Cisco Systems Capital (India) Private Limited, Bengaluru V. Joint Commissioner Of Income Tax, Circle- 2(1)(1), Bangalore

ITTPA 801/BANG/2022

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 8832 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 08-11-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Next Hearing Date: 02-11-2022
• Assessment Year: 2018-2019
• Appeal Filed On: 08-09-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Transfer pricing; International transaction; Retrospective amendment; Question of law; Notional interest
• Section: 143(3); 92B; 274; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH : BANGALORE BEFORE SMT. BEENA PILLAI, JUDICIAL MEMBER AND Ms. PADMAVATHY S, ACCOUNTANT MEMBER IT(TP)A No.801/Bang/2022 Assessment year : 2018-19 Cisco Systems Capital (India) Private Limited, Brigade South Parade No.10, M.G. Road, Bangalore - 560 001 PAN: AACCC 4552A Vs. The Joint Commissioner of Income Tax, Circle 2(1)(1), Bangalore. APPELLANT RESPONDENT Appellant by : Shri Rajan Vora, CA Respondent by : Shri K. Sankar Ganesh, Jt.CIT(DR)(ITAT), Bengaluru. Date of hearing : 03.11.2022 Date of Pronouncement : 09.11.2022 O R D E R Per Padmavathy S., Accountant Member This appeal by assessee is directed against assessment order passed u/s 143(3) r.w.s. 144C(13) r.w.s. 144B of the Income-tax Act,1961 ['the Act'] dated 15.7.2022 for the assessment year 2018-19 which was passed in consequent to directions of the Ld. DRP dated 16.6.22 u/s 144C(5) of the Act for the assessment year 2018-19. IT(TP)A No.801/Bang/2022 Page 2 of 19 2. Facts of the case are that Cisco Systems Capital (India) Private Limited ('Cisco Capital' or the Assessee') is an Indian company incorporated under the provisions of Companies Act, 1956 and is registered as a Non- Banking Financial Company ('NBFC') with the Reserve Bank of India. Cisco Capital is responsible for providing end-to-end financial solutions to the customers of Cisco in India by a variety of financing options. 3. For the AY 2018-19, the Assessee filed the return of income on November 30, 2018, wherein the Assessee had disclosed INR 432,49,59,140 as total income [(under the normal provisions of the Income Tax Act, 1961 and was liable to pay income tax amounting to INR 149,67,81,859 (including surcharge and education cess). Post availing tax credit under Section 115JAA of the Act [Minimum Alternate Tax (MAT') provisions], the net tax liability was determined to INR 134,29,70,405. The same was discharged by the Assessee by way of taxes deducted at source amounting to INR 27,15,31,483 and advance tax amounting to INR 111,00,00,000 thereby claiming refund of INR 3,85,61,080. Subsequently, the case was picked up for scrutiny assessment under section 143(2) of the Act for which appropriate response was provided. 4. During the scrutiny assessment the jurisdiction of the Assessee was transferred to National e-Assessment Centre, Delhi (hereinafter referred to as the learned faceless AO'). IT(TP)A No.801/Bang/2022 Page 3 of 19 Further, during the assessment proceedings, the learned AO called for certain information/ documents vide notice under section 142(1), which was duly furnished by the Assessee. The Assessee's case was also referred to Transfer Pricing Officer for determining the arm's length price (ALP) of the international transactions entered into by the Assessee during the FY 2017-18. 5. The TPO proposed certain corporate tax and transfer pricing adjustments to the returned income of the Assessee which were incorporated in the draft assessment order dated April 26, 2021, which are as follows:- (a) Disallowance of depreciation claimed by the Assessee on assets leased out under finance lease arrangement amounting to INR 73,92,55,536; (b) Transfer pricing adjustment amounting to INR 11,78,02,658. 6. Aggrieved by the draft order, the Assessee filed objections before the Dispute Resolution Panel (`DRP') on October 22, 2021. The DRP in view of the decision of the Hon’ble High Court of Karnataka in assessee’s own case for AY 2008-09 directed to allow depreciation in the hands of the assessee vide directions dated June 16, 2022 thereby providing relief on the corporate tax adjustment. Further the DRP gave partial relief towards the TP adjustment owing to which the TPO in the scrutiny report dated Jun 29, 2022 has recomputed IT(TP)A No.801/Bang/2022 Page 4 of 19 the interest on delayed receivables and revised adjustment has been computed to be INR 11,64,41,718. 7. Aggrieved by the final order of assessment passed pursuant to the directions of the DR, the assessee is in appeal before the Tribunal. 