KANTAR GDC INDIA PRIVATE LIMITED,HYDERABAD vs. ACIT., CIRCLE - 2(1), HYDERABAD

5. Ground nos.4 & 5 are related to legal ground under which the Ld. AR has raised objection against validity of impugned order passed on 29.12.2023. The Ld. AR invited our attention to page no.3 of paper book dated 14.10.2024, wherein the intimation letter dated 01.01.2024 is placed and argued that, the Ld. AO has intimated the DIN to the assessee on 01.01.2024, however, the last date for passing the impugned order was 31.12.2023. Therefore, the DIN issued after the last date of passing of impugned order, makes the order time barred under the Act. In support of their alternate argument, the Ld. AR invited our attention to page no.29 of paper book dated 14.10.2024 containing the copy of order sheet and submitted that, against the entry dated 29.12.2023, the Ld. AO has mentioned as ‘pending for income tax computation’, which means that, the computation of income was not completed on 29.12.2023. Further, in the same order sheet, on 26.01.2024 i.e. after the limitation period of 31.12.2023, it has been mentioned as “issued intimation letter”, which means that, the impugned order has been sent on 26.01.2024. Accordingly, the impugned order has been sent to the assessee after the limitation period of 31.12.2023, hence, barred by limitation. The Ld. AR also submitted that, no notice u/s.156 was issued by the Ld. AO along with assessment order. Therefore, in absence of notice u/s. 156 of the Act, the order is invalid. The Ld. AR further invited our attention to para no.11 of decision of Hon'ble Manipur High Court in the case of Smt. Mema Paul Vs. ITO 1614 taxmann.com 778 dated 18.07.2024 placed at page no.01 of the case law paper book and submitted that, if the assessment order is communicated after the period of limitation for completing the assessment proceedings, then, the assessment order will be treated as null and void. Finally, the Ld. AR submitted that the impugned order passed by the Ld. AO is bad in law and hence, liable to be quashed.

6.1 As far as the alternated argument of the assessee concerned, the Ld. DR invited our attention to copy of order sheet placed at page no.29 of the paper book dated 14.10.2024 and submitted that, the Ld. AO had completed the assessment and uploaded the copy of order on the ITBA portal on 29.12.2023 i.e. before the limitation period of 31.12.2023. He further submitted that, the impugned order passed by the Ld. AO was a manual order and as per the standard operating practice, the manual order is again processed online by CPC for the purpose of accounting. Therefore, on 29.12.2023, it is being reflected as ‘pending for income computation’. Further, the Ld. DR invited our attention to the copy of the impugned order placed at page nos.4 & 5 of the paper book dated 14.10.2024 and demonstrated that, in the impugned order itself, the Ld. AO has worked out the taxable income as well as the amount refundable to the assessee i.e. a refund of Rs.1,17,51,024/-. Hence, there was no pendency on the part of the Ld. AO qua computation of income as well as computation of tax liability of the assessee as on 29.12.2023. He further submitted that, the intimation letter dated 01.01.2024 was only prepared to intimate the assessee about the completion of accounting by CPC. From the perusal of said intimation letter, it is evident that a copy of order was already issued prior to this notice. Hence, the contention of the Ld. AR that the order was not complete before the limitation period and the same has been sent first time along with this intimation letter is not correct. However, due to some technical glitches, the intimation letter dated 01.01.2024 could not be mailed to the assessee on that date, however, the same was mailed to the assessee on 26.01.2024. As far as the objection of Ld. AR regarding issue of notice u/s.156 of the Act is concerned, the Ld. DR invited our attention to the provisions of section 156 of the Act and submitted that, the notice u/s.156 of the Act is required to be issued only in those cases where after finalization of computation of tax, a demand is raised on the assessee. However, in the present case, there is no demand, as per the impugned order. He further submitted that, for a valid assessment, the final computation of income and tax is important and not the issue of notice u/s.156 of the Act. Hence, the objection of the Ld. AR on legal ground is liable to be rejected.

7.2 On perusal of above, it is abundantly clear that DIN has been mentioned on the face of the impugned order dated 29.12.2023. Therefore, it is clear that the DIN is generated well within the period of limitation. Accordingly, this objection of the Ld. AR is rejected.

