NEWGEN DIGITALWORKS PVT.LTD,CHENNAI V. DCIT, CORP. CIRLCE 4(1), CHENNAI, CHENNAI

ITTPA 73/CHNY/2024

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The case involves Newgen Digitalworks Private Limited, an Indian company engaged in e-publishing, which appealed against the order of the Deputy Commissioner of Income Tax, Corporate Circle-4(1), Chennai. The appeal contested the adjustments made to the company's income due to transfer pricing issues related to transactions with its overseas associated enterprises (AEs). The Tribunal examined the adjustments made for sales support services, consultancy charges, and interest on overdue receivables, and found that the lower authorities had erred in their application of transfer pricing provisions and in making adjustments to the book profits under section 115JB.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 315547 (ITAT-CHENNAI)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 16-05-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2021-2022
• Other Referred Cases: Everest Kanto Cylinder Ltd. vs. ACIT, Bechtel India Pvt. Ltd. vs. ACIT, Tech Books International Pvt Ltd vs. DCIT, Kusum Healthcare Pvt. Ltd. vs. ACIT, Ameriprise India P Ltd. vs. ACIT, Mckinsey Knowledge Centre Pvt. Ltd. vs. ACIT, CMA CGM Shared Service Centre (India) Pvt. Ltd. vs. ACIT, Foxteq Services India vs. ACIT, Integra Software Services P Ltd vs. ACIT, Temenos India Pvt. Ltd vs. ACIT, Stanadyne India Private Limited vs. ACIT, Verizon Data Services Pvt Ltd vs. ACIT, Plintron Global Technologies Solutions vs. ACIT, VA Tech Wabag Pvt. Ltd vs. ACIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A. SASIKUMAR
• Assessee Lawyers: J. PRABHAKAR; S.MURLIDHAR
• Keywords: Set aside; Additional evidence; Transfer pricing; International transaction; Retrospective amendment; Question of law; Corroborative evidences; Depreciation; Commercial expediency; Capital expenditure; Notional interest; Wholly owned subsidiary; Working capital adjustments
• Section: 143(3); 115JB; 92B; 80G

Judgement Text

"आयकर अपीलीय अधिकरण, ’डी’ न्यायपीठ, चेन्नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH: CHENNAI श्री एबी टी. वर्की, न्यायिर्क सदस्य एवं श्री अयिताभ शुक्ला, लेखा सदस्य क े समक्ष BEFORE SHRI ABY T VARKEY, JUDICIAL MEMBER AND SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER आयकर अपील सं./IT(TP)A No.73/Chny/2024 Assessment Years: 2021-22 Newgen Digitalworks Private Limited, Block No.38, D.No.129B, Baid Hi-Tech Park, La Shawarma, East Coast Road, Thiruvanmiyur Chennai-600 041. [PAN: AAACH0904R] The Deputy Commissioner of Income Tax, Corporate Circle-4(1), Chennai (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थी की ओर से/ Assessee by : Shri J.Prabhakar, CA & Mr.S.Murlidhar,CA प्रत्यर्थी की ओर से /Revenue by : Shri A.Sasikumar, CIT सुनवाई की तारीख/Date of Hearing : 03.04.2025 घोषणा की तारीख /Date of Pronouncement : 16.05.2025 आदेश / O R D E R PER AMITABH SHUKLA, A.M : This appeal is filed by the assessee against the order bearing DIN & Order No.ITBA / AST / S / 143(3) / 2024-24-25 / 1068646158(1) dated 12.09.2024 of the Learned Assessing Officer, NFAC, for the assessment year 2021-22 passed in compliance to directions vide F No.321/DRP- 2/Bangalore/2023-24 dated 14.08.2024 of the Ld.DRP. 2.0 Brief factual matrix of the case is that the assessee, an Indian company engaged in the business of e-publishing, filed its Return of IT(TP)A No. 73/Chny/2024 Page - 2 - of 39 Income for AY 2021-22 on 11-3-2022, declaring a Gross Total Income of Rs.40,29,58,821/= under the normal provisions. After setting off the brought forward losses of Rs.38,36,68,317/- and the deduction under sec 80G of Rs. 33,12,500/=, the total income returned was Rs.1,59,78,004/=. The book profit u/s 115JB returned by the assessee was Rs.38,46,76,966/-. The assessee company, an Indian company engaged in the business of E publishing with Indian promoters, namely Newgen Digital Works Private Limited, was incorporated on 10-3-2003 as E- Pagemaker Private Limited. The name was changed to the current name, Newgen Digital Works Private Limited, after the amalgamation of Newgen Knowledge Works Private Limited with E-PageMaker Private Limited, which took effect from 1- 4- 2015. As part of the E-publishing business, the company provides business process outsourcing services (largely for publishing houses) in the nature of typesetting, editing, designing and formatting, proofreading, and publishing books, magazines, articles, and other written materials in electronic format to make content accessible on computers, tablets, smartphones, e-readers, etc. The company's main customers are reported to be reputed publishing houses such as Oxford University Press (OUP), Wolters Kluwer (WK), Cambridge University Press, Thomson Reuters, Bloomsbury, Aspen Publishers, Kluwer Law International, Amazon, etc. These publishing houses outsource the various E-publishing activities to the assessee company, viz typesetting, IT(TP)A No. 73/Chny/2024 Page - 3 - of 39 editing, designing and formatting, proofreading, and final publication in electronic format. The company’s main production centres are in Chennai and Bangalore, where various e-publishing activities are carried out. The company has approximately 900 employees .The company also has established subsidiaries in foreign countries i.e. AEs (Associated Enterprises) to market the company’s services and to procure export orders for which its are paid Sales Support charges. In addition, the AEs perform project management and coordination activities for which they are paid Consultancy, Sub contracting and outsourcing charges. The decision to set up various AEs and receive services from them has been made to obtain commercial benefits by way of enhancing the appellant’s global reach and profitability. 3.0 In view of the international transactions, the case was referred by the Ld.AO to the Ld.TPO for determination of arm’s length price. After considering Ld.TPO’s recommendations and approval of the Ld.DRP, the Ld.AO passed an order on 12.09.2024 determining total income at Rs.54,27,89,399/-. The assessed income included downward adjustment of Rs.15,13,05,424/- on account of denial of payments made to its overseas AEs qua sales support services and sub-contracting and outsourcing charges of Rs.1,25,15,580/- towards upward adjustment to AEs income on account of guarantee fee and another upward adjustment of Rs. 19,24,293/- to AE income on account of interest on outstanding IT(TP)A No. 73/Chny/2024 Page - 4 - of 39 receivables. Thus, on the basis of Ld.TPO’s recommendations and approval of the Ld.DRP, the Ld.AO made a cumulative addition of Rs.16,57,75,297/-. The addition on account of guarantee fees was subsequently reduced, as per DRP’s directions to Rs.15,81,10,717/- as against Rs.16,57,75,297/-. On the Corporate issues, the Ld.AO further made an addition of Rs.15,46,247/- on account of unconfirmed sundry creditor balances from some five parties. The Ld. AO further proceeded to add the TP adjustments of Rs.15,81,10,717/- to the book profit determined u/s 115JB. During the present proceedings, the appellant assessee has filed petition dated 31.03.2025 for admission of additional evidences reportedly necessary for the fair adjudication of this appeal. The same comprised audited financial statements of subsidiaries, bank statements, CA certificates etc. Upon consideration, the same were admitted for the purposes of this adjudication. 4.0 The first issue raised by the assessee through its grounds of appeal is regarding the downward adjustments of Rs.15,13,05,424/-. The Ld. Counsel for the assessee submitted that the assessee has following overseas AEs S No Name of the AE Name of the country where the AE is located % shareholding of the assessee company in the AE 1 Newgen North America USA 100% IT(TP)A No. 73/Chny/2024 Page - 5 - of 39 S No Name of the AE Name of the country where the AE is located % shareholding of the assessee company in the AE Inc. 2 Newgen Knowledge Works UK Ltd. UK 100% 2a Newgen Publishing Services Ltd. UK 100% subsidiary of No.2 2b Newgen Digital Works Ltd. UK 100% subsidiary of No.2 2c Out of House Publishing UK 80% subsidiary of No.2 3 Global Publishing Solutions Ltd. UK 79% 4 Spectra Global Solutions Ltd. UK 84% 5 Konvertus BV Netherlands 80% 6 Newgen Knowledge Works Malaysia, SDN BHD Malaysia 100% The Ld. Counsel submitted that submitted that its overseas AEs are critical to its business and that in a way assessee’s own survival depends upon services rendered by the said AEs. It was submitted that during the year under consideration the assessee had paid following amounts to its AEs IT(TP)A No. 73/Chny/2024 Page - 6 - of 39 S No Name of the AE Country Amount of Sale Support Charges paid by the assessee company to the AE Amount of Consultancy, Sub contracting and outsourcing charges paid by the assessee company to the AE for project management services 1 Newgen North America Inc USA 5,28,18,239 2,90,22,399 2 Newgen Publishing Services Ltd UK 62,63,563 - 3 Konvertus BV, Netherlands Netherlands 3,21,36,114 3,08,25,109 4 Newgen Publishing UK Ltd. UK 2,40,000 - Total 9,14,57,916 5,98,47,508 5.0 The Ld. Counsel submitted that the Ld. DRP has erroneously concurred with the action of the Ld.TPO in disallowing the entire expenses. It is the case of the assessee that the arguments taken by the Ld.TPO that the assessee has failed to provide any Need Benefit analysis and supporting documentary evidence, failed to substantiate how these services have resulted in tangible benefits for the assessee in the form of revenue increase, has not provided any basis for the profit split between itself and the AE’s, etc before concluding that no service IT(TP)A No. 73/Chny/2024 Page - 7 - of 39 whatsoever has been rendered by the AEs, are erroneous and not supported by facts on records. The Ld. Counsel argued that the assessee company is an Indian company engaged in the e-publishing business. As export orders offer better rates and profitability, the company felt it necessary to establish or acquire companies in foreign countries to procure export orders and also to service/coordinate with overseas clients located in foreign countries. Thus, the AEs are necessary parties to assessee’s business. It was argued that their main work is to procure orders for the parent company in India i.e the assessee and to perform project management and coordination services between the publishing house, authors, and the production team of the assessee company in India. These AEs do not have production related capabilities and hence cannot execute the E-publishing activities with their limited staff strength. On the other hand, the assessee company in India employs over 900 people who are engaged in production-related activities. It was submitted that in many cases, the foreign customers prefer to enter into contracts only with local entities. In such cases, the AEs procure the business in their names. However, since they lack production-related capabilities, they outsource, back to India all the production related work. Their activities are confined to sales support and project management/coordination only. The Ld. Counsel emphatically submitted that the AEs procure orders only for the assessee company IT(TP)A No. 73/Chny/2024 Page - 8 - of 39 and similarly render project management/coordination services only to the assessee company. The AEs do not work for anybody other than the assessee company. Therefore, they are captive service providers to the assessee company. 