8. The assessee raised the following grounds with regard to the TP adjustment:- “A. Grounds of appeal in relation to transfer pricing matters Initiating scrutiny proceedings in relation to Specified domestic transaction, not considering amendment made by Finance Act - 2017 1. The learned AO/TPO has erred in law and fact, by initiating scrutiny proceedings in relation to the specified domestic transaction of payment made by the Appellant towards the fees for administrative support services to the AE. disregarding the deletion of clause (i) of section 92BA of the Act by virtue of amendment by the Finance Act, 2017 w.e.f April 1 , 2017. Transfer pricing adjustment on account of re- characterization of payment made for administration support services Treating payment for administrative support services to Cisco Systems India Private Limited ('Cisco India') as an International transaction 2. The learned TPO/AO has failed to appreciate the fact that the agreement between Cisco Capital and Cisco India for availing of administrative support services (which was in the nature of outsourcing of services to Cisco India or deputation services by Cisco India to Cisco IT(TP)A No.801/Bang/2022 Page 5 of 19 Capital) is bona-fide arrangement and the same cannot be treated as an international transaction under section 92B of the Act. Alleging that Appellant has an arrangement with Cisco India and Cisco Systems International BV ("CSI BV") whereby Appellant has rendered marketing, sales and administrative support services to CSI BV 3. The learned TPO/AO has erred in law and fact by ignoring the fact that the appellan t has not rendered any service to CSI BV. 4. The learned TPO/AO has erred in law and fact by alleging a hypothetical international transaction under section 92B of the Act, wherein marketing, sales and administrative support services (which was in the nature of outsourcing of services to Cisco India or deputation services by Cisco India to Cisco Capital) are allegedly rendered by Cisco Capital and re-characterizing the payment made for these services to Cisco India as a transaction entered into pursuant to an understanding/ arrangement between Cisco Capital. Cisco India and CSI BV. 5. The learned TPO/A0 has erred in law and fact by ignoring that in absence of an arrangement/ understanding between Cisco Capital, Cisco India and CSI BV, the adjustment is outside the purview of the jurisdiction of learned AO/ TPO, as the alleged Advertising Marketing Promotion (`AMP') transaction and further determining a mark-up though it is not an 'international transaction'. Bundled Approach for benchmarkinq should be accepted 6. Without prejudice, the learned TPO/A0 has erred, in law and in fact, by not appreciating that once the net margin is tested for arm's length price under Transactional Net Margin Method ("TNMM") method (including administrative fees paid to Cisco India), it presupposes IT(TP)A No.801/Bang/2022 Page 6 of 19 that the various items of income and expenditure considered in the process of arriving at the net profit are also at arm's length and therefore no separate adjustment in respect of particular item of expenditure. Erroneous re-characterization of the appellant as captive lease provider 7. Without prejudice the learned TPO/AO has erred in law and in fact by erroneously re-characterizing the assessee as captive lease provider without appropriately analyzing the risk, asset and functional profile of the assessee Considering Administrative/ Selling expenses as part of AMP expenses 8. Without prejudice, the learned TPO/ AO has erred, in law and in fact, considering certain pure administrative and selling expenses as AMP expenses, and therefore adjustment made considering such expenditure is unwarranted; Rejection of benchmarking analysis undertaken by Appellant 9. Without prejudice to the other grounds, the learned AO/TPO have erred. in law and in fact by a. not appreciating the economic analysis undertaken by the Appellant in accordance with the provisions of the Act read with Income Tax Rules, 1962, b. rejecting the transfer pricing approach identified by the Appellant in its transfer pricing documentation report maintained, c. conducting a fresh economic analysis for identification of comparables (with unreasonable comparability criteria) and determining of the ALP in connection with the impugned specified domestic transaction. IT(TP)A No.801/Bang/2022 Page 7 of 19 Rejection of Non-comparable companies 10. Without prejudice, the learned TPO/ AO has erred. in law and in fact. by selecting certain companies as comparable companies ignoring the fact that the companies are functionally different: a) Pressman Advertising Limited b) Axience Consulting Private Limited c) Cheil India Private Limited d) Dun & Bradstreet Information Services India Private Limited e) Majestic Research Service and Solutions Limited 11. Without prejudice, the learned TPO/ AO has erred, in law and on facts. in erroneously selecting the companies that has high fluctuating profit trend as comparable i.e. Pressman Advertising Limited. 