IN LIEU OF THE DISCUSSIONS AND THE RATIO LAID D OWN IN THE CASE OF KUSUM HEALTHCARE PVT. LTD., WE DIRECT THAT NO SEPARATE AD JUSTMENT FOR INTEREST ON RECEIVABLES ARE WARRANTED IN THE HANDS OF THE ASSESSEE. 6.3 THE DECISION OF THE HYDERABAD BENCH OF THE TRIB UNAL IN THE CASE OF OAKTON GLOBAL TECHNOLOGY SERVICES CENTRE (INDIA) PV T. LTD. (SUPRA), THE TRIBUNAL HAD HELD AS FOLLOWS :- IT IS A FACT THAT THE ASSESSEE IS A CAPTIVE DEVELO PER, FUNCTIONS ON THE DIRECTIONS OF AE AND DEPENDS ON AE ON FUNCTIONALLY AND FINANCIALLY. THE BUSINESS RUNS ON THE MUTUAL AGREEMENT. UNLESS THERE IS MUTUAL AGREEMENT ON THE TERMS OF PAYMENT OR ANY BENCH MARK AVAILABLE IN THE INDUSTRY, WHICH CAN BE CONSID ERED. REVENUE AUTHORITIES CANNOT PRESUME UNLESS THERE IS ANY WRITTEN AGREEMENT OR AG REED TERMS IN THE INDUSTRY OR ANY COMPARABLES AVAILABLE ON THE RECORD. WE FIND THAT T HE ASSESSEE HAS ALLOWED THE CREDIT PERIOD OF 79 DAYS WHICH IS MUCH BELOW THE INDUSTRY AVERAGE OF 112 DAYS AS SUBMITTED BY THE ID. AR. THE SAME WAS NOT DISPUTED BY THE ID. DR. IN OUR CONSIDERED VIEW, THE CREDIT PERIOD EXTENDED BY THE ASSESSEE TO ITS AE IS REASONABLE PARTICULARLY WHEN THERE IS NO BENCH MARK AVAILABLE. ACCORDINGLY, THIS GROUN D IS ALLOWED.' 6.4 THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF KUSUM HEALTHCARE PRIVATE LIMITED (SUPRA), THE TRIBUNAL HA D HELD AS FOLLOWS :- 9 ITA NO.6040/DEL/2016 PARA 7 ..... THE APPROPRIATE ADJUSTMENTS NEED TO BE CONSID ERED TO BRING PARITY IN THE WORKING CAPITAL INVESTMENT OF THE ASSESSEE AND THE COMPARAB LES RATHER THAN LOOKING AT THE RECEIVABLE INDEPENDENTLY. SUCH WORKING CAPITAL ADJU STMENT TAKES INTO ACCOUNT THE IMPACT OF OUTSTANDING RECEIVABLES ON THE PROFITABIL ITY .... PARA 8 ..... ACCORDINGLY, WHILE CALCULATING THE WORKING CA PITAL ADJUSTED, OPERATING MARGIN ON COSTS OF THE COMPARABLE COMPANIES, THE IMPACT OF OU TSTANDING RECEIVABLES ON THE PROFITABILITY HAS BEEN TAKEN INTO ACCOUNT. IF THE P RICING/ PROFITABILITY OF THE ASSESSEE ARE MORE THAN THE WORKING CAPITAL ADJUSTED MARGIN O F 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 COMPARABLES HAS ALREADY BEEN FACT ORED IN THE PRICING/PROFITABILITY OF THE ASSESSEE WHICH IS MORE THAN THAT WORKING CAPITA L ADJUSTED MARGIN OF THE COMPARABLES. HENCE, ANY FURTHER ADJUSTMENT TO THE M ARGINS OF THE ASSESSEE ON THE PRETEXT OF OUTSTANDING RECEIVABLES IS UNWARRANTED A ND WHOLLY UNJUSTIFIED. 6.5 FURTHER, THE ARGUMENT OF THE ASSESSEE BY GIVING THE COMPARISON OF THE AVERAGE REALIZATION PERIOD OF THE COMPARABLES WITH THE AVERAGE REALIZATION PERIOD OF THE ASSESSEE NEEDS TO BE VERIFIED ON FACT S, THOUGH THE ASSESSEE SUBMITTED THAT MATHEMATICAL AVERAGES ARE A RECOGNIZ ED TOOL IN TRANSFER PRICING. THE CLAIM OF THE REVENUE THAT THIS IS A FALLACIOUS ARGUMENT HAS TO BE EXAMINED BY THE ASSESSING OFFICER/TPO WITH RELATIONS TO FACT S AND FIGURES AFTER CONSIDERING THE REJOINDER OF THE ASSESSEE. 7. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE C ONSIDERED VIEW THAT THIS IS THE FIT CASE FOR SET ASIDE TO THE FILE OF THE ASSES SING OFFICER FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW. REGARDING THE OTHER ARGUMENTS OF THE ASSESSEE ON APPLICABILITY OF LIBOR RATE AND ALLOWIN G +/- 5% RANGE, WE ARE OF 10 ITA NO.6040/DEL/2016 THE CONSIDERED OPINION THAT THIS ISSUE SHOULD ALSO BE SET-ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN ACCORDA NCE WITH LAW AS ALL THESE ISSUES ARE INTERRELATED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF MARCH, 2017. SD/- SD/- (AMIT SHUKLA) (J. S. REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 24-03-2017. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE DRP-2, NEW DELHI. 4) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI