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“interest on outstanding receivables”

Transfer PricingSection 92BSection 92B244 judgments

The decision most relied on for interest on outstanding receivables is CIT v. EKL Appliances Ltd. (345 ITR 241), cited in 422 judgments on BharatTax.

Leading authorities on interest on outstanding receivables

CIT v. EKL Appliances Ltd.
345 ITR 241 · 2012 · High Court
422
citing judgments

Transfer pricing adjustments for outstanding receivables are permissible only if the Tax Officer establishes, through analysis over a period, a pattern indicating an international transaction intended to benefit an associated enterprise. The Tax Officer cannot question purely business decisions like royalty payments or exceed jurisdiction by applying cost-benefit analysis to determine the arm's length price of services.

CIT v. Cotton Naturals (I) (P.) Ltd.
55 Taxmann.com 523 · 2015 · High Court
273
citing judgments

The interest rate for benchmarking foreign currency loans advanced to Associated Enterprises should be the market-determined rate applicable to the currency of the loan, such as LIBOR for US Dollar loans, rather than a domestic lending rate like the Indian PLR.

Pr. CIT v. Kusum Health Care Pvt. Ltd.
398 ITR 66 · 2017 · High Court
100
citing judgments

Not every item of receivables appearing in the accounts of an entity dealing with foreign associated enterprises automatically constitutes an international transaction under Section 92B. A separate adjustment for interest on outstanding receivables is not permissible if the working capital adjustment has already factored in their impact.

CIT v. Patni Computer Systems Ltd.
215 Taxmann 108 · 2013 · High Court
92
citing judgments

The provision of an extended credit period or non-charging of interest on delayed receivables from associated enterprises constitutes an international transaction under Section 92B(1) and requires separate benchmarking at arm's length, even retrospectively due to the Finance Act, 2012 amendment.

Avenue Asia Advisors Pvt. Ltd. v. DCIT
398 ITR 120 · 2017 · High Court
84
citing judgments

The Delhi High Court holds that a detailed functional and working capital analysis, considering various factors, is essential before treating outstanding receivables as a separate international transaction for transfer pricing adjustments on notional interest. Simply making an adjustment based on receivables alone without such study distorts the transaction's character.

348 (Mum.); Tata Autocomp Systems Ltd. v. Asstt. CIT
21 Taxmann.com 6 · 2012 · ITAT
49
citing judgments

The use of LIBOR is upheld for benchmarking loans or advances given to foreign Associated Enterprises (AEs), and notional interest is to be computed using LIBOR rates for transfer pricing adjustments on amounts receivable from AEs.

Kusum Healthcare (P.) Ltd. v. Asstt. CIT
62 Taxmann.com 79 · 2015 · High Court
44
citing judgments

Interest cannot be separately charged on outstanding receivables from an associated enterprise if these receivables are an integral part of the underlying international transaction for which the arm's length price has already been determined. Such outstanding receivables are not considered a distinct international transaction.

CIT v. Indo American Jewellery Ltd.
44 Taxmann.com 310 · 2014 · High Court
42
citing judgments

A transfer pricing adjustment for notional interest on delayed receivables from an Associated Enterprise (AE) may not be warranted if the assessee consistently does not charge interest from both AEs and non-AEs.

Judgments citing interest on outstanding receivables

Phoenix Lamps Ltd., Noida vs. DCIT, Noida

In the result, the appeal of the assessee is partly allowed for statistical purposes

ITA 1152/DEL/2017[2012-13]Status: DisposedITAT Delhi26 Jul 2023AY 2012-13

Bench: Shri Saktijit Dey, Vice- & Shri M. Balaganeshassessment Year: 2011-12 Assessment Year 2012-13 Phoenix Lamps Ltd. Vs Dcit, (Formerly Known As Halonix Ltd.), Circle-2, 59-A, Nsez Phase Ii, Noida. Noida. Pan: Aabcp7718G (Appellant) (Respondent) Assessee By : Dr. Shashwat Bajpai, Advocate Revenue By : Shri Manu Chaurasia, Sr. Dr Date Of Hearing : 12.07.2023 Date Of Pronouncement : 26.07.2023 Order Per M. Balaganesh, Am: These Appeals In Ita No.1702/Del/2016 For Ay 2011-12 & In Ita No.1152/Del/2017 For Ay 2012-13 Arise Out Of The Order Ld. Assessing Officer, Circle-2, Noida (Hereinafter Referred To As ‘Ld. Ao’) Passed U/S 144C R.W.S. 143(3) Of The Income-Tax Act, 1961 (Hereinafter Referred To As ‘The Act’) Dated 12.02.2016. Ita No.1152/Del/2017 2. Identical Issues Are Involved In Both These Appeals, Hence, They Are Taken Up Together & Disposed Of By This Common Order For The Sake Of Convenience. Let Us Take Up The Appeal Of The Assessee In Ita No.1702/Del/2016 For Ay 2011-12 First.

For Appellant: Dr. Shashwat Bajpai, AdvocateFor Respondent: Shri Manu Chaurasia, Sr. DR
Section 144CSection 92C

allowed on merits. 11. Grounds No.5 and 5.1 raised by the assessee is with regard to transfer pricing adjustment made on account of interest on outstanding receivables from AE. 12. We have heard the rival submissions and perused the material available on record. It is not in dispute that ... account the outstanding trade receivables and outstanding trade payables at the end of the year, there is no need for separate imputation of interest on outstanding receivables from the AE as the same would get subsumed in working capital adjustment itself. Reliance was placed in support of this argument

Phoenix Lamps Ltd., Noida vs. DCIT, Noida

In the result, the appeal of the assessee is partly allowed for statistical purposes

ITA 1702/DEL/2016[2011-12]Status: DisposedITAT Delhi26 Jul 2023AY 2011-12

Bench: Shri Saktijit Dey, Vice- & Shri M. Balaganeshassessment Year: 2011-12 Assessment Year 2012-13 Phoenix Lamps Ltd. Vs Dcit, (Formerly Known As Halonix Ltd.), Circle-2, 59-A, Nsez Phase Ii, Noida. Noida. Pan: Aabcp7718G (Appellant) (Respondent) Assessee By : Dr. Shashwat Bajpai, Advocate Revenue By : Shri Manu Chaurasia, Sr. Dr Date Of Hearing : 12.07.2023 Date Of Pronouncement : 26.07.2023 Order Per M. Balaganesh, Am: These Appeals In Ita No.1702/Del/2016 For Ay 2011-12 & In Ita No.1152/Del/2017 For Ay 2012-13 Arise Out Of The Order Ld. Assessing Officer, Circle-2, Noida (Hereinafter Referred To As ‘Ld. Ao’) Passed U/S 144C R.W.S. 143(3) Of The Income-Tax Act, 1961 (Hereinafter Referred To As ‘The Act’) Dated 12.02.2016. Ita No.1152/Del/2017 2. Identical Issues Are Involved In Both These Appeals, Hence, They Are Taken Up Together & Disposed Of By This Common Order For The Sake Of Convenience. Let Us Take Up The Appeal Of The Assessee In Ita No.1702/Del/2016 For Ay 2011-12 First.

For Appellant: Dr. Shashwat Bajpai, AdvocateFor Respondent: Shri Manu Chaurasia, Sr. DR
Section 144CSection 92C

allowed on merits. 11. Grounds No.5 and 5.1 raised by the assessee is with regard to transfer pricing adjustment made on account of interest on outstanding receivables from AE. 12. We have heard the rival submissions and perused the material available on record. It is not in dispute that ... account the outstanding trade receivables and outstanding trade payables at the end of the year, there is no need for separate imputation of interest on outstanding receivables from the AE as the same would get subsumed in working capital adjustment itself. Reliance was placed in support of this argument

Rockwell Automation Private Ltd., New Delhi vs. ACIT, Circle-19(1), New Delhi

In the result, appeal filed by the assessee is partly allowed

ITA 1638/DEL/2022[2017-18]Status: FixedITAT Delhi12 Jul 2023AY 2017-18

Bench: Shri Shamim Yahya & Shri Challa Nagendra Prasadrockwell Automation India Private Acit, Circle 19(1), Limited, Vs. Delhi. 131, Functional Industrial Area, Patparganj, New Delhi.

For Appellant: Shri Ajit Jain, AdvocateFor Respondent: Shri Bhaskar Goswami, CIT(DR)
Section 143(1)Section 144C(10)Section 144C(13)Section 92C

additional return on account receivables. 8.5 Arbitrarily applying a markup of 400 basis points on LIBOR for the purpose of computing national interest on outstanding receivables. Pertaining to corporate tax matters 9. On the facts and in law, pursuant to the directions ... 1638/Del/2022 Rockwell Automation India Private Limited. Rs. 27,54,300/-, Business support service of Rs. 39,32,078/- and Interest on outstanding receivables of Rs. 3,60,38,910/- i.e. total adjustment of Rs. 25,49,73,168/-. Accordingly, the NaFAC, Delhi passed a draft order u/s 144C

Fujitsu Consulting India P.Ltd, New Delhi vs. ACIT, Circle-7(1), New Delhi

In the result, this appeal filed by the assessee is allowed for

ITA 931/DEL/2021[2016-17]Status: DisposedITAT Delhi20 Jun 2023AY 2016-17
For Appellant: Shri Nageswar Rao, AdvocateFor Respondent: Shri Anshuman Patnaik, CIT DR
Section 143(3)Section 234ASection 271(1)(c)Section 92C

case and in law, the Hon’ble DRP vide its directions dated 7 October 2020 grossly erred in upholding addition pertaining to interest on outstanding receivables made by the Learned AO to returned income of the Appellant vide draft assessment order dated 19 December 2019 passed under section ... carrying out working capital adjustment; ii. By re-characterizing the nature of outstanding receivables as unsecured loan advanced to AEs; iii. Imputing interest on outstanding receivable to its AEs ignoring the fact that the Appellant is a debt-free company; iv. Without prejudice to the Ground No.3

Brodaways Overseas Limited, Jalandhar vs. Deputy Commissioner of Income Tax, Circle-1, Jalandhar

ITA 123/ASR/2018[2013-14]Status: DisposedITAT Amritsar30 May 2023AY 2013-14

Bench: Dr. M. L. Meena & Sh. Anikesh Banerjee

Section 10BSection 14A

that the two issues involved are with regard to transfer pricing adjustments for interest on loan advanced to AE in foreign currency and interest on outstanding receivables in the account of AE. The TPO had benchmarked the interest rate against the expected return from investment from bonds and made adjustment ... Admittedly, there are two issues involved with regard to transfer pricing adjustments for interest on loan advanced to AE in foreign currency and interest on outstanding receivables in the account of AE. The Ld. CIT(A) has discussed that the TPO had benchmarked the interest rate against the expected return

The Asstt. Commissioner of Income Tax, Jalandhar vs. M/S Broadway Overseas Ltd., Jalandhar

ITA 49/ASR/2016[2011-12]Status: DisposedITAT Amritsar30 May 2023AY 2011-12

Bench: Dr. M. L. Meena & Sh. Anikesh Banerjee

Section 10BSection 14A

that the two issues involved are with regard to transfer pricing adjustments for interest on loan advanced to AE in foreign currency and interest on outstanding receivables in the account of AE. The TPO had benchmarked the interest rate against the expected return from investment from bonds and made adjustment ... Admittedly, there are two issues involved with regard to transfer pricing adjustments for interest on loan advanced to AE in foreign currency and interest on outstanding receivables in the account of AE. The Ld. CIT(A) has discussed that the TPO had benchmarked the interest rate against the expected return

The Asstt. Commissioner of Income Tax, Jalandhar vs. M/S Broadway Overseas Ltd., Jalandhar

ITA 48/ASR/2016[2010-11]Status: DisposedITAT Amritsar30 May 2023AY 2010-11

Bench: Dr. M. L. Meena & Sh. Anikesh Banerjee

Section 10BSection 14A

that the two issues involved are with regard to transfer pricing adjustments for interest on loan advanced to AE in foreign currency and interest on outstanding receivables in the account of AE. The TPO had benchmarked the interest rate against the expected return from investment from bonds and made adjustment ... Admittedly, there are two issues involved with regard to transfer pricing adjustments for interest on loan advanced to AE in foreign currency and interest on outstanding receivables in the account of AE. The Ld. CIT(A) has discussed that the TPO had benchmarked the interest rate against the expected return