12. Without prejudice, the learned TPO/ AO has erred, in law and on facts. in erroneously computing the operating margins of certain comparables.” 9. The learned TPO opined that the sales, marketing and related administrative services rendered by Cisco India are related to the Cisco products manufactured by CSI BV/ Cisco Systems Inc ('CSI') for which the ownership of IPR, trade mark, copyright and moral rights belong to the Associated Enterprise ('AE') abroad and accordingly the TPO disregarded the intermediary entity i.e. Cisco Capital and concluded that the services are in substance rendered by Cisco India to CSI BV. IT(TP)A No.801/Bang/2022 Page 8 of 19 10. The TPO has benchmarked the administrative support services on a standalone basis stating it to be an independent transaction and conducted a separate search and identified 13 Comparable companies and arrived at arm's length margin (average) of 19.42% which Cisco Capital, allegedly ought to recover from CSI BV, in relation to the payment made for administrative and marketing support services to Cisco India and thereafter proposed a TP adjustment of INR 10,66,48,586 (in effect TPO holds that Cisco Capital should have got 119.42% of administrative and marketing support services paid to Cisco India). 11. Based on the directions of the Hon'ble DRP and consequential TP scrutiny report, the AO passed the final order dated July 15, 2022 retaining the said adjustment. Aggrieved, the assessee is in appeal before the Tribunal. 12. The ld AR submitted that the learned TPO has accepted the bundled approach of aggregation of payment of fees for administrative support services in the preceding years. The ld AR also brought to our notice that the coordinate bench in assessee’s own case for AY 2017-18 has considered the similar issue and upheld the bundled transaction approach adopted by the assessee. IT(TP)A No.801/Bang/2022 Page 9 of 19 13. We heard the ld DR. We notice that the coordinate bench in assessee’s own case for AY 2017-18 while considering the issue of bundled approach of bench marking has held as under:– “6. The crux of the above grounds are that TPO has made an adjustment alleging payment made towards administrative support services to Cisco Systems India Pvt. Ltd. as an international transaction u/s 92B of the Act. Similar issue came for consideration before this Tribunal in assessee’s own case for the assessment year 2016-17 in IT(TP)A No.309/Bang/2021 dated 8.11.2021 held as under:- 18. By ground No.9, the assessee grievance is bundled approach for benchmarking should be accepted. At the outset, the ld. AR submitted that the TPO has accepted the bundled approach of aggregation of payment of fees for administrative support services in the preceding years (i.e. from the incorporation year to AY 2015-16). Also, the Tribunal in its order passed for the AY 2015-16 dated April 8, 2021 has accepted the bundled transaction approach adopted by the Assessee. There has been no change in the functions, assets and risk analysis in the current year vis-a-vis preceding years. In this context, the Assessee submits that the rejection of the consistent approach adopted by the Assessee which has been accepted by the TPO in preceding years is incorrect. Given the fact that primary transaction of purchase of networking equipment for lease has been considered at arm's length, the claim of the TPO that the impugned specified domestic transaction should be separately benchmarked is erroneous and unjustified. In this regard, reliance is also placed on the following decision wherein bundled transaction approach has being upheld:- • Sony Ericsson Mobile Communications India Private Limited (231 Taxman 113) (Delhi HC) IT(TP)A No.801/Bang/2022 Page 10 of 19 • Delhi High Court decision in case of Maruti Suzuki India Limited, 129 DTR 25 (Del) • Sony Mobile Communications (ITA No 6410/Del/2012) affirmed by Delhi High Court in (2019) 104 CCH 0355 Del HC • Audco India Ltd (264 Taxman 237) (Bombay High Court) • Bangalore Tribunal in the case of M/s. Forsoc Chemicals India Private Limited vs. ACTT [IT(TP)A No. 1813/Bang/2013) • Bangalore Tribunal in case of M/s Parametrics Technology Private Limited Vs DCIT, ITA No.359(Bang)/2016 19. Accordingly, it was submitted that as the assessee’s primary transaction of import of equipment from AE (Appellant's margin 5.90%) has been accepted at arm's length after considering the payment of administrative and marketing support services as part of operating cost, no separate adjustment is warranted in respect of the same. 20. We have both the parties. This issue came up for consideration in assessee’s own case in AY 2015-16 in IT(TP)A No.2614/Bang/2019 and by order dated 8.4.2021 the Tribunal held as under:- “6.7 It is also an admitted fact that assessee has been carrying out these activities