6.0 The Ld.Counsel argued that it had before the Ld.TPO and the Ld.DRP presented sufficient evidences to indicate that services were indeed rendered by the overseas AEs. Through a voluminous paper book, the Ld.AR drew our attention to contemporaneous email communication between assessee and its AEs, the details of export business done by the assessee, inter-company agreements, sample invoices raised by the AEs on the assessee. On the issue of non- submission of details of time spent by AE’s employees on assessee’s projects it was argued that in this line of business as against man / hour calculation, expenses are paid on the basis of per page / per book. Thus, there was no need to maintain any time sheets. Reiterating its arguments of the overseas AEs contributing critical role in the E- publishing business of assessee it was submitted that the sales support services or the marketing services included ,Identifying and meeting prospective client ,Participating in the Request for Proposals (RFP), discussions, and submitting proposals for e-publishing jobs , Negotiating pricing and contractual terms with customers, Procuring/securing the final orders for the assessee company, Follow up and Renewal of orders and IT(TP)A No. 73/Chny/2024 Page - 9 - of 39 contracts with customers, Maintaining ongoing communication with clients throughout the project lifecycle to ensure timely service delivery in accordance with contract terms and Studying the market requirements and communicating the same to the team in India. Similarly, the project management and coordination services which included Consultancy, Subcontracting, and outsourcing activities comprised Communication/coordination between the authors, publishers, and the Newgen production team in India, etc. ,Collection of corrections from the authors, especially of foreign language publications,Translating the corrections from foreign languages to English to ensure clarity and understandability for the typesetter,Preparing corrections in a format that is easily understandable and actionable,Creating front matter and back matter for books to ensure completeness and Liaising with authors and freelancers to coordinate tasks and resolve queries. In support of its contentions, the Ld. Counsel invited reference to and placed reliance upon its extensive paper book. It was submitted that the services from the AEs contributed to an export business of Rs. 108.88 crores to the assessee company, out of its total turnover of Rs 172.56 crores i.e about 63%. The Ld. Counsel submitted that the Ld.TPO had accepted the amounts of Rs.45,26,63,807/- and Rs.10,27,828/- as being at arm’s length which were undertaken with AEs using the TNMM method. IT(TP)A No. 73/Chny/2024 Page - 10 - of 39 However, only the transactions qua above mentioned expenses were disallowed. 7.0 Per contra, the Ld. DR would like to place reliance upon the order of lower authorities. It was argued that it was a case of shifting of profits and that therefore disturbance made by the Ld.TPO is order. 8.0 We have heard rival submissions in the light of material available on records. The Ld. TPO and the Ld.DRP have made the impugned disturbance on the premise that the services were not rendered by the AEs and therefore there cannot be any case of allowance of the accompanying expenditure. We have noted that the assessee is engaged in the business of E-Publishing and that it has earned its entire turnover, including export turnover, of about Rs.172.56 Crores from the said activity. Against the turnover of about Rs.172.56 Crores, the assessee has claimed the expenditure of Rs.15,13,05,424/- which comes to less than 10% of its total turnover. We have also noted that all the activities claimed to have been performed by the AEs are integral to the business of E-Publishing. It is trite law that expenditure is an integral part of any business. By and large, every income earned by a business entity is dependent upon some expenditure. Therefore to conclude that the assessee earned a hefty turnover of about Rs.172 Crores without incurring any corresponding expenditure would be a conclusion far from reality. This is all the more conspicuous since the business is done IT(TP)A No. 73/Chny/2024 Page - 11 - of 39 overseas also and assessee has sizable presence outside the country. It is also noted that expenditure of similar type has not been locally claimed. We have also noted the arrangements with AEs for reimbursement of expenses are governed by written agreements, payments have been disbursed through banking channels obtaining necessary statutory approvals and the series of activities are documented through the emails. Emails have contemporarily assumed the place of most favoured method of communication. Accordingly, we are of the considered view that there is no case for doubting the expenditure incurred by the assessee qua payments made to its overseas AEs. We therefore set aside the order of lower authorities and direct the Ld.AO to delete the impugned addition of Rs.15,13,05,424/-. All the grounds of appeal raised by the assessee on this issue are allowed. 9.0 The next issue raised by the assessee is regarding an addition of Rs.41,58,000/- on account of upward adjustment made by the Ld. TPO and its confirmation by the Ld.DRP. The Ld. Counsel for the assessee submitted that the assessee company provided a Guarantee in favour of Standard Chartered Bank, India for a revolving term loan facility of USD 6.6 Million sanctioned by the said Bank to Newgen North America Inc., the assessee’s AE. The assessee did not charge any guarantee fee for the guarantee so issued. The Ld.TPO disagreed and computed the ALP of the guarantee at 2.58% of the guarantee amount, viz 2.58% of USD IT(TP)A No. 73/Chny/2024 Page - 12 - of 39 6.6 Million which amounted to Rs. 1,25,15,580/. The Ld.TPO had arrived at 2.58% as the average of the guarantee fee by relying upon similar charges taken by certain banks in India. The Ld.DRP confirmed the action of the TPO, but as regards the quantum, reduced the rate of the guarantee fee from 2.58% to 1%, being the rate prescribed in the Safe Harbour Rules. Thus, the addition on account of the guarantee fee was scaled down from Rs. 1,25,15,580/- to Rs. 48,51,000/-. The Ld. Counsel for the assessee submitted that the guarantee fee may be fixed at 0.5% of the guarantee amount, in line with the Tribunal decision in Everest Kanto Cylinder Ltd. [2013] 34 taxmann.com 19 (Mumbai)[23-11-2012], which has been affirmed by the Hon’ble Bombay High Court in Everest Kento Cylinders Ltd. [2015] 58 taxmann.com 254 (Bombay) and Nimbus Communication [2014] 42 taxmann.com 139 (Mumbai). It was further urged that since the assessee company had issued the guarantee only on 2-2-2021, the guarantee fee adjustment be calculated pro-rata only for 2 months for this FY 2020-21 (AY 2021-22)-. It was stated that the same works out to Rs. 4,04,250, which is 0.50 % of USD 66,00,000 for 2 months @ exchange rate of Rs. 73.50 /$. 10.0 Per contra, the Ld. DR placed reliance upon the order of lower authorities. The issue was reported to be subjudice, presently 11.0 We have heard rival submissions in the light of material available on records. We have noted that on the issue of guarantee fees Hon’ble IT(TP)A No. 73/Chny/2024 Page - 13 - of 39 Bombay Tribunal in the case of Everest Kanto Cylinders Limited as at 34 Taxmann.com 19 have held that guarantee fee of 0.5% as reasonable for similar cases. Thus, Hon’ble Coordinate Bench have observed as under:- “…..We have carefully considered the rival submissions, perused the material on record and gone through the orders of the CIT(A) as well as the TPO. The only issue before us is the upward adjustment of arms length price in relation to corporate guarantee given by the assessee to the ICICI Bank, Bahrain Branch for loan taken by its subsidiary in Dubai. Earlier the assessee carried out its business through its branch at Dubai, which was later on taken over by wholly owned subsidiary company of the assessee for carrying out the business of manufacturing of cylinders. The said subsidiary company has hypothecated its assets for getting the term loan for working capital and capital expenditure. The assessee has provided a corporate guarantee to ICICI Bank Bahrain Branch by two deals of guarantee - one for working capital facility (USD 15 million) and another for capital expenditure (USD 5 million). The assessee has charged 0.5% as guarantee commission from its subsidiary in favour of the guarantee provided to the said bank. From the records, it is also seen that the assessee had an independent sanction letter of credit arrangement with ICICI Bank in India, wherein under a guarantee scheme commission of 0.6% per annum is paid by the assessee for the bank guarantee provided by the ICICI Bank India in favour of the assessee. The TPO found that charging of 0.5% of guarantee commission by the assessee from its subsidiary is not at ALP as without the guarantee provided by the assessee the bank either would not have given the loan at all or would have charged higher rate of interest from its AE. As per the TPO, the assessee has undertaken a risk on behalf of its AE which in any case of third party situation, the same would not have been undertaken or would have charged a huge consideration for the same. For risk evaluation, he has compared the bank rate based on the PLR rate and worked out the rate of return for bearing the risk around 4.5%. Thus, on this premise, he went for external comparables and found that various banks have been charging rate of around 3% like HSBC Ltd Mumbai was charging rate of 0.15% to 3%, Allahabad Bank is charging 0.75% per quarter i.e. 3% p.a.; Exim Bank USA which has provided a guarantee to Boeing Co. of USA against Hire Purchase Agreement for purchase of Aircrafts by Jet Airways India, has charged a commission of 3% plus commitment charges. Accordingly, he has benchmarked the ALP for bank guarantee at the rate of 3% for the amount of guarantee. 