RIBBON COMMUNICATION PRIVATE LIMITED ,BANGALORE vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-5(1)(1), BANGALORE

Brief facts of the case are that the assessee is a company, filed its return of income declaring total income of Rs.25.81 Crores. The same was processed under section1 39(1) of the Act and thereafter the case of the assessee was selected for scrutiny. During the course of assessment proceedings, the AO observed that the assessee has entered into certain international transactions,

Aggrieved with the Order of AO, the assessee has come up in appeal before us. At the outset, the Counsel for the assessee pointed out that the assessee has entered into MAP proceedings for Assessment Years 2014-15 to 2016-17 wherein the issue involved in the present appeal has been considered and adjudicated by the MAP authorities. The solitary issue involved in this case is rate of interest to be applied on delayed receivables. The TPO, while conducting the TP study, has applied 6 months libor + 450 basis points. Counsel for the assessee craved that the rate of interest on delayed receivables may be restricted to the directions given by the MAP authorities.

Learned DR relied upon the Orders of the authorities below.

After considering the rival submissions, we are of the view that in this case, it is appropriate to apply 6 months libor + 115 basis points for computing the interest on delayed receivables. We further clarify that we allow the credit period of 30 days only and not the credit period of 90 days as given by the MAP authorities. We are not granting 90 days’ credit period for the reason that the MAP proceedings were relevant for Assessment Years 2014-15 to 2016-17 and not for subsequent years. Further, time and circumstances are changed and MAP guidelines have persuasive value but not binding on the tribunal.

The DRP on this issue has observed that the assessee has made payments towards CSR fund to these societies in accordance with section 135 of the Companies Act. The DRP was of the view that CSR donations cannot be claimed under section 80G of the Act.

Submission of the assessee is that the assessee has duly submitted 80G(5)(vi) of the Act. Further, the lower authorities failed to appreciate that these certificates were valid for the impugned year also.

Learned DR relied on the Orders of the authorities below.

After considering the rival submissions, we are of the view that this issue requires fresh consideration at the end of AO. Learned AO will consider the applicability of Circular No.7/2010 dated 27.10.2010 issued by the CBDT. The AO will also examine the issue as to whether the payments were towards CSR payment or towards charitable activities. Similar issue has come up in appeal before the Co-ordinate Bench in ITA No.1693/Bang/2019 in the case of Allegis Services (India) Pvt. Ltd. Vs. ACIT wherein the Hon’ble Bench in para 18 has observed as under:

With these observations, we restore this issue to the file of AO for examining afresh.

In the result, appeal filed by the assessee is allowed for statistical purposes as indicated above.