HEXAGON CAPABILITY CENTER INDIA PRIVATE LIMITED, HYDERABAD,HYDERABAD vs. ACIT, CIRCLE-2(2), HYDERABAD, HYDERABAD

ITA 84/HYD/2017Status: DisposedITAT Hyderabad08 June 2018AY 2012-139 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that notional interest on outstanding receivables is not chargeable and no transfer pricing adjustment can be made. It further noted that working capital adjustments, when considered, already factor in interest on receivables.

What were the facts?

The assessee company had outstanding receivables from its associated enterprise (AE) at the end of the financial year. The Transfer Pricing Officer (TPO) considered these receivables as international transactions and proposed an adjustment for notional interest. The assessee contended that these were service receivables, not capital financing, and that it was a zero-debt company with no working capital risk.

What were the issues?

Whether outstanding receivables from an associated enterprise on account of services rendered constitute an international transaction for which notional interest can be charged as a transfer pricing adjustment.

Which sections of the Income-tax Act were involved?

Section 92B

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Income Tax Appellate Tribunal, HYDERABAD BENCH “A”, HYDERABAD

Before: SMT. P. MADHAVI DEVI & SHRI B. RAMAKOTAIAH

For Respondent: Shri J. Siri Kumar

PER B. RAMAKOTAIAH, AM: These are appeals by Assessee for A.Y 2011-12 and 2012-13, and cross appeal by Revenue for A.Y 2011-12 on the orders of DRP followed by the assessment order u/s 143(3) r.w.s 92CA(4) r.w.s 144C(13) of the IT Act. The issue in these appeals are with reference to transfer pricing

2 M/s. Hexagon Capability Center India Pvt Ltd., Hyderabad. adjustment made on the receivables outstanding at the end of the year by TPO /

The order continues below.

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