in a bundled format in the preceding years which has not been objected by the Ld.TPO/AO. Further that all these expenses incurred by assessee towards administrative expenses and sales and marketing expenses stands subsumed in the operating expenses under TNMM for computing the arm’s length margin of the international transaction, a separate benchmarking may not be necessary. However all these things deserves verification at the end of Ld.AO/TPO. The Ld.AO/TPO shall verify the transactions as indicated hereinabove. In the event the expenses are subsumed under TNMM we do not find any necessity for a separate benchmarking. IT(TP)A No.801/Bang/2022 Page 11 of 19 Accordingly these grounds raised by assessee stands partly allowed.” 21. Taking a consistent view, we hold that payment of administrative and marketing support services is part of the operating cost, no separate adjustment is warranted. This ground of the assessee is partly allowed. 22. In the result, the appeal of the assessee is partly allowed for statistical purposes. 7. In view of the above order of the Tribunal, we hold that the issue of administrative and marketing support services is part of the operating cost and no separate adjustment is warranted. These grounds of assessee are partly allowed for statistical purposes.” 14. Respectfully following the above decision of the coordinate bench, we hold that the issue of administrative and marketing support services is part of the operating cost and no separate adjustment is warranted. 15. Ground no.6 pertains the contention that the bundled approach for bench marking should be accepted and the same is adjudicated in the aforesaid paragraphs. Therefore the rest of the grounds i.e. Grounds 1 to 5 and Ground 7 to 12 have become academic and does not warrant separate adjudication. 2. Ground no.13 and 14 are with regard to the interest charged on outstanding receivable. The grounds read as under – “13. Without prejudice, the learned TPO/ AO has erred. in law and on facts, by determining a transfer pricing adjustment on account of interest on outstanding receivables, not appreciating the fact that such receivables are arising from rebates and discounts offered by CSI BV and should IT(TP)A No.801/Bang/2022 Page 12 of 19 not be tested separately or re-characterized as a loan transaction. 14. Without prejudice, the learned TPO/ AO has erred, in law and on facts, by using the SBI Short term deposit interest rate as against using of LIBOR rate for the transaction denominated in USD.” 16. The TPO, without appreciating the nature of the transaction, has concluded that the receivables transaction should be treated as a separate international transaction and given the delay in receipt of receivables from AE's, TPO has re-characterized such receivables to be in the nature of unsecured loan given to AEs in the TP order passed. Accordingly, TPO after considering SBI Short term deposit rate as ALP of interest and granting credit period of 30 days has computed interest on delayed receivables amounting to INR 1,06,89,684 (18,17,00,000*6.41%*335/365). 17. The DRP in its directions dated June 16, 2022, has upheld the delayed receipt of receivables as an "international transaction". However, the Hon'ble DRP, has granted credit period of 60 days and upheld the interest rate to be adopted as SBI short term deposit rate. Accordingly, the adjustment has been reduced to INR 97,93,132 (18,17,00,000*6.41% *305/365). 18. Aggrieved, the assessee is in appeal before the Tribunal. 19. At the outset, the ld. AR submitted that similar issue had IT(TP)A No.801/Bang/2022 Page 13 of 19 come up before Tribunal in assessee’s own case for AY 2017- 18, wherein the Tribunal has upheld the separate benchmarking of delayed receivables as done by the TPO/ DRP. However, the ITAT has, following the decision of co- ordinate bench in case of Swiss Re-Global Business Solutions India Pvt Ltd (IT(TP)A No 397/Bang/2021 dated 21 January 2022, has upheld the rate to be applied at LIBOR+200 bps. 20. We have considered the rival submissions and perused the material on record. The issue of interest on receivable has been decided by the coordinate bench in assessee’s own case for 2017-18 where the Tribunal has held that - “35. The only other issue that remains for adjudication is ground No. 15 with regard to re-characterizing certain trade receivables as unsecured loans and computing notional interest on such trade receivables. The main contention of the ld. AR is that deferred receivables would not constitute a separate international transaction and need not be benchmarked while determining the ALP of the international transaction. In our opinion, this issue was considered by the Tribunal in assessee's own case for A.Y. 2014-15 and in paras 23 to 23.9 of the order dated 21-5-2020 this Tribunal held as under :— "23. Ground Nos. 14-17 alleged by assessee against adjustment of notional interest on outstanding receivables. From TP study, it is observed that payments to assessee are not contingent upon payment received by AEs from their respective customers. Further Ld.AR submitted that working capital adjustment undertaken by assessee includes the adjustment regarding the receivables and thus receivables arising out of such transaction have already been accounted for. Alternatively, he submitted that working capital IT(TP)A No.801/Bang/2022 Page 14 of 19 subsumes sundry creditors and therefore separate addition is not called for. 23.1 Ld.TPO computed interest on outstanding receivables under weighted average method using LIBOR + 300 basis points applicable for year under consideration that worked out to 3.3758% on receivables that exceeded 30 days. It has been argued by Ld.AR that authorities below disregarded business/commercial arrangement between the assessee and its AE's, by holding outstanding receivables to be an independent international transaction. 23.2 Ld.AR placed reliance on decision of Delhi Tribunal in Kusum Healthcare (P.) Ltd. v. Asstt. CIT [2015] 62 taxmann.com 79, deleted addition by considering the above principle, and subsequently Hon'ble Delhi High Court in Pr. CIT v. Kusum Health Care (P.) Ltd. [2018] 99 taxmann.com 431/[2017] 398 ITR 66, held that no interest could have been charged as it cannot be considered as international transaction. He also placed reliance upon decision of Delhi Tribunal in case of Bechtel India (P.) Ltd. v. Dy. CIT [2016] 66 taxmann.com 6 which subsequently upheld by Hon'ble Delhi High Court vide order in Pr. CIT v. Bechtel India (P.) Ltd. [IT Appeal No. 379 of 2016, dated 21-7-16] also upheld by Hon'ble Supreme Court vide order, in CC No. 4956/2017. 23.3 It has been submitted by Ld.AR that outstanding receivables are closely linked to main transaction and so the same cannot be considered as separate international transaction. He also submitted that into company agreements provides for extending credit period with mutual consent and it does not provide any interest clause in case of delay. He also argued that the working capital adjustment takes into account the factors related to delayed receivables and no separate adjustment is required in such circumstances. 23.4 On the contrary Ld. CIT. DR submitted that interest on receivables is an international transaction and Ld.TPO rightly determined its ALP. In support of the contentions, he placed reliance on decision of Delhi Tribunal order in Ameriprise India (P.) Ltd. v. Asstt. CIT [2015] 62 taxmann.com 237 wherein it is held that, interest on IT(TP)A No.801/Bang/2022 Page 15 of 19 receivables is an international transaction and the transfer pricing adjustment is warranted. He stated that Finance Act, 2012 inserted Explanation to section 92B, with retrospective effect from 1-4-2002 and sub-clause (c) of clause (i) of this Explanation provides that: (i) the expression "international transaction" shall include— ......(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;. . . . ' 23.5 Ld. CIT. DR. submitted that expression 'debt arising during the course of business' refers to trading debt arising from sale of goods or services rendered in course of carrying on business. Once any debt arising during course of business is an international transaction, he submitted that any delay in realization of same needs to be considered within transfer pricing adjustment, on account of interest income short charged or uncharged. It was argued that insertion of Explanation with retrospective effect covers assessment year under consideration and hence under/non-payment of interest by AEs on debt arising during course of business becomes international transactions, calling for computing its ALP. He referred to decision of Delhi Tribunal in Ameriprise (supra), in which this issue has been discussed at length and eventually interest on trade receivables has been held to be an international transaction. Referring to discussion in said order, it was stated that Hon'ble Delhi Bench in this case noted a decision of the Hon'ble Bombay High Court in the case of CIT v. Patni Computer Systems Ltd. [2013] 33 taxmann.com 3/215 Taxman 108 (Bom.), which dealt with 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, IT(TP)A No.801/Bang/2022 Page 16 of 19 1961 refers to any other transaction having a bearing on the profits, income, losses or assets of such enterprises?" 