7.3 The second objection of the Ld. AR is that, the copy of order has been sent to the assessee on 26.01.2024. We have gone through the copy of order sheet placed at page no.29 of the paper book dated 14.10.2024, which is to the following effect :

7.4 On perusal of above, we found that on 29.12.2023, the Ld. AO had generated the assessment order and uploaded the order on ITBA portal. Further with regards to the objection of the Ld. AR regarding “pending of income computation” on 29.12.2023 as mentioned in the order sheet, we are convinced with the submission of the Ld. DR that in case of manual order, the processing is done by CPC for completion of accounting and only due to the said reason, it is so reflected in the order sheet. Further, we also got strength on perusal of the impugned order, where the Ld. AO has completed the computation of income as well as the final tax liability of the assessee and made a final calculation of Rs.1,17,51,024/- as refundable to the assessee. Hence, in our considered opinion, the impugned order had been uploaded by the Ld. AO on ITBA portal on 29.12.2023 and no computation on the part of the Ld. AO was pending as on 29.12.2023 . Accordingly, the objection of the assessee that the impugned order was not completed and was not issued before the limitation period is rejected.

7.5 As far as the third objection of the Ld. AR regarding non-issue of notice u/s.156 of the Act along with the assessment order is concerned, we have gone through the provision of section 156 of the Act which are to the following effect :-

“ Notice of Demand 156. (1) When any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under this Act, the Assessing Officer shall serve upon the assessee a notice of demand in the prescribed form specifying the sum so payable : Provided that where any sum is determined to be payable by the assessee or the deductor or the collector under sub-section (1) of section 143 or sub-section (1) of section 200A or sub-section (1) of section 206CB, the intimation under those sub-sections shall be deemed to be a notice of demand for the purposes of this section. (2) Where the income of the assessee of any assessment year, beginning on or after the 1st day of April, 2021, includes income of the nature specified in clause (vi) of sub-section (2) of section 17 and such specified security or sweat equity shares referred to in the said clause are allotted or transferred directly or indirectly by the current employer, being an eligible start-up referred to in section 80-IAC, the tax or interest on such income included in the notice of demand referred to in sub-section (1) shall be payable by the assessee within fourteen days— (i) after the expiry of forty-eight months from the end of the relevant assessment year; or (ii) from the date of the sale of such specified security or sweat equity share by the assessee; or (iii) from the date of the assessee ceasing to be the employee of the employer who allotted or transferred him such specified security or sweat equity share, whichever is the earliest.” 7.6 On perusal of above, we found that, the heading of section 156 is ‘notice of demand’, which itself states that notice u/s.156 of the Act is to be issued in case of demand only. The primary purpose behind issue of notice u/s.156 of the Act is to inform the assessee about payment to be made on finalisation of an assessment. However, in a case where the assessment resulted in a refund, there is no amount to be paid by the assessee, instead, the revenue owes money to the assessee. Consequently, the issuance of notice u/s.156 of the Act is not arises in case of refund. What is crucial on the part of the revenue is to communicate the outcome of assessment and the calculation of refund to the assessee, which has been done by the Ld. AO in the present case before us. Therefore, we do not find any merits on this objection of the Ld. AR. Accordingly, this objection of the Ld. AR is rejected.

9. With regard to ground nos.6 to 14, the Ld. AR submitted that, these grounds are related to adjustment of Rs.8,35,90,000/- made by the Ld. AO on account of global / regional management overhead allocation fees. The Ld. AR submitted that the assessee needs to file some additional documentary evidences in support of their claim, which required factual verification on the part of the Ld. AO/Ld. TPO. The Ld. AR invited our attention to decision of this tribunal placed at page nos.197 and 198 of the case law paper book and submitted that, the issues are covered by the decision of this Tribunal in assessee's own case for A.Y. 2018-19 in dated 09.05.2023, wherein under the identical issue, ITAT has set aside the issue to the file of Ld. AO/Ld. TPO. Hence, relying on the decision of this Tribunal (supra), the Ld. AR prayed before the bench to set aside the issue to the file of Ld. AO/Ld. TPO.

10. Ld. DR stated that they have no objection, if the issue is remanded to Ld. AO/Ld. TPO.

“ 4. Coming to the first adjustment on account of payment for global/regional management overhead allocation fee, learned AR submitted that this issue has arisen on earlier occasions also and by order dated 04/10/2021 in & 636/Hyd/2016 for the assessment year 2011-12 and by order dated 22/09/2022 in for the assessment year 2012-13, Co-ordinate Benches of this Tribunal considered this issue and held that the matter requires factual verification at the end of the learned Assessing Officer/learned TPO in view of the need for the assessee to file the additional documentary evidence in support of their claim. Learned AR submitted that for this year also, the same situation prevails and, therefore, this issue may be restored to the file of learned Assessing Officer/learned TPO for considering the documentary evidence to be filed by the assessee in line with the orders for the earlier assessment years. Learned DR does not dispute for this issue, to be sent to the learned Assessing Officer/learned TPO for factual verification as claimed by the assessee. Copies of the orders stated above are filed and they form part of record.

12. Ground nos.15 to 22 of the assessee are related to interest on trade receivables, where the Ld. AO had made an adjustment of Rs.2,50,18,764/-.

Ld. AR submitted that the Ld. AO/Ld. TPO have adopted the short term deposit rate of SBI for the purpose of bench marking the rate of interest on trade receivables, however, the assessee is seeking for LIBOR +200 points. The Ld. AR invited our attention to page nos.198 to 203 of the case law paper book and submitted that the issues are covered by the co-ordinate bench of Tribunal in assessee's own case for A.Y. 2018-19 in dated 09.05.2023, wherein the ITAT has bench marked the interest rate at LIBOR +200 points. Hence, relying on the decision of co-ordinate bench of Tribunal (supra), the Ld. AR prayed before the bench to bench mark the interest rate on trade receivables at LIBOR +200 points.

12.1 Ld. DR relied on the decision of the Ld. AO/TPO.

12.2 We have heard the rival contentions and also gone through the record in the light of the submissions made by either side. We found that, identical issue has been decided by this Tribunal in assessee's own case for A.Y. 2018-19 in (supra), wherein this Tribunal at para nos. 6 to 12 has decided the issue, which are to the following effect :

“ 6. Other issue remains to be considered is issue of interest on trade receivables. On this aspect, learned AR argued at length stating that this particulars transaction is not covered in the definition of international transaction as defined under section 92B of the Act; that the receivables are consequential/closely linked to the principal transaction of provision of services and hence has been aggregated for determination of ALP under Transactional Net Margin Method (TNMM); that the re-characterising the outstanding receivables as unsecured loan extended by the assessee to its AEs is improper; that the assessee is fully funded by its AEs and does not bear any working capital risks; that the assessee does not chargeable interest on outstanding receivables from third party customers as well; and that the assessee has outstanding payables due to AEs on which no interest has been levied by the AEs as well.

7. Learned AR in the alternative submitted that in the case of Afton Chemical India Private Limited vs. ITO in by order dated 05/09/2022 had taken a view that in these sorts of cases, the ends of justice would be met by accepting the interest rate on similar foreign currency receivables/advances as LIBOR+200 points, and if the Bench comes to the conclusion that the assessee is liable on this aspect, the same view may be adopted in this case also.

8. Per contra, learned DR submitted that this aspect does not leave any scope for any discussion in view of the decision of the Hon'ble Bombay High Court in the case of CIT Vs. Patni Computer Systems (2013) 215 Taxmann 108 (Bom), wherein the amendment to Section 92B of the Act by Finance Act, 2012 with retrospective effect from 01/04/2002 was considered. Basing on the view taken in a number of decisions of the Tribunal of various Benches, learned TPO held that it is incumbent upon the taxpayer to separately benchmark the arm’s length price of the international transaction relating to interest on overdue receivables from the AE by way of analysis of functions, assets and risks. While following the view taken by the Tribunal in the case of M/s. Logix Microsystems Ltd. Vs. ACIT in dated 07/10/2010, learned TPO thought it proper to consider the SBI short term deposit rate as appropriate CUP to determine the ALP of the interest on outstanding receivables.

11. In the case of CIT Vs. CottonNaturals (I) (P.) Ltd. [2015] 55 taxmann.com 523 (Delhi) the Hon'ble Delhi High Court considered the question - whether the interest rate prevailing in India should be applied, for the lender was an Indian company/assessee, or the lending rate prevalent in the United States should be applied, for the borrower was a resident and an assessee of the said country, observed that such a question must be answered by adopting and applying a commonsensical and pragmatic reasoning and held that the interest rate should be the market determined interest rate applicable to the currency concerned in which the loan has to be repaid; that the interest rates should not be computed on the basis of interest payable on the currency or legal tender of the place or the country of residence of either party. It is further observed that the interest rates applicable to loans and deposits in the national currency of the borrower or the lender would vary and are dependent upon the fiscal policy of the Central bank, mandate of the Government and several other parameters; that the interest rates payable on currency specific loans/ deposits are significantly universal and globally applicable; that the currency in which the loan is to be re-paid normally determines the rate of return on the money lent, i.e. the rate of interest. While referring to the Klaus Vogel on Double Taxation Conventions (Third Edition) under Article 11 in paragraph 115, the Hon'ble High Court held that the PLR rate, therefore, would not be applicable and should not be applied for determining the interest rate and the PLR rates are not applicable to loans to be re-paid in foreign currency. Hon'ble Court accordingly held that whatever the principle that is applicable to the case of outbound loans, would be equally applicable to inbound loans given to Indian subsidiaries of foreign AEs, that the parameters cannot be different for outbound and inbound loans, and a similar reasoning applies to both inbound and outbound loans.

14. At the outset, the Ld. AR submitted that ground no.1 is general in nature, they are not pressing ground no.2 and ground no.28 is consequential in nature. Therefore, no separate adjudication is required on ground nos.1, 2 & 28.

15. Ground nos.3 to 11 of the assessee are related to adjustment made by the Ld. AO on account of global / regional management overhead allocation fee. The issue involved under these grounds are identical to issues involved in ground nos.6 to 14 in . Hence, our decision and findings in shall apply mutatis mutandis to these grounds also. Accordingly, the ground nos.3 to 11 of the assessee are allowed for statistical purposes.

16. Ground nos.12 to 19 of the assessee are related to interest on trade receivables. The facts and issues involved under these grounds are identical to facts and issues involved in . Hence, our decisions and findings in applies mutatis muntandis to these grounds also. Accordingly, the ground nos.12 to 19 of the assessee are partly allowed.

17. Ground nos.20 to 25 of the assessee are related to addition made by CPC u/s.143(1) of the Act, on account of penalty of Provident Fund (“PF”) of Rs.14,864/- and on account of delayed deposit of employees’ contribution to PF addition of Rs.34,26,382/- u/s.36(1)(va) of the Act.

18. With regard to addition of Rs.14,864/-, the Ld. AR submitted that, the assessee while filing the ROI had already added Rs.14,864/- in computation of income. However, the CPC again added the same during the proceedings u/s.143(1) of the Act. The Ld. AR also submitted that, the assessee had brought this fact during the assessment proceedings before the Ld. AO. However, while completing the assessment order, the Ld. AO did not grant any relief on account of this double disallowances. Hence, the Ld. AR prayed before the bench to delete Rs.14,864/- which has been added twice in the hands of the assessee.

19. With regard to addition of Rs.34,26,382/-, the Ld. AR submitted that the CPC had disallowed the same u/s.36(1)(va) of the Act, however, the assessee had deposited the employees’ contribution to PF before the due date specified for filing of the ROI. The assessee had made his submission during the assessment proceedings before the Ld. AO also. However, the Ld. AO without considering their claim, did not allow any relief on this count. Finally, the Ld. AR prayed before the bench to delete the disallowance made by the CPC.

20. Per contra, the Ld. DR made objection to the claim of the assessee, stating that the assessee has not filed any appeal against the intimation u/s.143(1) of the Act and therefore their objection should not be entertained. On alternative argument regarding the disallowance of Rs.34,26,382/- made u/s.36(1)(va) of the Act, the Ld. DR relied on the decision of Hon'ble Supreme Court in the case of Checkmate Services Pvt. Ltd. Vs. CIT (2022) 448 ITR 518 (SC), wherein it was held by Hon'ble Supreme Court that, delayed deposit of employees’ contribution to PF beyond the statutory due date specified under the relevant Act is not allowable as a deduction.