ACIT SPL.RANGE-05, NEW DELHI vs. KUSUM HEALTHCARE PVT. LTD., NEW DELHI

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ITA 6013/DEL/2019Status: HeardITAT Delhi14 October 2022AY 2014-156 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the facts of the current year were similar to earlier years where the Delhi High Court had ruled in favor of the assessee. Therefore, the CIT(A)'s deletion of the transfer pricing adjustment was upheld.

What were the facts?

The assessee, Kusum Healthcare Pvt. Ltd., engaged in exporting pharmaceuticals, had its receivables from an associated enterprise recharacterized as loans by the TPO, who imputed notional interest. The CIT(A) deleted this adjustment, relying on a Delhi High Court decision in the assessee's own case for an earlier assessment year.

What were the issues?

Whether the TPO was justified in imputing notional interest on delayed receivables by recharacterizing them as loans, and if a prior High Court decision in the assessee's own case for a different assessment year applies.

Which sections of the Income-tax Act were involved?

Section 92CA

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, DELHI BENCH ‘I’, NEW DELHI

Before: C.M. GARG & SH. N.K. BILLAIYA

Hearing: 11/10/2022Pronounced: 14/10/2022

Appellant Mrinal Kumar Das, Sr. DR Respondent Sh. VIshal Kalra, Advocate Ms. Reema Jain, CA Date of hearing: 11/10/2022 Date of Pronouncement: 14/10/2022 ORDER

PER N.K. BILLAIYA, AM:

1.

This appeal by the revenue is preferred against the order of the CIT(A)-44, New Delhi dated 22.04.2019 pertaining to A.Y. 2014-15.

2.

The grievance of the assessee read as under :- 1. In the facts and circumstances of the case, the Ld. CIT(A) erred in deleting the Transfer Pricing adjustment

amounting to Rs.2,66,13,334/- u/s. 92CA(3) on account of interest chargeable on delayed receivables. 2. Whether in the fat of the circumstances of the case, Ld. CIT(A) was justified in relying upon the judgment of Hon’ble Delhi High Court in assesse’s own case for A.Y.2010-11, ignoring the fact that the above decision of Hon’ble High Court was not accepted by Revenue and SLP is pending for adjudication before Hon’ble Supreme Court of India.

Total tax effect Rs.86,34,696/-

3.

At the very outset the Counsel for the assessee stated that the impugned quarrel has been settled by the Hon’ble Jurisdictional High Court of Delhi in assessee’s own case in A.Y.2010-11 which decision was subsequently followed by this Tribunal in A.Y.2012-13 and 2013-14.

4.

Per contra the DR though agreed that in earlier assessment years there are decisions in favour of the assessee by the Hon’ble High Court and by the Tribunal, but strongly stated that the working capital adjustment does not take into account the impact of outstanding receivables on the profitability. It is the say of the DR, therefore, the facts of the appeal under consideration are different from the facts of earlier assessment years.

5.

We have carefully considered the orders of the authorities below and have perused the decisions relied upon.

6.

Facts on record show that the assessee is engaged in export of Pharmaceuticals Products to its overseas associates Enterprises as well as non group companies, the assessee had under taken the international transaction pertaining to export of pharmaceuticals products and the said international transaction has been accepted by the TPO to be at arms length.

7.

However, the TPO re-charaterised receivables outstanding from AE as unsecured loans advanced by the assessee to its AE and imputed a notional interest based on LIBOR + 400 basis points and by taking interest rate 4.683 percent an adjustment of Rs.2,66,13,334/- was made by the TPO.

8.

The adjustment was agitated before the CIT(A) who deleted the TP adjustment following the decision by the Hon’ble Delhi High Court in assesee’s own case in 398 ITR 66 for A.Y.2010-11.

9.

The contention of the DR that facts of the year under consideration are different from the facts of earlier assessment years is without any basis as we find that the working capital adjustment is based on the same lines as was done in earlier assessment years, therefore, the decision of the Hon’ble Delhi High Court (supra) and the decision of this Tribunal in A.Y.2012- 13 and 2013-14 squarely apply on the facts of the case. The relevant findings of the Hon’ble High Court in dated 25.04.2017 read as under :-

10.

The same view was taken by this Tribunal in for A.Y. 2013-14 and in ITA No.84/Del/2017 for A.Y. 2012-13.

11.

Respectfully following the decision of the Hon’ble High Court (supra) we do not find any reason to interfere with the findings of the CIT(A). The appeal filed by the revenue is dismissed.

Order pronounced in the open court on 14.10.2022.

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