TEMENOS INDIA PVT. LTD.,CHENNAI V. DCIT, CC-3(1), CHENNAI

ITTPA 32/CHNY/2024

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The case involves Temenos India Pvt. Ltd., a captive service provider of software development services, which appealed against the final assessment order passed by the Deputy Commissioner of Income Tax, Chennai. The primary contention was regarding the transfer pricing adjustment made by the Transfer Pricing Officer (TPO) on outstanding trade receivables from its AEs, which were treated as international transactions. The TPO had imputed interest on these receivables based on LIBOR rates, arguing that the receivables were overdue. The Dispute Resolution Panel (DRP) upheld the TPO's decision, leading to the final assessment order. Temenos India contested that the receivables were not separate transactions and that no overdue receivables existed, citing various judicial precedents and their own financial practices. The Tribunal, after considering the submissions and relevant case laws, particularly the Supreme Court's decision in Bechtel India Pvt. Ltd., ruled in favor of the assessee, leading to the deletion of the imputed interest adjustment.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 469617 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 25 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 03-12-2024
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 27-11-2024
• Assessment Year: 2020-2021
• Appeal Filed On: 08-08-2024
• Other Referred Cases: PCIT vs. Bechtel India Pvt. Ltd., Kusum Healthcare Pvt. Ltd. vs. ACIT, Integra Software Services Pvt. Ltd. vs. DCIT, Doosan Power Systems India Pvt. Ltd. vs. DCIT, Infac India P. Ltd. vs. DCIT, CMA CGM Shared Service Centre (India) Pvt. Ltd. vs. DCIT, Foxteq Services India vs. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A. SASIKUMAR
• Assessee Lawyers: VIKRAM VIJAYARAGHAVAN
• Keywords: Set aside; Transfer pricing; International transaction; Retrospective amendment; Question of law; Notional interest
• Section: 13; 92B; 10B; 20

Judgement Text

"आयकर अपीलȣय अͬधकरण, ‘डी’ Ûयायपीठ, चेÛनई IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH, CHENNAI Įी जॉज[ जॉज[ क े, उपाÚय¢ एवं Įी एस.आर.रघुनाथा, लेखा सदèय क े सम¢ BEFORE SHRI GEORGE GEORGE K, VICE PRESIDENTAND SHRI S.R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./IT(TP)A No.: 32/CHNY/2024 िनधाᭅरण वषᭅ/Assessment Year: 2020-21 Temenos India Pvt. Ltd., No.146, Sterling Road, Nungambakkam, Chennai – 600 034. PAN: AAACT 2612E Vs. The Deputy Commissioner of Income Tax, Corporate Circle 3(1), Chennai. (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮ कᳱ ओर से/Appellant by : Shri Vikram Vijayaraghavan, Advocate ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Shri A. Sasikumar, CIT सुनवाई कᳱ तारीख/Date of Hearing : 27.11.2024 घोषणा कᳱ तारीख/Date of Pronouncement : 03.12.2024 आदेश /O R D E R PER GEORGE GEORGE K, VICE PRESIDENT: This appeal at the instance of the assessee is directed against the final assessment order dated 11.06.2024 passed under section 143(3) r.w.s. 144C(13) r.w.s. 144B of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2020-21. - 2 - IT(TP)A No.32/CHNY/2024 2. Brief facts of the case are as follows: The assessee is a private limited company. It is a captive service provider of software development services for banking solutions to its AE, Temenos AG. The international transactions of the assessee were provision of software development services, maintenance fee paid, reimbursement of ESOP costs, sale of IP license and recovery of expenses with the main activity being provisions of software development services. 3. For the assessment year 2020-21, the return of income was filed on 12.02.2021 declaring total income of Rs.92,92,20,010/-. The return was selected for scrutiny and notice u/s.143(2) was issued and served on the assessee on 29.06.2021. During the course of assessment proceedings, the case was referred to the TPO to determine the Arms Length Price (ALP) of international transactions undertaken by the assessee with its AE. The TPO passed order u/s.92CA of the Act on 31.03.2023. In the said order of the TPO, the outstanding trade receivables was treated as international transactions. The TPO applied LIBOR + 350 BPS (rate of 5.818%) on the outstanding receivables of Rs.32,848 lakhs as on 31.03.2020 and imputed interest of Rs.3,14,15,287/- representing - 3 - IT(TP)A No.32/CHNY/2024 the arms length interest income from outstanding / trade receivables from the AE’s. The relevant finding of the TPO reads as follows:- “6.4 Since the assessee has not performed the benchmarking of the outstanding receivables and trade receivable transaction in the Transfer Pricing study documentation, the International transactions pertaining to the receivables is being benchmarked using the following approach: 1. Credit period of 30 days is being allowed. 