23.6 Ld. CIT. DR. submitted that, while answering above question, Hon'ble Bombay High Court referred to amendment to section 92B by Finance Act, 2012 with retrospective effect from 1-4-2002. Setting aside view taken by Tribunal, Hon'ble Bombay High Court restored the issue to file of Tribunal for fresh decision in light of legislative amendment. It was thus argued that non/under-charging of interest on excess period of credit allowed to AEs for realization of invoices, amounts to an international transaction and ALP of such international transaction has to be determined by Ld.TPO. Insofar as charging of rate of interest is concerned, he relied on decision of the Hon'ble Delhi High Court in CIT v. Cotton Naturals (I) (P.) Ltd. [2015] 55 taxmann.com 523/231 Taxman 401 holding that currency in which such amount is to be re-paid, determines rate of interest. He, therefore, concluded by summing-up that interest on outstanding trade receivables is an international transaction and its ALP has been correctly determined. 23.7 We have perused the submissions advanced by both the sides in the light of the records placed before us. This Bench referred to decision of Special Bench of this Tribunal in case of Special Bench of ITAT in case of Instrumentation Corpn. Ltd. v. Asstt. DIT (IT) [2016] 71 taxmann.com 193/160 ITD 1 (Kol.-Trib.), held that outstanding sum of invoices is akin to loan advanced by assessee to foreign AE., hence it is an international transaction as per Explanation to section 92B of the Act. We also perused decision relied upon by Ld.AR. In our considered opinion, these are factually distinguishable and thus, we reject argument advanced by Ld.AR. 23.8 Alternatively, it has been argued that in TNMM, working capital adjustment subsumes sundry creditors. In such situation computing interest on outstanding receivables and loans and advances to associated enterprise would amount to double taxation. Hon'ble Delhi Tribunal in case of Orange Business Services IndiaSolutions (P.) Ltd. v. Dy. IT(TP)A No.801/Bang/2022 Page 17 of 19 CIT [2018] 91 taxmann.com 286 has observed that: "There may be a delay in collection of monies for supplies made, even beyond the agreed limit, due to a variety of factors which would have to be investigated on a case-to- case basis. Importantly, the impact this would have on the working capital of the assessee would have to be studied. It went on to hold that, there has to be a proper inquiry by the TPO by analysing the statistics over a period of time to discern a pattern which would indicate that vis-a-vis the receivables for the supplies made to an AE, the arrangement reflected an international transaction intended to benefit the AE in some way. Similar matter once again came up for consideration before the Hon'ble Delhi High Court in Avenue Asia Advisors Pvt. Ltd. v. DCIT [2017] 398 ITR 120 (Del.). Following the earlier decision in Kusum Healthcare (supra), it was observed that there are several factors which need to be considered before holding that every receivable is an international transaction and it requires an assessment on the working capital of the assessee. Applying the decision in Kusum Health Care (supra), the Hon'ble High Court directed the TPO to study the impact of the receivables appearing in the accounts of the assessee; looking into the various factors as to the reasons why the same are shown as receivables and also as to whether the said transactions can be characterized as international transactions." 23.9 In view of the above, we deem it appropriate to set aside this issue to Ld.AO/TPO for deciding it in conformity with the above referred judgment. Needless to say, the assessee will be allowed a reasonable opportunity of being heard in accordance with law." 36. Accordingly, we are of the opinion that deferred receivables would constitute an independent international transaction and the same is required to be benchmarked independently as held by the Hon'ble Karnataka High Court in Pr. CIT v. AMD (India) (P.) Ltd. [IT Appeal No. 274 of 2018, dated 31-8-2018]. IT(TP)A No.801/Bang/2022 Page 18 of 19 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. [2017] 99 CCH 70. It is ordered accordingly.” 21. Respectfully following above decision of the coordinate bench, we hold that for the purpose of interest on delayed receivables, it would be appropriate to direct the AO to consider LIBOR + 3%. For this purpose, we place reliance on the coordinate Bench decision in the case of Xchanging Solutions Ltd vs DCIT [IT(TP)A No.2570/Bang/2019 dated 16.08.2022]. 22. Ground no.15 is with regard to non-consideration of set- off of brought forward depreciation loss from prior year. The AO is directed to verify and allow the same in accordance with law. 23. Ground No.16 is consequential not warranting separate adjudication. IT(TP)A No.801/Bang/2022 Page 19 of 19 24. In the result, the appeal of the assessee is partly allowed. Pronounced in the open court on this 09 th day of November, 2022. ( BEENA PILLAI ) ( PADMAVATHY S. ) JUDICIAL MEMBER ACCOUNTANT MEMBER Bangalore, Dated, the 9 th November, 2022. /Desai S Murthy / Copy to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore.