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Income Tax Appellate Tribunal, BANGALORE BENCH ‘B’, BANGALORE
Before: SHRI S.K.YADAV & SHRI A. K. GARODIA
O R D E R PER A. K. GARODIA, A. M.:
This is an assessee’s appeal directed against the Assessment Order dated 28.11.2014 passed u/s 143 (3) r.w.s. 144C of the I. T. Act as per the directions of DRP.
The Grounds raised by the assessee are as under:-
“Based on the facts and circumstances of the case, Lotus Labs Private Limited (hereinafter referred to as “the Appellant”) respectfully craves leave to prefer an appeal against the appeal order passed b the learned Assessing Officer [hereinafter referred to as the “learned AO”] under 2 IT (TP) A No.92/B/2015 section 143(3) read with section 144C(10) of the Income-tax Act, 1961 (“the Act”) on the following grounds:
That on the facts and circumstances of the case and in law,
1. The order of the learned AO/TPO and directions of the Hon'ble DRP are based on incorrect interpretation of law and therefore are bad in law.
2. The learned TPO and the learned AO have erred, in law and in facts, by considering the outstanding dues from the AEs to be in the nature of loan and not considering the business/commercial expediencies of the arrangement.
3. Without prejudice to the above, no adjustment on account of interest for delay in receivables from AE is warranted as it is already factored in the margins earned from AEs.
4. Without prejudice to our contention that notional interest on outstanding receivables should be not imputed, the learned TPO and the learned AO have erred, in law and in facts, in not objectively selecting the interest rate to determine the arm's length rate of interest applicable for outstanding dues from the AEs.
5. The learned TPO has passed the order at the fag-end of the limitation period and provided inadequate time to the Appellant for submitting replies/objections and that such an order is bad in law and liable to be quashed. The Appellant submits that each of the above grounds is independent and without prejudice to one another. The Appellant craves leave to add, alter, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal, so as to enable the Hon’ble Tribunal to decide on the appeal in accordance with the law.”
Learned AR of the assessee submitted a copy of the Tribunal order rendered in the case of M/s Tally Solutions Pvt. Ltd. Vs. ACIT in dated 19.08.2016 and our attention was drawn to Para 5 of this tribunal order and it was pointed out that in that case also, the Tribunal considered the issue of extending credit period for realization of 3 IT (TP) A No.92/B/2015 sales to AE and it was held that it is closely linked with the transaction of providing services to the AE and therefore, cannot be treated as an individual and separate transaction of advance or loan. He also pointed out that the Tribunal in that case considered various other Tribunal orders and also a judgment of Hon’ble Bombay High Court rendered in the case of Vodafone India Services Pvt. Ltd. Vs. UOI as reported in 368 ITR 1 and thereafter, the matter was restored back to A.O./T.P.O. to redo the exercise of determination of ALP by considering the credit period allowed in realization of sale proceeds as closely linked transaction with the transaction of providing services to the AE and therefore, both has to be clubbed and aggregated for the purpose of determination of ALP. He submitted that in the same line, in the present case also, the matter may be restored to AO/TPO. Learned DR of the revenue supported the order of AO/TPO and DRP.
We have considered the rival submissions. We find that no difference in facts could be pointed out by the learned DR of the revenue in the present case and in the case of M/s Tally Solutions Pvt. Ltd. vs. ACIT (Supra).
Hence, by respectfully following this Tribunal order, we restore this issue to AO/TPO to redo the exercise of determination of ALP by considering the credit period allowed in realization of sale proceeds as closely linked transaction with the transaction of providing services to the AE and therefore, both has to be clubbed and aggregated for the purpose of determination of ALP. The AO/TPO should pass necessary order as per law as per above discussion after providing adequate opportunity of being heard
4 IT (TP) A No.92/B/2015 to the assessee. In view of this decision, no separate adjudication is called for in respect of various grounds raised by the assessee.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on the date mentioned on the caption page.