2. Credit period extended by the assessee exceeding 30 days is considered to propose adjustment on account of receivables. The outstanding amount of Rs.32,848 lakhs as on 31st March 2020 is then multiplied with the LIBOR + 350 BPS (Rate of 5.818%) to arrive at the adjustment on account of the receivables. 6.4.1 Computation of interest on Overdue receivables: Credit Period allowable in days (A) 30 Weighted average receivable days of the assessee (B) 90 Excess receivable days C=(A-B) 60 Outstanding Receivables D Rs.32,848 lakhs Interest Rate on excess receivable days (LIBOR + 350 BPS) R 5.818% Interest on overdue receivables I=D*R(C/365) Rs.3,14,15,287/- The working relating to the computation of Interest allowing the credit period of 30 days reckoning from the date of Invoice which amounts to Rs.3,14,15,287/- representing the Arm/s Length Interest from Outstanding receivables and trade receivables, as furnished above. 7. Hence an Upward adjustment of Rs.3,14,15,287/- lakhs towards interest on outstanding receivable, is proposed to the value of international transaction reported in the case of the assessee for A.Y. 2020-21. - 4 - IT(TP)A No.32/CHNY/2024 4. Pursuant to the TPO’s order, the AO passed draft assessment order on 27.09.2023 incorporating the aforesaid TP adjustment proposed by the TPO. The AO also made certain corporate tax addition / disallowances. 5. Aggrieved by the draft assessment order, the assessee filed objections before the DRP on 25.10.2023. The DRP vide its directions dated 14.05.2024 dismissed the objections of the assessee insofar as transfer pricing adjustments made with regard to imputation of interest on outstanding trade receivables from the assessee’s AE’s. With regard to corporate tax issues, as regards the adjustment that was made in the intimation passed u/s.143(1) of the Act, which was also taken into account for the purpose of computation of tax, the DRP held the assessee ought to have filed appeal as against the intimation passed u/s.143(1) of the Act and rejected the objections of the assessee. Pursuant to the directions of the DRP, the AO passed the impugned final assessment order dated 11.06.2024 u/s.143(3) r.w.s. 144C(13) r.w.s. 144B of the Act. 6. Aggrieved by the final assessment order passed, the assessee has filed the present appeal before the Tribunal. The assessee has raised grounds with regard to TP adjustment as well as corporate tax - 5 - IT(TP)A No.32/CHNY/2024 issues. However, during the course of hearing, the ld.AR did not press the grounds relating to the corporate tax issues. Hence, the grounds relating to corporate tax namely Ground nos.3 to 9 are rejected. Ground Nos. 1 and 10 are general in nature and no specific adjudication is called for, hence, the same are dismissed. The surviving ground namely Ground No.2 and its sub-grounds with regard to the transfer pricing issue read as follows:- “Ground No. 2 - Erroneous treatment of outstanding receivables as a separate international transaction: a. Outstanding receivables not a separate international transaction: TPO erred in law and on facts and the DRP further erred in upholding / confirming the action of the TPO, in considering outstanding receivable as a separate and distinct international transaction without appreciating the fact that the receivables are consequential/ closely linked/ aggregated with the principal transaction which have already been determined to be at arm's length by the TP0, and further erred in making transfer pricing adjustment in the nature of notional interest on receivables. Without prejudice, TPO erred to appreciate that Outstanding balances from Debtors or Receivables from AEs are a continuing debit balance arisen as a result of primary transaction and cannot be considered as a separate transaction. Accordingly, no separate determination of ALP is warranted. b. No overdue receivables: The TPO and the DRP has failed to appreciate the fact that all the receivables have been collected within the agreed credit period with its AEs (i.e. as per the inter-company agreement) and there are no overdue receivables. c. Credit period of 30 days arbitrarily applied: The TPO and the DRP erred in arbitrarily adopting a 30-day credit period, without taking into consideration actual credit period allowed as per intercompany agreements, in computing the overdue period. Further, the TPO failed to consider Judicial precedents relied on by the Assessee, wherein the credit period ranging from 90 days to 180 days has been upheld. - 6 - IT(TP)A No.32/CHNY/2024 d. Outstanding receivables transactions subsumed in TNMM: The TPO and the DRP did not appreciate that the Assessee had reported the receivables transactions in the Form 3CEB and arm's length analysis of the same is subsumed in the Transactional Net Margin Method (TNMM') analysis, which has been accepted by TPO. Without prejudice, the TPO erred in law and in facts and the Hon'ble DRP further erred in not considering the fact that the NCP Margins earned by the Appellant for the principal international transactions are much higher than the margins of Comparables, which vindicate the fact that the excess credit period has been adequately factored and no additional adjustment is warranted on such overdue receivables. e. Working capital adjustment obviates need for separate adjustment on delayed receivables: Further, TPO and DRP erred in law and in facts in not allowing the claim for working capital adjustment and failed to appreciate the fact that the NCP Margins earned by the Assessee is within working capital adjusted margins of the comparable companies. The TPO/DRP ought to have provided working capital adjustment as claimed by assessee which would obviate any separate adjustment on delayed receivables as held by decision on this of Kusum Healthcare Delhi HC’ f. Debt-free company: The TPO/DRP failed to appreciate the fact that the appellant is a zero debt company and there are no finance/interest costs incurred by the assessee in its operations. The TPO and DRP ought to have followed the decision of Hon'ble SC in Bechtel India in this regard. g. TPO's benchmarking of outstanding receivables not as per provisions/Rules: The TPO grossly erred in not appropriately applying any of the prescribed methods under Rule 10B of the Income Tax Rules, 1962 (the Rules') as the Most Appropriate Method and not providing details of any comparable uncontrolled transaction, thereby completely ignoring the mandate for application of CUP Method / Other method under Rule 10B and Rule 10C of the Rules.” - 7 - IT(TP)A No.32/CHNY/2024 7. The assessee has filed three sets of paper-book. In one set, namely Part A, the assessee has enclosed its financials for the relevant assessment year, Form 3CEB, Transfer Pricing Study, Inter- company service agreement with HQ, show cause notices issued by the TPO, working related to working capital adjustment margins, invoice wise ageing schedule, etc. In the second set of paper-book namely Part B, the assessee has enclosed the case laws relied on. In the last paper-book namely Part C, the assessee has enclosed the Tax Audit report of 2020-21, the return of income of the assessee for the assessment year 2018-19, consolidated financial statement for the financial year 2019-20, etc. 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 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 2010- 11 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 TS- 129-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 2012- 13 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. - 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 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. 16. In the result, the appeal filed by the assessee is partly-allowed. Order pronounced in the open court on 3rd December, 2024 at Chennai. Sd/- Sd/- (एस.आर. रघुनाथा) (S.R. RAGHUNATHA) लेखा सदèय/ACCOUNTANT MEMBER (जॉज[ जॉज[ क े) (GEORGE GEORGE K) उपाÚय¢ /VICE PRESIDENT चेÛनई/Chennai, Ǒदनांक/Dated, the 3rd December, 2024 RSR आदेश कȧ ĤǓतͧलͪप अĒेͪषत/Copy to: 1. अपीलाथȸ/Appellant 2. Ĥ×यथȸ/Respondent 3. आयकर आयुÈत /CIT, Chennai 4. ͪवभागीय ĤǓतǓनͬध/DR 5. गाड[ फाईल/GF. "