20. While applying these external comparables of the Banks, the TPO has not brought anything on the record that under which terms and conditions and circumstances, the banks have been charging guarantee commission at the rate of 3%. The charging of a guarantee commission depends upon transaction to transaction and mutual understanding between the parties. There may be a case where the bank may not charge any guarantee commission, depending upon its evaluation of relationship with a particular client. Even otherwise also the TPO IT(TP)A No. 73/Chny/2024 Page - 14 - of 39 himself has noted that guarantee commission ranges between 0.15% to 3% in case of HSBC. The universal application of rate of 3% for guarantee commission cannot be upheld in every case as it is largely dependent upon the terms and conditions, on which loan has been given, risk undertaken, relationship between the bank and the client, economic and business interest are some of the major factors which has to be taken into consideration. In the present case, when the assessee has specifically stated that neither it has incurred any cost for providing the guarantee to the bank for loan taken by its subsidiary nor has undertaken any kind of risk, as it was the subsidiary company which has hypothecated its assets against the loan, the TPO has not brought anything on the record to controvert the same. He has proceeded on the premise that there is always a risk in providing the guarantee and some kind of security is needed for giving a guarantee. Such a premise of the Assessing Officer is without basis or material on record. Thus, applying the rate of 3% on the guarantee commission based on external comparables and that to be on naked quote given in the website, is uncalled for in the present case. 21. So far as the learned Senior Counsel's contention that guarantee commission is not an international transaction and there could not be any method for evaluating the ALP for the guarantee commission, we do not find any merit in the said contention in view of the amendment brought by the Finance Act, 2012 with retrospective effect from 1-4-2002 by way of Explanation added in Section 92B. Payment of guarantee fee is included in the expression 'international transaction' in view of the Explanation i(c) of Section 92B. Once the guarantee fee falls within the meaning of 'international transaction', then the methodology provided in the rules also becomes applicable. Here in this case, it is undisputed that the assessee in its T.P.Study Report and also the TPO, have accepted that it is an international transaction and CUP is the most appropriate method for benchmarking the charging of guarantee fee. We also do not agree with the contention of the learned counsel that there could not be any cost or charge of guarantee fee by providing corporate guarantee to its subsidiary because there is an always element of benefit or cost while providing such kind of guarantee to AE. However, in this case, the assessee has itself charged 0.5% guarantee commission from its AE, therefore, it is not a case of not charging of any kind of commission from its AE. The only point which has to be seen in this case is whether the same is at ALP or not. We have already come to a conclusion in the foregoing paras that the rate of 3% by taking external comparable by the TPO, cannot be sustained in facts of the present case. We also find that in an independent transaction, the assessee has paid 0.6% guarantee commission to ICICI Bank in India for its credit arrangement. This could be a very good parameter and a comparable for taking it as internal CUP and comparing the same with the transaction with the AE. The charging of 0.5% guarantee commission from the AE is quite near to 0.6%, where the assessee has paid independently to the ICICI Bank and charging of guarantee commission at the rate of 0.5% from its AE can be said to be at arms length. The difference of 0.1% can be ignored as the rate of interest on which ICICI Bank, Bahrain Branch has given loan to AE (i.e. subsidiary company) is at 5.5%, whereas the assessee is paying interest rate of more than 10% on its loan taken with ICICI Bank in India. Thus, such a minor difference can be on account of differential rate of interest. Thus, on these facts, we do not find any reason to uphold any kind of upward adjustment in ALP in relation to charging of guarantee commission. Hence, the addition of Rs.28,50,353/- on account of TP IT(TP)A No. 73/Chny/2024 Page - 15 - of 39 adjustment on guarantee commission is hereby deleted and the order of the CIT(A) is set aside. Accordingly, ground No.2 is treated to be allowed….” 12.0 We have further noted that the Hon’ble Bombay High Court have affirming the ruling of Hon’ble Mumbai Tribunal in its decision at 58 taxmann.com 254 held as under:- “…….We have heard rival submissions in the light of material available on records. We have noted that the action of the Ld. AO in making the upward adjustment by disturbing the credit period contracted between the assessee and its foreign AEs is not correct. It is a settled principle of law that the Revenue cannot decide as to how business shall be done by a taxpayer. To this extent the arguments of the Ld. DR that the Ld. TPO has powers to question the commercial expediency are incorrect. The decisions of a business are fundamentally guided with the objective of maximizing the profits and cannot be guided by the taxman. 5.1 The Ld. Counsel for the assessee has invited our attention to the decision of Hon’ble Delhi Tribunal in the case of Tech Books International Pvt Ltd vide ITA No.240 of Delhi of 2015 dated 06.07.2015 and of Hon’ble Bangalore Tribunal in the case of Outsource partners International Pvt Ltd vide ITA No. IT(TP)/35/2020 dated 24.06.2022 wherein it has been held that the contracted credit period takes precedence over any other action and that no interest can be charged qua amounts received during the contracted credit. 5.2 We have noted that the Hon’ble Coordinate Bench of this Tribunal vide ITA No. 736/Chny/2017 in the case of M/s. Integra Software Services P Ltd for Assessment Year: 2012-13 has ruled as under:- “….3.1 The assessee had outstanding receivable from its Associated Enterprises (AE). The Ld.TPO held that excessive outstanding receivables have to comply with Transfer Pricing (TP) provisions. The outstanding beyond comparable period was proposed to be treated as separate transaction of interest free advances as per Sec. 92B(1). The maximum credit period was accepted to be 90 days and outstanding receivables beyond that time period were benchmarked at prime lending rate of 14.4%. The same resulted in to an adjustment of Rs.57.14 Lacs. 3.2 Before DRP, the assessee submitted that it did not charge any interest from AE as well as non-AEs. No finance cost was incurred. The delayed realization was beyond the control of the assessee and not to bestow any benefit on the AE. It was also submitted that the assessee - 4 - ITA No.736/Chny/2017 was a zero debt company and it did not have any borrowings from external sources and therefore, it was not required to pay any interest. Further, Ld. TPO having chosen TNMM method erred in making further adjustment for interest on overdue receivable since the application of TNMM would take care of the same. Lastly, the assessee advanced loans to its AEs and charged interest at LIBOR and therefore, the same should be applied to benchmark the transactions. 3.3 However, Ld. DRP chose to confirm the approach of Ld. TPO. The only relief granted was on account of applicable rate and Ld. TPO was directed to benchmark the same on the basis of IT(TP)A No. 73/Chny/2024 Page - 16 - of 39 interest rates on short term fixed deposits prevailing at relevant point of time. The said directions reduced the impugned adjustment to Rs.25.11 Lacs. Aggrieved, the assessee is in further appeal before us. 3.4 From the fact, it emerges that the assessee has not charged any interest on outstanding receivables from AEs and non-AEs. Further, the loans advanced to AEs have been benchmarked separately. It also emerges that the assessee is a zero-debt entity and do not incur significant interest expenditure. Therefore, to allege that the assessee accommodated its AEs in the guise of receivables would not be a correct proposition. Therefore, this addition is not sustainable. We order so. The corresponding grounds raised by the assessee stand allowed…”. 5.3 Further, on the impugned issue the Hon’ble Coordinate Bench of this Tribunal in its latest decision in the case of Temenos India Pvt. Ltd for Assessment Year: 2020-21 vide IT(TP)A No.: 32/CHNY/2024 has ruled as under:- “….8. The ld.AR’s first contention was that the assessee company being a debt free company, no adjustment is warranted as interest imputation on outstanding trade receivables from its AE’s. In this context, the ld.AR relied on the Hon’ble Supreme Court judgment in the case of PCIT vs. Bechtel India Pvt. Ltd., in CC No.4956/2017/SC (judgment dated 21.07.2017). The second contention of the ld.AR was that the TPO / DRP ought to have granted working capital adjustment and factoring the impact of receivables on working capital, no separate adjustment is required on trade receivables. In - 8 - IT(TP)A No.32/CHNY/2024 this context, the ld.AR placed reliance on the following judicial pronouncements:- i) Kusum Healthcare Pvt. Ltd., in ITA 765/2016 (Delhi HC) ii) Doosan Power Systems India Pvt. Ltd., in ITA No.2/CHNY/2020 (Chennai Bench, ITAT) iii) Infac India P. Ltd., in IT(TP)A No.27/CHNY/2018 (Chennai Bench, ITAT) iv) CMA CGM Shared Service Centre (India) Pvt. Ltd., in IT(TP)A No.76/CHNY/2018 (Chennai Bench, ITAT) v) Foxteq Services India in ITA No.174/Mds/2016 (Chennai Bench, ITAT) 9. Lastly, it was contended that the credit period of 30 days given by the TPO is adhoc, arbitrary and completely ignore the credit period as per inter-company agreement of 180 days, the credit period that is given to the comparable companies and various judicial pronouncements allowing credit period of 90 to 120 days. 10. The ld.DR supported the orders of the TPO and the DRP. 11. We have heard rival submissions and perused the material on record. The Hon’ble Delhi High Court in the case of Kusum Healthcare Pvt.Ltd., (supra) had categorically held that inclusion in the Explanation to Section 92B of the Act by the Finance Act, 2012 in - 9 - IT(TP)A No.32/CHNY/2024 regard to expression ‘receivables’ does not mean that de hors the context every item of ‘receivables’ appearing in the accounts of an entity, which may have dealings with foreign AEs would automatically be characterized as an international transaction. The Hon’ble High Court held that there may be delay in collection of monies for supplies made, even beyond the agreed period, due to a variety of factors which will have to be investigated on case to case basis and the impact of this would have on the working capital of the assessee will have to be studied and enquired properly by the AO for analyzing the statistics over a period of time to find out the pattern which would indicate that viz-a-viz the receivables for the supplies made to its AE, the arrangement reflects an international transaction intended to benefit the AE in some way. Further, the Hon’ble High Court held that when the assessee having already factored in the impact of receivables on the working capital and thereby on its profitability viz-a-vis with that of its comparables, any further adjustment, only on the basis of IT(TP)A No. 73/Chny/2024 Page - 17 - of 39 outstanding receivables would have distorted the picture. Hence, it was held that it is not permissible. In this instant case before us also, the TPO has not carried out basic exercise or any analysis on the facts of the case or the factors mentioned by the Hon’ble Delhi High Court. The TPO has not carried - 10 - IT(TP)A No.32/CHNY/2024 out any exercise of statistics and the pattern which would indicate that the receivables from supplies will benefit the AEs in some way. 12. Most importantly, we find that the assessee is a debt free company. In other words, outstanding receivables will not impact the profitability of the company because the assessee is having largely its own funds and there is no debt secured by assessee on which interest is to be paid by the assessee. Hence, the delayed receivables will not impact in any way. The Co-ordinate Bench of Chennai, ITAT in the case of Integra Software Services Pvt. Ltd., in ITA No.736/CHNY/2017 (order dated 21.10.2022) has considered the issue of zero debt entity and finally deleted the addition by observing in para 3.4 as under:- 3.4 From the fact, it emerges that the assessee has not charged any interest on outstanding receivables from AEs and non-AEs. Further, the loans advanced to AEs have been benchmarked separately. It also emerges that the assessee is a zero-debt entity and do not incur significant interest expenditure. Therefore, to allege that the assessee accommodated its AEs in the guise of receivables would not be a correct proposition. Therefore, this addition is not sustainable. We order so. The corresponding grounds raised by the assessee stand allowed. 13. Before concluding it is to be mentioned that DRP had relied on the Delhi Bench of the ITAT order in the case of Bechtel India Pvt. Ltd., in ITA No.6530/Del/2016, dated 16.05.2017, (Assessment Year 2012-13). This order of the Delhi Bench of the Tribunal in the case - 11 - IT(TP)A No.32/CHNY/2024 of Bechtel India Pvt. Ltd., for AY 2012-13, had distinguished the Delhi Bench order in the same assessee’s case concerning assessment year 2010-11. The Delhi Bench order in the case of Bechtel India Pvt. Ltd., for assessment year 2010-11 in ITA No.1478/Del/2015 (order dated 21.12.2015) had deleted the interest on delayed receivables citing that assessee was a debt free company and no interest was paid even on delayed payables. The above order of the Tribunal for assessment year 2010-11 concerning Bechtel India Pvt. Ltd., was confirmed by the Hon’ble Delhi High Court in ITA No.379/2016 (judgment dated 21.07.2016). The Delhi High Court judgment was confirmed by the Hon’ble Supreme Court in CC No. 4956/2017 (judgment dated 21.07.2017). The Supreme Court dismissed the Revenue’s SLP and upheld the Hon’ble Delhi High Court judgment. The Tribunal in the case of Bechtel India Pvt. Ltd., concerning assessment year 2012-13 (relied on by the DRP) had not taken note of the Delhi High Court concerning AY 2010-11. The Hon’ble Supreme Court judgment concerning AY 2010-11 was rendered on 21.07.2017 i.e., after order of ITAT for AY 2012-13. 14. For the subsequent assessment year namely AY 2013-14, (post the judgment of the Hon’ble Supreme Court judgment and the Hon’ble Delhi High Court judgment in the case of Bechtel India Pvt. Ltd., concerning AY 2010-11) the Delhi Bench of ITAT in - 12 - IT(TP)A No.32/CHNY/2024 ITA No.7234/Del/2017 (order dated 18.12.2020) had discussed the conflicted saga of Bechtel cases concerning Assessment Year 201011 and 2012-13 and held that the Hon’ble Supreme Court judgment in Bechtel India Pvt. Ltd., for the assessment year 2010-11 (supra) had settled the law and there cannot be any interest imputed on outstanding receivables when assessee in the said case was a debt free company. The relevant facts, contentions raised by both the sides and the finding of the Delhi Bench of the Tribunal in the case of IT(TP)A No. 73/Chny/2024 Page - 18 - of 39 Bechtel India Pvt. Ltd., for assessment year 2013-14 (supra), reads as follows:- 11. The ground No. 5 of the appeal relates to transfer pricing adjustment for interest on receivables. 11.1 The facts qua the issue in dispute are that in view of payments against invoices raised by the assessee to associated enterprises were received with the delay more than industry standard. The Learned TPO proposed a separate transfer pricing adjustment re-characterizing the outstanding receivables as unsecured loans. He applied CUP method for benchmarking the transaction of interest on receivables and using SBI prime lending rate, computed adjustment for interest on receivables amounting to ₹ 1,30,78,181/-. On the objections of the assessee, the Learned DRP noted that in assessment year 2010-11, the Tribunal following the decision of the Tribunal in the case of Kusum Healthcare Private Limited (reported in TS129-ITAT 2015(Del)-TP) held that no separate adjustment for interest on receivable was warranted when working capital adjustment was already granted to the assessee. The Learned DRP further noted that Hon’ble Delhi High Court in the assessee own case (ITA No.379/2016) for assessment year 2010-11 vide order dated 21/07/2016 upheld the order of the Tribunal holding that the assessee is a debt free company and the question of receiving any interest on receivable did not arise. The Learned DRP thereafter noted that the Tribunal in assessment year 2012-13 in order dated 16/05/2017 relying on the decision of the Tribunal in the case of ‘Ameriprise - 13 - IT(TP)A No.32/CHNY/2024 India P Ltd.’, 2015-TII-347-ITAT-Del-TP held that when the export proceeds are realized within the year, but beyond the stipulated period of the agreement, then same will not come within the working capital adjustment and rejected the contention of the assessee that interest on delayed payment of receivable get subsumed in the working capital adjustment allowed to the assessee. The Tribunal in AY 2012-13 held that interest on delayed realization of receivables is a separate international transaction and therefore require benchmarking. The Tribunal applying interest rate of six months LIBOR +400 basis point on receivables, upheld the transfer pricing adjustment of interest on receivables accordingly. In view of the finding of the Tribunal in assessment year 2012-13, the Learned DRP in the year under consideration directed the Learned TPO to compute the adjustment using the interest rate of six month of LIBOR +400 basis point. 11.2 Before us, the Learned Counsel of the assessee has repeated the historical background of the issue in dispute and submitted that special leave petition filed by the Revenue against the order of the Hon’ble High Court for assessment year 2010-11 has been rejected by the Hon’ble Supreme Court on 21/07/2017, which is after the order of the Tribunal for AY 2012-13 dated 16/05/2017 and therefore decision of the Tribunal in assessment year 201213 need not be followed. 11.3 The Learned DR, on the other hand, submitted that the Tribunal in assessment year 2012-13 noted the decision of the Hon’ble High Court in assessment year 2010-11 and after taking into consideration the Explanation inserted by way of the Finance Act, 2012 to section 92B with retrospective effect from 01/04/2002, held that any delay in realization of debt arising during the course of the business is liable to be visited with TP adjustment on account of interest income short charged or uncharged. In view of the learned DR, the Learned DRP is justified in following the order of the Tribunal in assessment year 2012-13. 11.4 We have heard rival submission of the parties on the issue in dispute and relevant material on record including the decisions cited by the Learned Counsel of the assessee as well as by the Learned DR. In the instant case, the Learned DRP has noted the decisions of the Tribunal and High Court in IT(TP)A No. 73/Chny/2024 Page - 19 - of 39 the earlier years. In assessment year 2010-11 the Tribunal in ITA No.1478/Del/2015 placed reliance on the decision of the Tribunal in the case of Kusum Healthcare Private Limited (supra) and held that impact of credit period was duly factored in working capital adjustment allowed while - 14 - IT(TP)A No.32/CHNY/2024 determining the arm’s-length price and, therefore, no separate adjustment for interest on receivables was warranted in the hands of the tested party. The relevant extract of the decision of the Tribunal is reproduced as under: “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 has also not brought on record that the assessee has been found paying interest to its creditors or suppliers on delayed payments. 16. In lieu of the discussions and the ratio laid down in the case of Kusum Healthcare Pvt. Ltd., we direct that no separate adjustment for interest on receivables are warranted in the hands of the assessee. Grounds no. 3 of the assessee’s appeal is there by allowed.” 11.5 On appeal by the Revenue, against the above order of the Tribunal, the Hon’ble Delhi High Court (ITA No. 379/2016) in order dated 21/07/2016 dismissed the appeal observing as under: “4. As far as question (B) concerning the adjustment for interst no receivables, the Court finds that the ITAT has returned a detailed finding of fact that the Assessee is a debt free company and the question of receiving any interest on receivables did not arise. Consequently, no substantial question of law arises for consideration as far as this issue is concerned.” 11.6 The assessee brought the decision of the Hon’ble High Court in assessment year 2010-11, before the Tribunal in assessment year 2012-13 by way of raising ground No. 1.5 of the appeal, however, the Tribunal after considering the amendment brought into Act by way of Finance Act, 2012 and other decisions held that interest on delayed realization of receivable is a separate international transaction, which requires separate benchmarking. The finding of the Tribunal in assessment year 2012-13 is reproduced as under: “17. We have considered the submissions of both the parties and perused the record of the case. The assessee's grievance is two-fold. - 15 - IT(TP)A No.32/CHNY/2024 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 proceedings from receivables. The assessee's 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 Knowledge 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 23 as under:- The ld. AR supported the impugned order IT(TP)A No. 73/Chny/2024 Page - 20 - of 39 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). - 16 - IT(TP)A No.32/CHNY/2024 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 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;” 11.7 But before us the Learned Counsel of the assessee has referred to the decision of the Hon’ble Supreme Court dated 21/07/2017, which is after the decision of the Tribunal in assessment year 2012-13. The Hon’ble Supreme Court has held as under: “Delay condoned. We are in agreement with the High Court that as far as Question-B concerning adjustment for interest on receivables is concerned the Tribunal has returned a finding of fact. Consequently, no substantial question of law therefore, rises, on the facts of this case. The special leave petition is dismissed.” 11.8 In view of the order of the Hon’ble Supreme Court, which is subsequent to the order of the Tribunal in assessment year 2012-13, we direct the Ld. AO/TPO to delete the transfer pricing adjustment on account of the interest - 17 - IT(TP)A No.32/CHNY/2024 receivables. The ground No. 5 of the appeal of the assessee is accordingly allowed. 15. From the above order of the Delhi Bench of the Tribunal in the case of Bechtel India Pvt. Ltd., concerning AY 2013-14, we find that ITAT has taken note of the judgments of the Hon’ble Delhi High Court, Hon’ble Supreme Court concerning AY 2010-11 and also co-ordinate bench order of the Tribunal for assessment year 2012-13. After taking note of above judicial pronouncements, the ITAT had deviated from its earlier order for AY 2012-13 and followed the judgment of Hon’ble Delhi High Court and Hon’ble Supreme Court concerning AY 2010-11. The Delhi Bench of the Tribunal in Bechtel India Pvt. Ltd., for the assessment year 2013-14 had categorically held that there need not be any transfer pricing adjustment for imputing interest cost for the outstanding trade receivables from AEs when the assessee in the said case is a debt free company. Therefore, the DRP’s reliance on the order of Delhi Bench of the Tribunal in Bechtel India Pvt. Ltd., concerning assessment year 2012-13 (which IT(TP)A No. 73/Chny/2024 Page - 21 - of 39 according to us has not laid down a correct proposition of law) is legally not tenable. In light of the above, we delete the transfer pricing adjustment imputing interest income on the outstanding trade receivables. In the result, the Ground No.2 (f) is allowed. Since we have deleted the TP adjustment - 18 - IT(TP)A No.32/CHNY/2024 of Rs.3,14,15,287/-, Ground No. 2 and its other sub-grounds are not adjudicated. It is ordered accordingly….” 5.4 In the cases of Tecnimont Pvt Ltd (ITA 56/Bom/2016) Hon’ble Bombay High Court and this Hon’ble Tribunal in the case of Verizon Data Services Pvt Ltd (ITA 3411/Chny/2016) and Plintron Global Technologies Solutions have held that receivables from overseas entities, have to be only charged to interest as per LIBOR rate. Consequently, the appellant assessee has assailed the additional adjustments of 3.5% to the LIBOR rate made by the Ld. AO. 6.0 We are therefore of the considered view that considering the facts the appellant assessee, as well as in respectful compliance to the decisions of Hon’ble High Courts and Coordinate Benches of the Tribunal including this tribunal, there is no merit in the action of the Revenue in making the impugned addition by way of adjustment proposed by the Ld.TPO. Accordingly, we set aside the order of the lower authorities and direct the Ld.AO to delete the addition of Rs.50,78,859/-. Therefore, all the grounds of appeal raised by the assessee are allowed….” 13.0 Thus we have noted that guarantee fee of 0.5% has been taken as reasonable amount. We have also noted that a coordinate Bench of this tribunal in the case of M/s.VA Tech Wabag Pvt. Ltd vide ITA No.147/Chny/2018, for Assessment Years: 2009-10 through order dated 19.02.2025 have held as under: “…..We have heard rival submissions in the light of material available on records. We have noted the decision of Hon’ble Coordinate Bench of this Tribunal in IT(TP)A No.7,8,9 & 326/Chny/2021 dated 16.10.2024 in assessee’s own case. Thus, para 18 to 20 of the impugned order reads as under:- “…..18.0 The next issue that has been raised by the revenue for AY-2013-14 is in respect of action of the Ld. CIT(A) in deleting the disallowance made by the Ld. AO in respect of transfer pricing adjustments u/s 92CA(3). From the perusal of Ld. AO’s order we find that the Ld. TPO had recommended an adjustment of 1% of the value of services provided, in this case being value of the corporate guaranty to its overseas AEs. As per the factual matrix the assesse had acquired shares of VA Tech Wabag GmbH Austria from siemens and the purchase consideration for the acquisition of the shares of the company namely VA Tech Wabag GmbH Austria is by taking over the contingent liability which included performance bank guaranty given by Austrian subsidiary to various customers amounting to some 70 Million Euros. Originally these customers of VA Tech Austria AE were guaranteed by the bank of Austria and backed IT(TP)A No. 73/Chny/2024 Page - 22 - of 39 by corporate performance guaranty given by Siemens. Upon acquisition of shares from Siemens the assesse entered its (Siemens) shoes qua corporate performance guaranty. The Ld. Counsel for the assesse informed that the assesse had extended corporate guaranty for its overseas associated enterprises and that there was no cost imbedded therein. It was argued that consequently there cannot be any case for disturbance to its ALP. The Ld. CIT(A) held that the extension of a corporate guaranty is a cost neutral activity and therefore cannot be part of any ALP adjustments. While deleting the addition made by the Ld. AO he relied upon the decision of the Coordinate Bench of this tribunal in ITA No.458 / MDS / 201 in the case of TVS Logistics Services Limited. Before us, in support of its contentions, the Ld. Counsel also placed reliance upon the decision of the Coordinate Bench of this tribunal in assesse’s own case for AY-2010-11 and 2011-12 vide ITA Nos.953 / Chny / 2015 and 807/Chny/2016 respectively holding that only part adjustment of corporate guaranty can be done. The Ld. DR fairly conceded that the issue stands partly decided in favour of the assesse by the above decisions. 19.0 We have heard rival submissions in the light of material available on records. We have noted that decision of the Coordinate Bench of this tribunal in assesse’s own case for AY-2010-11 and 2011-12 vide ITA Nos.953 / Chny / 2015 and 807/Chny/2016 on this issue a corporate guaranty, pronouncing as under: “…8. Before us, the Ld. CIT-DR relied on the decision of Hon'ble High Court of Madras in the case of Redington (India) Ltd. vs. Addl. CIT [2022] 242 ITR 450 (Mad.). 9. On the other hand, the Ld. counsel for the assessee only requested that in view of the decision of Hon'ble Bombay High Court in the case of Everest Kanto Cylinder Ltd. 52 taxmann.com 395 (Bom.), wherein it is held that the corporate guarantee upward adjustment in ALP can be done by taking 0.5%, but it is held to be international transaction. The Ld. counsel for the assessee only requested that the upward adjustment of ALP can be done at 0.5%. 10. After hearing both the parties and going through the facts and circumstances of the case, we concur with the TPO's order that this is an international transaction, but upward adjustment is now covered in favour of the assessee partly by the decision of Hon'ble Bombay High Court in the case of Everest Kanto Cylinder Ltd, supra, wherein it is directed that the adjustment should be made @0.5%. Hence, we direct the A.O accordingly. 11. Coming to ITA No.807/CHNY/2016 for the assessment year 2011-12 of assessee's appeal, the issue is regarding corporate guarantee charged by AO and affirmed by DRP at the rate of 1.5%. Since we have adjudicated this issue while dealing with Revenue's Appeal in ITA No.953/CHNY/2015 for assessment year 2010-11 and the facts are identical, taking a consistent view, we direct the AO to adopt the rate @ 0.5%. This issue of the assessee's appeal is partly-allowed…” 20.0 In respectful compliance to the decision of the Coordinate Bench of this tribunal supra as also in consideration of the principles of consistency we therefore set aside the orders of lower authorities and direct the Ld. AO to recalculate the disallowance by adopting the rate of 0.5% for his addition. Accordingly, the ground of appeal raised by the revenue is partly allowed…” 4.0 We have noted that the facts of the present appeal are identical to those adjudicated vide our order dated 16.10.2024 and no changes have been pointed by the Revenue. Accordingly, in respectful compliance to the decision cited above as IT(TP)A No. 73/Chny/2024 Page - 23 - of 39 also in consideration of the principles of consistency, we therefore set aside the order of lower authorities and direct the Ld.AO to recalculate the disallowance by adopting the rate of 0.5% for his addition. Accordingly, all the grounds of appeal raised by the Revenue are partly allowed. …” 14.0 Accordingly, in respectful compliance to the judicial precedents discussed hereinabove as also for the principles of consistency we set aside the order of lower authorities and direct the Ld.AO to recalculate the disallowance by adopting the rate of 0.5% for this addition. We have also found force in the argument of the Ld.AR that guarantee fees is to be calculated on pro-rata basis. We therefore set aside the order of lower authorities and we direct the Ld.AO to recalculate the same after verifying from records the actual period for which the guarantee was extended. Accordingly, all the grounds of appeal raised by the assessee are partly allowed. 15.0 The next issue raised by the assessee through its grounds of appeal is regarding an upward adjustment made by the Ld.TPO of Rs.19,54,293/- on account of deemed interest on over due receivables from overseas AEs. The Ld. Counsel for the assessee submitted that the action of the Ld.TPO and Ld.DRP on this issue is not based upon correct appreciation of the facts of the case. As per arrangement with the AEs, the assessee offers them a credit limit. No interest is charged in respect of few payments received even after completion of impugned credit limit period. The Ld. Counsel argued that its normal business IT(TP)A No. 73/Chny/2024 Page - 24 - of 39 transactions generate receivables from non-AEs also. It has been submitted that consistently, as a general policy, the assessee does not charges any interest either from its AEs nor from Non-AEs. It was further submitted that even the credit period of 90 days is allowed to AEs and Non-AEs uniformly. It was submitted that assuming that the interest on over due receivables is treated as an international transaction then the credit period terms with non-AEs would constitute an internal comparable transaction, hence, the addition was unwarranted. In support reliance was placed upon the decision of Hon’ble Bombay High Court in the case of Indo-American Jewellery 44 taxmann.com holding that “….. On appeal, the CIT(A) held that the total outstanding amount was Rs.8.73 Crores and out of which the amount outstanding from the Associated Enterprises was to the extent of Rs.5.11 Crores and the balance amount of Rs 3.62 Crores was outstanding from non Associated Enterprises. Relying on the Board Circular no. 12 of 2001, the CIT(A) further held that in the present case, the profit of one Associated Enterprise is negligible and the other Associated Enterprise has incurred losses and therefore it cannot be said that the assessee had transfered any profit to the Associated Enterprises outside India by not charging interest on the outstanding payment which has been realised after the due date and accordingly deleted the interest charged on late realisation of the export proceeds. IT(TP)A No. 73/Chny/2024 Page - 25 - of 39 5. On appeal filed by the Revenue, the ITAT upheld the order of CIT(A). While, upholding the order of CIT(A), the ITAT held that interest income is associated only with the lending or borrowing of money and not in case of sale. We express no opinion on the above reasoning of the ITAT and keep that reasoning open for debate in an appropriate case. However, in the facts of the present case, the specific finding of the ITAT is that there is complete uniformity in the act of the assessee in not charging interest from both the Associated Enterprises and Non Associated Enterprises debtors and the delay in realisation of the export proceeds in both the cases is same. In these circumstances the decision of the Tribunal in deleting the notional interest on outstanding amount of export proceeds realised belatedly cannot be faulted. 6. Accordingly, we see no reason to entertain the second question raised by the revenue….” The Ld. Counsel for the assessee alternatively argued that even if interest on overdue receivables is to be calculated the same should be done in respect of net receivables i.e amounts to be received reduced by amounts to be paid by the assessee. 16.0 The Ld. DR argued in favour of the lower authorities. It was submitted that the impugned transaction was indeed an international transactions and that therefore the overdue receivables would attract levy IT(TP)A No. 73/Chny/2024 Page - 26 - of 39 of interest. The Ld. DR argued that the decisions in the case of Trimble and Temenos delivered by this tribunal on the subject would not be helpful to the assessee. In response to appellant’s arguments of necessity of working capital adjustments, it was urged that working capital adjustments and interest on receivables Act on different plains. 17.0 We have heard rival submissions in the light of material available on records. As far as the controversy as to whether the impugned interest on overdue recievables would qualify as an International transactions or not , We would like to place reliance upon the decision of an Hon’ble coordinate bench of this tribunal taken in the case of M/s. Stanadyne India Private Limited in appeal IT(TP)A No.100/Chny/2024 for Assessment Years: 2021-22 vide order dated 14.05.2025 where identical facts existed. In the case of Stanadyne India Private Limited supra it was held as under:- “…… We have heard rival submissions in the light of material available on records. As far as the controversy as to whether the impugned transaction of outstanding receivables are ‘international’ transactions or not, we find force in the arguments of the learned DR that they are indeed international transactions. We have noted that an amendment u/s.92B has been made in the Act vide Finance Act, 2012 postulating that international transaction shall include “deferred payment or receivable or any other debt arising during the course of business”. It is an undisputed fact of the present case that the issue in question are receivables akin to sundry debts which had arisen to the assessee during the course of its regular business with its AEs. We have also noted that the impugned amendment has been upheld by various courts in their decisions, some of which have been relied upon by the learned DRP. We have also noted that in the case of Kusum Healthcare Private Limited, the Hon’ble Delhi High Court has held that in order to hold receivable as international transactions, the learned TPO would be required to establish through his enquiries that an indirect benefit was intended to be given back the assessee to its AEs by delaying the receipt of receivables. Thus we find sufficient force in the arguments of the revenue that the IT(TP)A No. 73/Chny/2024 Page - 27 - of 39 impugned transactions being receivables from AEs are to be treated as international transactions…..” Thus, there cannot be any doubt about the nature of the impugned transaction as an international transaction 18.0 The question that however remains is as to whether an upward adjustment was required to be made by the Ld.TPO on the overdue receivables from its overseas AEs invoking the hypothesis. In this regard, it is noted that this tribunal has been consistently taking a decision that interest on overdue receivables from overseas AEs is not liable for any upward adjustment on account of deemed interest. Thus, in the case of Trimble Information Technologies India Private Limited vide IT(TP)A No.28/Chny/2024 for Assessment Years: 2020-21 vide order dated 14.02.2025 this tribunal has held as under:- “…5.0 We have heard rival submissions in the light of material available on records. We have noted that the action of the Ld. AO in making the upward adjustment by disturbing the credit period contracted between the assessee and its foreign AEs is not correct. It is a settled principle of law that the Revenue cannot decide as to how business shall be done by a taxpayer. To this extent the arguments of the Ld. DR that the Ld. TPO has powers to question the commercial expediency are incorrect. The decisions of a business are fundamentally guided with the objective of maximizing the profits and cannot be guided by the taxman. 5.2 The Ld. Counsel for the assessee has invited our attention to the decision of Hon’ble Delhi Tribunal in the case of Tech Books International Pvt Ltd vide ITA No.240 of Delhi of 2015 dated 06.07.2015 and of Hon’ble Bangalore Tribunal in the case of Outsource partners International Pvt Ltd vide ITA No. IT(TP)/35/2020 dated 24.06.2022 wherein it has been held that the contracted credit period takes precedence over any other action and that no interest can be charged qua amounts received during the contracted credit. 5.2 We have noted that the Hon’ble Coordinate Bench of this Tribunal vide ITA No. 736/Chny/2017 in the case of M/s. Integra Software Services P Ltd for Assessment Year: 2012-13 has ruled as under:- IT(TP)A No. 73/Chny/2024 Page - 28 - of 39 “….3.1 The assessee had outstanding receivable from its Associated Enterprises (AE). The Ld.TPO held that excessive outstanding receivables have to comply with Transfer Pricing (TP) provisions. The outstanding beyond comparable period was proposed to be treated as separate transaction of interest free advances as per Sec. 92B(1). The maximum credit period was accepted to be 90 days and outstanding receivables beyond that time period were benchmarked at prime lending rate of 14.4%. The same resulted in to an adjustment of Rs.57.14 Lacs. 3.2 Before DRP, the assessee submitted that it did not charge any interest from AE as well as non-AEs. No finance cost was incurred. The delayed realization was beyond the control of the assessee and not to bestow any benefit on the AE. It was also submitted that the assessee - 4 - ITA No.736/Chny/2017 was a zero debt company and it did not have any borrowings from external sources and therefore, it was not required to pay any interest. Further, Ld. TPO having chosen TNMM method erred in making further adjustment for interest on overdue receivable since the application of TNMM would take care of the same. Lastly, the assessee advanced loans to its AEs and charged interest at LIBOR and therefore, the same should be applied to benchmark the transactions. 3.3 However, Ld. DRP chose to confirm the approach of Ld. TPO. The only relief granted was on account of applicable rate and Ld. TPO was directed to benchmark the same on the basis of interest rates on short term fixed deposits prevailing at relevant point of time. The said directions reduced the impugned adjustment to Rs.25.11 Lacs. Aggrieved, the assessee is in further appeal before us. 3.4 From the fact, it emerges that the assessee has not charged any interest on outstanding receivables from AEs and non-AEs. Further, the loans advanced to AEs have been benchmarked separately. It also emerges that the assessee is a zero-debt entity and do not incur significant interest expenditure. Therefore, to allege that the assessee accommodated its AEs in the guise of receivables would not be a correct proposition. Therefore, this addition is not sustainable. We order so. The corresponding grounds raised by the assessee stand allowed…”. 5.4 Further, on the impugned issue the Hon’ble Coordinate Bench of this Tribunal in its latest decision in the case of Temenos India Pvt. Ltd for Assessment Year: 2020-21 vide IT(TP)A No.: 32/CHNY/2024 has ruled as under:- “….8. The ld.AR’s first contention was that the assessee company being a debt free company, no adjustment is warranted as interest imputation on outstanding trade receivables from its AE’s. In this context, the ld.AR relied on the Hon’ble Supreme Court judgment in the case of PCIT vs. Bechtel India Pvt. Ltd., in CC No.4956/2017/SC (judgment dated 21.07.2017). The second contention of the ld.AR was that the TPO / DRP ought to have granted working capital adjustment and factoring the impact of receivables on working capital, no separate adjustment is required on trade receivables. In - 8 - IT(TP)A No.32/CHNY/2024 this context, the ld.AR placed reliance on the following judicial pronouncements:- i) Kusum Healthcare Pvt. Ltd., in ITA 765/2016 (Delhi HC) ii) Doosan Power Systems India Pvt. Ltd., in ITA No.2/CHNY/2020 (Chennai Bench, ITAT) iii) Infac India P. Ltd., in IT(TP)A No.27/CHNY/2018 (Chennai Bench, ITAT) iv) CMA CGM Shared Service Centre (India) Pvt. Ltd., in IT(TP)A No.76/CHNY/2018 (Chennai Bench, ITAT) v) Foxteq Services India in ITA No.174/Mds/2016 (Chennai Bench, ITAT) 9. Lastly, it was contended that the credit period of 30 days given by the TPO is adhoc, arbitrary and completely ignore the credit period as per inter-company agreement IT(TP)A No. 73/Chny/2024 Page - 29 - of 39 of 180 days, the credit period that is given to the comparable companies and various judicial pronouncements allowing credit period of 90 to 120 days. 10. The ld.DR supported the orders of the TPO and the DRP. 11. We have heard rival submissions and perused the material on record. The Hon’ble Delhi High Court in the case of Kusum Healthcare Pvt.Ltd., (supra) had categorically held that inclusion in the Explanation to Section 92B of the Act by the Finance Act, 2012 in - 9 - IT(TP)A No.32/CHNY/2024 regard to expression ‘receivables’ does not mean that de hors the context every item of ‘receivables’ appearing in the accounts of an entity, which may have dealings with foreign AEs would automatically be characterized as an international transaction. The Hon’ble High Court held that there may be delay in collection of monies for supplies made, even beyond the agreed period, due to a variety of factors which will have to be investigated on case to case basis and the impact of this would have on the working capital of the assessee will have to be studied and enquired properly by the AO for analyzing the statistics over a period of time to find out the pattern which would indicate that viz-a-viz the receivables for the supplies made to its AE, the arrangement reflects an international transaction intended to benefit the AE in some way. Further, the Hon’ble High Court held that when the assessee having already factored in the impact of receivables on the working capital and thereby on its profitability viz-a-vis with that of its comparables, any further adjustment, only on the basis of outstanding receivables would have distorted the picture. Hence, it was held that it is not permissible. In this instant case before us also, the TPO has not carried out basic exercise or any analysis on the facts of the case or the factors mentioned by the Hon’ble Delhi High Court. The TPO has not carried - 10 - IT(TP)A No.32/CHNY/2024 out any exercise of statistics and the pattern which would indicate that the receivables from supplies will benefit the AEs in some way. 12. Most importantly, we find that the assessee is a debt free company. In other words, outstanding receivables will not impact the profitability of the company because the assessee is having largely its own funds and there is no debt secured by assessee on which interest is to be paid by the assessee. Hence, the delayed receivables will not impact in any way. The Co-ordinate Bench of Chennai, ITAT in the case of Integra Software Services Pvt. Ltd., in ITA No.736/CHNY/2017 (order dated 21.10.2022) has considered the issue of zero debt entity and finally deleted the addition by observing in para 3.4 as under:- 3.4 From the fact, it emerges that the assessee has not charged any interest on outstanding receivables from AEs and non-AEs. Further, the loans advanced to AEs have been benchmarked separately. It also emerges that the assessee is a zero-debt entity and do not incur significant interest expenditure. Therefore, to allege that the assessee accommodated its AEs in the guise of receivables would not be a correct proposition. Therefore, this addition is not sustainable. We order so. The corresponding grounds raised by the assessee stand allowed. 13. Before concluding it is to be mentioned that DRP had relied on the Delhi Bench of the ITAT order in the case of Bechtel India Pvt. Ltd., in ITA No.6530/Del/2016, dated 16.05.2017, (Assessment Year 2012-13). This order of the Delhi Bench of the Tribunal in the case - 11 - IT(TP)A No.32/CHNY/2024 of Bechtel India Pvt. Ltd., for AY 2012-13, had distinguished the Delhi Bench order in the same assessee’s case concerning assessment year 2010-11. The Delhi Bench order in the case of Bechtel India Pvt. Ltd., for assessment year 2010-11 in ITA No.1478/Del/2015 (order dated 21.12.2015) had deleted the interest on delayed receivables citing that assessee was a debt free company and no interest was paid even on delayed IT(TP)A No. 73/Chny/2024 Page - 30 - of 39 payables. The above order of the Tribunal for assessment year 2010-11 concerning Bechtel India Pvt. Ltd., was confirmed by the Hon’ble Delhi High Court in ITA No.379/2016 (judgment dated 21.07.2016). The Delhi High Court judgment was confirmed by the Hon’ble Supreme Court in CC No. 4956/2017 (judgment dated 21.07.2017). The Supreme Court dismissed the Revenue’s SLP and upheld the Hon’ble Delhi High Court judgment. The Tribunal in the case of Bechtel India Pvt. Ltd., concerning assessment year 2012-13 (relied on by the DRP) had not taken note of the Delhi High Court concerning AY 2010-11. The Hon’ble Supreme Court judgment concerning AY 2010-11 was rendered on 21.07.2017 i.e., after order of ITAT for AY 2012-13. 14. For the subsequent assessment year namely AY 2013-14, (post the judgment of the Hon’ble Supreme Court judgment and the Hon’ble Delhi High Court judgment in the case of Bechtel India Pvt. Ltd., concerning AY 2010-11) the Delhi Bench of ITAT in - 12 - IT(TP)A No.32/CHNY/2024 ITA No.7234/Del/2017 (order dated 18.12.2020) had discussed the conflicted saga of Bechtel cases concerning Assessment Year 201011 and 2012-13 and held that the Hon’ble Supreme Court judgment in Bechtel India Pvt. Ltd., for the assessment year 2010-11 (supra) had settled the law and there cannot be any interest imputed on outstanding receivables when assessee in the said case was a debt free company. The relevant facts, contentions raised by both the sides and the finding of the Delhi Bench of the Tribunal in the case of Bechtel India Pvt. Ltd., for assessment year 2013-14 (supra), reads as follows:- 11. The ground No. 5 of the appeal relates to transfer pricing adjustment for interest on receivables. 11.1 The facts qua the issue in dispute are that in view of payments against invoices raised by the assessee to associated enterprises were received with the delay more than industry standard. The Learned TPO proposed a separate transfer pricing adjustment re-characterizing the outstanding receivables as unsecured loans. He applied CUP method for benchmarking the transaction of interest on receivables and using SBI prime lending rate, computed adjustment for interest on receivables amounting to ₹ 1,30,78,181/-. On the objections of the assessee, the Learned DRP noted that in assessment year 2010-11, the Tribunal following the decision of the Tribunal in the case of Kusum Healthcare Private Limited (reported in TS129-ITAT 2015(Del)-TP) held that no separate adjustment for interest on receivable was warranted when working capital adjustment was already granted to the assessee. The Learned DRP further noted that Hon’ble Delhi High Court in the assessee own case (ITA No.379/2016) for assessment year 2010-11 vide order dated 21/07/2016 upheld the order of the Tribunal holding that the assessee is a debt free company and the question of receiving any interest on receivable did not arise. The Learned DRP thereafter noted that the Tribunal in assessment year 2012-13 in order dated 16/05/2017 relying on the decision of the Tribunal in the case of ‘Ameriprise - 13 - IT(TP)A No.32/CHNY/2024 India P Ltd.’, 2015-TII-347-ITAT-Del-TP held that when the export proceeds are realized within the year, but beyond the stipulated period of the agreement, then same will not come within the working capital adjustment and rejected the contention of the assessee that interest on delayed payment of receivable get subsumed in the working capital adjustment allowed to the assessee. The Tribunal in AY 2012-13 held that interest on delayed realization of receivables is a separate international transaction and therefore require benchmarking. The Tribunal applying interest rate of six months LIBOR +400 basis point on receivables, upheld the transfer pricing adjustment of interest on receivables accordingly. In view of the finding of the Tribunal in assessment year IT(TP)A No. 73/Chny/2024 Page - 31 - of 39 2012-13, the Learned DRP in the year under consideration directed the Learned TPO to compute the adjustment using the interest rate of six month of LIBOR +400 basis point. 11.2 Before us, the Learned Counsel of the assessee has repeated the historical background of the issue in dispute and submitted that special leave petition filed by the Revenue against the order of the Hon’ble High Court for assessment year 2010-11 has been rejected by the Hon’ble Supreme Court on 21/07/2017, which is after the order of the Tribunal for AY 2012-13 dated 16/05/2017 and therefore decision of the Tribunal in assessment year 201213 need not be followed. 11.3 The Learned DR, on the other hand, submitted that the Tribunal in assessment year 2012-13 noted the decision of the Hon’ble High Court in assessment year 2010-11 and after taking into consideration the Explanation inserted by way of the Finance Act, 2012 to section 92B with retrospective effect from 01/04/2002, held that any delay in realization of debt arising during the course of the business is liable to be visited with TP adjustment on account of interest income short charged or uncharged. In view of the learned DR, the Learned DRP is justified in following the order of the Tribunal in assessment year 2012-13. 11.4 We have heard rival submission of the parties on the issue in dispute and relevant material on record including the decisions cited by the Learned Counsel of the assessee as well as by the Learned DR. In the instant case, the Learned DRP has noted the decisions of the Tribunal and High Court in the earlier years. In assessment year 2010-11 the Tribunal in ITA No.1478/Del/2015 placed reliance on the decision of the Tribunal in the case of Kusum Healthcare Private Limited (supra) and held that impact of credit period was duly factored in working capital adjustment allowed while - 14 - IT(TP)A No.32/CHNY/2024 determining the arm’s-length price and, therefore, no separate adjustment for interest on receivables was warranted in the hands of the tested party. The relevant extract of the decision of the Tribunal is reproduced as under: “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 has also not brought on record that the assessee has been found paying interest to its creditors or suppliers on delayed payments. 16. In lieu of the discussions and the ratio laid down in the case of Kusum Healthcare Pvt. Ltd., we direct that no separate adjustment for interest on receivables are warranted in the hands of the assessee. Grounds no. 3 of the assessee’s appeal is there by allowed.” 11.5 On appeal by the Revenue, against the above order of the Tribunal, the Hon’ble Delhi High Court (ITA No. 379/2016) in order dated 21/07/2016 dismissed the appeal observing as under: “4. As far as question (B) concerning the adjustment for interst no receivables, the Court finds that the ITAT has returned a detailed finding of fact that the Assessee is a debt free company and the question of receiving any interest on receivables did not arise. Consequently, no substantial question of law arises for consideration as far as this issue is concerned.” 11.6 The assessee brought the decision of the Hon’ble High Court in assessment year 2010-11, before the Tribunal in assessment year 2012-13 by way of raising ground No. 1.5 of the appeal, however, the Tribunal after considering the amendment brought into Act by way of Finance Act, 2012 and other decisions held that interest on delayed realization of receivable is a separate international transaction, which requires separate benchmarking. The finding of the Tribunal in assessment year 2012-13 is reproduced as under: “17. We have considered the submissions of both the parties and perused the record of the case. The assessee's grievance is two-fold. - IT(TP)A No. 73/Chny/2024 Page - 32 - of 39 15 - IT(TP)A No.32/CHNY/2024 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 proceedings from receivables. The assessee's 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 Knowledge 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 23 as under:- 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). - 16 - IT(TP)A No.32/CHNY/2024 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 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;” 11.7 But before us the Learned Counsel of the assessee has referred to the decision of the Hon’ble Supreme Court dated 21/07/2017, which is after the decision of the Tribunal in assessment year 2012-13. The Hon’ble Supreme Court has held as under: “Delay condoned. We are in agreement with the High Court that as far as Question-B IT(TP)A No. 73/Chny/2024 Page - 33 - of 39 concerning adjustment for interest on receivables is concerned the Tribunal has returned a finding of fact. Consequently, no substantial question of law therefore, rises, on the facts of this case. The special leave petition is dismissed.” 11.8 In view of the order of the Hon’ble Supreme Court, which is subsequent to the order of the Tribunal in assessment year 2012-13, we direct the Ld. AO/TPO to delete the transfer pricing adjustment on account of the interest - 17 - IT(TP)A No.32/CHNY/2024 receivables. The ground No. 5 of the appeal of the assessee is accordingly allowed. 15. From the above order of the Delhi Bench of the Tribunal in the case of Bechtel India Pvt. Ltd., concerning AY 2013-14, we find that ITAT has taken note of the judgments of the Hon’ble Delhi High Court, Hon’ble Supreme Court concerning AY 2010-11 and also co-ordinate bench order of the Tribunal for assessment year 2012-13. After taking note of above judicial pronouncements, the ITAT had deviated from its earlier order for AY 2012-13 and followed the judgment of Hon’ble Delhi High Court and Hon’ble Supreme Court concerning AY 2010-11. The Delhi Bench of the Tribunal in Bechtel India Pvt. Ltd., for the assessment year 2013-14 had categorically held that there need not be any transfer pricing adjustment for imputing interest cost for the outstanding trade receivables from AEs when the assessee in the said case is a debt free company. Therefore, the DRP’s reliance on the order of Delhi Bench of the Tribunal in Bechtel India Pvt. Ltd., concerning assessment year 2012-13 (which according to us has not laid down a correct proposition of law) is legally not tenable. In light of the above, we delete the transfer pricing adjustment imputing interest income on the outstanding trade receivables. In the result, the Ground No.2 (f) is allowed. Since we have deleted the TP adjustment - 18 - IT(TP)A No.32/CHNY/2024 of Rs.3,14,15,287/-, Ground No. 2 and its other sub-grounds are not adjudicated. It is ordered accordingly….” 5.4 In the cases of Tecnimont Pvt Ltd (ITA 56/Bom/2016) Hon’ble Bombay High Court and this Hon’ble Tribunal in the case of Verizon Data Services Pvt Ltd (ITA 3411/Chny/2016) and Plintron Global Technologies Solutions have held that receivables from overseas entities, have to be only charged to interest as per LIBOR rate. Consequently, the appellant assessee has assailed the additional adjustments of 3.5% to the LIBOR rate made by the Ld. AO. 6.0 We are therefore of the considered view that considering the facts the appellant assessee, as well as in respectful compliance to the decisions of Hon’ble High Courts and Coordinate Benches of the Tribunal including this tribunal, there is no merit in the action of the Revenue in making the impugned addition by way of adjustment proposed by the Ld.TPO. Accordingly, we set aside the order of the lower authorities and direct the Ld.AO to delete the addition of Rs.50,78,859/-. Therefore, all the grounds of appeal raised by the assessee are allowed….” 19.0 We have also noted with deference the order of Hon’ble Bombay High Court in the case of Indo-American Jewellery Limited. In respectful compliance to the said judicial precedents as well as for the the principles IT(TP)A No. 73/Chny/2024 Page - 34 - of 39 of consistency, , we set aside the order of the lower authorities and direct the Ld.AO to delete the addition of Rs.19,54,293/-. Therefore, all the grounds of appeal raised by the assessee on this issue are allowed. 20.0 The next issue raised by the assessee through its grounds of appeal are regarding an addition of Rs.15,46,257/- made by the Ld.AO on account of variation in Sundry Creditors. The Ld. Counsel for the assessee submitted that amounts payable to the following five creditors as of 31-3-2021 were added to the total income on the premise that the said parties did not furnish the confirmation of balances to the AO upon notice being issued to them u/s 133(6). The Ld. Counsel submitted that upon receipt of Ld.AO’s show cause notice dated 2-11-2023, the assessee had obtained the confirmation of balances from all these five parties and furnished the same to the AO vide its letter dated 8-11-2023 which was duly acknowledged. In support necessary evidences have been placed in the paper book filed. The impugned five parties were detailed as under:- IT(TP)A No. 73/Chny/2024 Page - 35 - of 39 The Ld. Counsel also stated that the Ld. AO disallowed the amounts payable to the above sundry creditors as on 31-3-2021 of Rs 15,10,866 whereas the correct amount payable to these creditors as of 31-3-2021 is Rs.15,46,247. Request was accordingly made that the issue may be remanded to the AO for revisiting the matter by verifying the payments to the above vendors with the bank statements of the assessee and to take a decision as per law. 21.0 Per contra, the Ld.DR would like to place reliance upon the order of lower authorities. IT(TP)A No. 73/Chny/2024 Page - 36 - of 39 22.0 We have heard rival submissions in the light of material available on records. We have noted that the entire addition revolves around evidences reportedly filed by the assessee and which could not be considered by the Ld. AO. We are therefore of the view that ends of justice would be met if the assessee is given one last opportunity to present its case and file all supporting evidences before the Ld.AO. The assessing officer is the primary authority under the income tax act to be examine facts of a case in the light of available evidences before determining correct taxable income of a tax payer. We therefore set aside the order of lower authorities on this issue and we direct the Ld. AO to readjudicate the matter de novo by examining the matter afresh in accordance with law and by passing a speaking order. Reliance in this regard is placed upon the decision of Hon’ble Apex Court in the case of TIN box 249 ITR 216. The Ld. AO shall give opportunities of being heard to the assesse and it shall be bounden upon the assesse to comply with the notices issued by the Ld. AO. Any non-compliance on the part of the assesse can be adversely viewed. Accordingly, all the grounds of appeal raised by the assesse on this issue are allowed for statistical purposes. 23.0 The next issue raised by the assessee through its additional grounds of appeal is regarding the action of the Ld.AO in making TP IT(TP)A No. 73/Chny/2024 Page - 37 - of 39 adjustments to the group book profit u/s 115JB of Rs.15,81,10,717/-. The Ld. Counsel for the assessee invited reference to the decisions of the Hon’ble ITAT, Delhi in the case of Cash Edge India Pvt Ltd vide ITA No.64/Del/2015, Apollo Tyres 255 ITR 273(SC) and Malayalam Manorama 300 ITR 251(SC) urging that the impugned action is contrary to judicial ratios laid down in the above cases. 24.0 Per contra, the Ld. DR would like to place reliance upon the order of lower authorities. 25.0 We have heard rival submissions in the light of material available on records. On the impugned controversy we have noted the decision of Hon’ble ITAT, Delhi in the case of Cash Edge India Pvt Ltd vide ITA No.64/Del/2015 passed while considering the judicial ratio laid down in Apollo Tyres 255 ITR 273(SC) and Malayalam Manorama 300 ITR 251(SC). Thus, the in the case of Cash Edge India supra it was held that “……..33. The final issue for consideration is challenge raised by the assessee to the action of the AO in adding back transfer pricing adjustment of Rs.1,18,93,468/- to income assessed under Section 115JB (MAT). 34. In this regard, the learned counsel for the assessee submitted that the AO has added the transfer pricing adjustment of Rs.1,18,93,468/- to the book profits of the Assessee under Section 115JB of the Act without appreciating that book profits of the company cannot be adjusted except as provided in Explanation 1 Section 115JB(2) of the Act and that transfer pricing adjustment is not one of the adjustments contemplated under that Explanation. He placed reliance upon the following decisions to contend that except for adjustments provided in Explanation 1 Section 115JB(2) of the Act, no other adjustment can be made to book profits under Section 115JB of the Act :- i. ii. iii. iv. Apollo Tyres: 255 ITR 273(SC) Malayalam Manorma: 300 ITR 251(SC), HCL Comnet Systems and Services Ltd., 305 ITR 409 (SC) and DCIT v. Bisleri Sales Ltd.: 151 TTJ 285 (Mum)(ITAT) 35. The Ld. Sr. DR on the other hand supported the order of the AO on the strength of the decision of the Special Bench of the Tribunal in the case of Rain Commodities v. DCIT: (2010) 40 SOT 265. 36. We have considered the rival submissions and perused the material on record. It IT(TP)A No. 73/Chny/2024 Page - 38 - of 39 is settled law that except for adjustments provided in Explanation 1 Section 115JB(2) of the Act, no other adjustment can be made to book profits under Section 115JB of the Act. We find that that transfer pricing adjustment is not one of the adjustments contemplated under Explanation 1 Section 115JB(2) of the Act and, therefore, could not have been added back to the book profits under Section 115JB. 37. The case-law relied upon by the Ld. Sr. DR i.e. decision of the Special Bench in the case of the Tribunal in Rain Commodities (supra) does not also advance the case of the Revenue. In that case the Special Bench was considering whether the AO can alter the net profits declared by an assessee. The Special Bench has, following the decision the apex Court in Apollo Tyres and HCL Comnet (supra), inter alia, held that the AO cannot travel beyond the net profits declared by the assessee unless (a) it is discovered that profit and loss account is not drawn up in accordance with Part II and Part III of Schedule VI of the Companies Act, or (b) the incorrect accounting policies, accounting standards have been adopted for preparing such accounts and the method/rate of depreciation has been incorrectly adopted for preparation of profit and loss account. 38. In the present case there is no allegation is the assessment order much less any finding that either that profit and loss account has not been drawn up in accordance with Part II and Part III of Schedule VI of the Companies Act, or that any incorrect accounting policies, accounting standards has been adopted for preparing such accounts or that the method/rate of depreciation has been incorrectly adopted for preparation of profit and loss account. 39. In view of aforesaid, we hold that the AO erred in adding back the transfer pricing adjustment of the book profits under Section 115JB of the Act. Accordingly, this ground of the appeal raised by the assessee is allowed and the AO is directed to exclude the transfer pricing adjustment, if such adjustment survives, from the book profits computed under Section 115JB of the Act. 40. In the result, the appeal of the assessee is allowed for statistical purposes…..” 26.0 Accordingly, in respectful compliance to the decision of Hon’ble Coordinate Bench of Delhi supra, we are of the considered view that there is no case for invoking the provisions of section 115JB by the Ld.AO in this case. Accordingly, we set aside the order of lower authorities and direct the Ld.AO to recompute the income of the assessee without any invocation of the provisions of section 115JB. The grounds of appeal raised by the assessee on this issue are therefore allowed. 27.0 During the course of present proceedings, the Ld.Counsel for the assessee admitted that ground of appeal nos 23 to 25 are not being IT(TP)A No. 73/Chny/2024 Page - 39 - of 39 pressed. Consequently, ground of appeal nos 23 to 25 are dismissed being not pressed. 28.0 In the result the appeal of the assesse are partly allowed. Order pronounced on 16th , May-2025 at Chennai. Sd/- (एबी टी. वर्की) (ABY T VARKEY) न्याधयक सदस्य / Judicial Member Sd/- (अधमताभ शुक्ला) (AMITABH SHUKLA) लेखा सदस्य /Accountant Member चेन्नई/Chennai, धदनांक/Dated: 16th , May-2025. KB/- आदेश की प्रतितिति अग्रेतिि/Copy to: 1. अिीिार्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकर आयुक्त/CIT - Chennai 4. तिभागीय प्रतितिति/DR 5. गार्ड फाईि/GF "