RAMBOLL INDIA PRIVATE LIMITED,NEW DELHI vs. ACIT, CIRCLE-19(1), DELHI

The Learned AR before us made a preliminary argument that interest on outstanding receivables per se could not be construed independently as a separate international transaction and hence no adjustment under chapter X of the Act could be made for the same. This argument of the Learned AR is flawed in view of the decision of Hon’ble Madras High Court in the case of Redington India Limited reported in 430 ITR 298 (Mad) wherein it was held specifically that interest on outstanding receivables would indeed constitute a separate international transaction. Hence the argument advanced by the Learned AR in this regard is hereby rejected .

The Learned AR before has submitted that in order to maintain a long term business relationship and the commercial considerations, such charging of interest is usually ignored by the businessman in a third party transaction. Moreover, the business and commercial considerations also have to be looked into and one cannot apply a straight jacket method to say that the assessee ought to have earned an interest compensation from the AEs. It was further submitted that interest income is associated with the borrowing or lending of money and not with sale. The Learned AR also observed that the Learned TPO did not grant working capital adjustment in the provision of services segment. Had the working capital adjustment been given, there would be no need to impute any interest on outstanding receivables as the same would get subsumed in the working capital adjustment itself. In fact, the Learned DRP had directed the Learned TPO to grant working capital adjustment, but the same was not given by the Learned TPO. He placed reliance on the decision of Hon’ble Jurisdictional High Court in the case of PCIT vs Kusum Health Care Private Limited in / 2016 dated 25-04-2017 in support of this proposition. Further, he also submitted that assessee is a debt free company and had not paid any Ramboll India Pvt. Ltd interest either to its AEs or to third parties. Accordingly, there is no requirement for the assessee to even charge interest on delayed receivables either from the AEs or from outsiders. In support of this proposition, he placed reliance on the decision of Hon’ble Jurisdictional High Court in the case of PCIT vs Boeing India Pvt limited reported in 457 ITR 84 (Del). Per Contra, the Learned DR vehemently relied on the order of the Learned TPO and the elaborate workings adopted by him for charging the interest invoice wise after allowing credit period of 90 days on delayed receivables from AEs.

We find that the decisions relied upon by the Learned AR squarely applies to the facts of the instant case before us. On perusal of financials of the assessee, it is seen that there is no interest expenditure expended by the assessee, which goes to prove that the assessee company is a debt free company. The reliance on the decision of Hon’ble Jurisdictional High Court in the case of PCIT vs Boeing India Pvt limited reported in 457 ITR 84 (Del) is well placed wherein it was held that where Assessing Officer had made adjustment in hands of assessee-company on account of interest on outstanding receivables, since assessee-company was a debt free company and no interest was paid to creditor/supplier nor any interest had been earned from unrelated party, question of receiving any interest on receivables did not arise. Further we find that the Learned DRP had directed the Learned TPO to grant working capital adjustment on the provision of services segment, which was not given by the Learned TPO, which results in violation of provisions of section 144C(10) of the Act. In any event, once the same is granted, there is no need to separately impute interest on outstanding receivables as it would get subsumed in the working capital adjustment itself. This proposition has been accepted by the Hon’ble Jurisdictional High Court in the case of PCIT vs Kusum Health Care Private Limited in / 2016 dated 25-04-2017. Hence we hold that there Ramboll India Pvt. Ltd is no need to impute any interest on outstanding receivables separately in the peculiar facts and circumstances of the case of the assessee company herein. Accordingly, the Ground Nos. 1 & 2 raised by the assessee are allowed.

The Ground No. 3 raised by the assessee is challenging the rejection of claim made by the assessee towards deduction of expenditure under section 35DD of the Act based on the assessment order for Assessment Year 2017-18.

We have heard the rival submissions and peruse the materials available on record. The assessee vide letter dated 2-8-2021 filed for an additional claim for deduction under section 35DD of the Act of Rs 62,39,102/- being the 1/5th share of Rs 3,11,95,508/-, being the second year of deduction under section 35DD of the Act based on the assessment order passed under section 143(3) of the Act on 22-12-2019 for Assessment Year 2017-18. In Assessment Year 2017-18, the assessee claimed deduction of Rs 3,11,95,508/- towards the amalgamation expenditure which was disallowed by the Learned AO in the scrutiny assessment framed for Assessment Year 2017-18 and deduction under section 35DD of the Act was granted by the Learned AO for 1/5th of such expenditure. The assessee during the year under consideration based on the order of assessment for Assessment Year 2017-18 sought to claim one- fifth as eligible for deduction under section 35DD of the Act vide letter dated 2-8-2021 as time limit for filing revised return for Assessment Year 2018-19 had already expired. This was not appreciated by the Learned AO as well as by the Learned DRP. The authorities denied the claim by relying on the decision of Hon’ble Supreme Court in the case of Goetze India Limited reported in 284 ITR 323 (SC). We find that the last paragraph of the said Supreme Court decision clearly specifies that the restriction does not apply to appellate authorities especially the Tribunal. Hence, we direct the