The Asstt. Commissioner of Income Tax, Jalandhar vs. M/S Broadway Overseas Ltd., Jalandhar

ITA 47/ASR/2016[2009-10]Status: DisposedITAT Amritsar30 May 2023AY 2009-10

Bench: Dr. M. L. Meena & Sh. Anikesh Banerjee

Section 10BSection 14A

that the two issues involved are with regard to transfer pricing adjustments for interest on loan advanced to AE in foreign currency and interest on outstanding receivables in the account of AE. The TPO had benchmarked the interest rate against the expected return from investment from bonds and made adjustment ... Admittedly, there are two issues involved with regard to transfer pricing adjustments for interest on loan advanced to AE in foreign currency and interest on outstanding receivables in the account of AE. The Ld. CIT(A) has discussed that the TPO had benchmarked the interest rate against the expected return

The Asstt. Commissioner of Income Tax, Jalandhar vs. M/S Broadway Overseas Ltd., Jalandhar

ITA 46/ASR/2016[2007-08]Status: DisposedITAT Amritsar30 May 2023AY 2007-08

Bench: Dr. M. L. Meena & Sh. Anikesh Banerjee

Section 10BSection 14A

that the two issues involved are with regard to transfer pricing adjustments for interest on loan advanced to AE in foreign currency and interest on outstanding receivables in the account of AE. The TPO had benchmarked the interest rate against the expected return from investment from bonds and made adjustment ... Admittedly, there are two issues involved with regard to transfer pricing adjustments for interest on loan advanced to AE in foreign currency and interest on outstanding receivables in the account of AE. The Ld. CIT(A) has discussed that the TPO had benchmarked the interest rate against the expected return

The Asstt. Commissioner of Income Tax, Jalandhar vs. M/S Broadways Overseas Ltd, Jalandhar

ITA 345/ASR/2016[2012-13]Status: DisposedITAT Amritsar30 May 2023AY 2012-13

Bench: Dr. M. L. Meena & Sh. Anikesh Banerjee

Section 10BSection 14A

that the two issues involved are with regard to transfer pricing adjustments for interest on loan advanced to AE in foreign currency and interest on outstanding receivables in the account of AE. The TPO had benchmarked the interest rate against the expected return from investment from bonds and made adjustment ... Admittedly, there are two issues involved with regard to transfer pricing adjustments for interest on loan advanced to AE in foreign currency and interest on outstanding receivables in the account of AE. The Ld. CIT(A) has discussed that the TPO had benchmarked the interest rate against the expected return

The Assistant Commissioner of Income Tax, Jalandhar vs. M/S Broadways Overseas Ltd, Jalandhar

ITA 477/ASR/2015[2008-09]Status: DisposedITAT Amritsar30 May 2023AY 2008-09

Bench: Dr. M. L. Meena & Sh. Anikesh Banerjee

Section 10BSection 14A

that the two issues involved are with regard to transfer pricing adjustments for interest on loan advanced to AE in foreign currency and interest on outstanding receivables in the account of AE. The TPO had benchmarked the interest rate against the expected return from investment from bonds and made adjustment ... Admittedly, there are two issues involved with regard to transfer pricing adjustments for interest on loan advanced to AE in foreign currency and interest on outstanding receivables in the account of AE. The Ld. CIT(A) has discussed that the TPO had benchmarked the interest rate against the expected return

Orange Business Services India Solutions Private Limited (Formerly Known As Equant Solutions India Private Limited), Gurgaon vs. ACIT, Circle-3(1), Gurgaon

In the result, appeal of the assessee is allowed for statistical purpose

ITA 2026/DEL/2022[2018-19]Status: DisposedITAT Delhi30 May 2023AY 2018-19

Bench: Shri Shamim Yahya & Shri Yogesh Kumar Us

For Appellant: Shri Rishabh Malhotra, ARFor Respondent: Shri Rajesh Kumar, CIT(DR)
Section 143(3)Section 144BSection 144CSection 144C(13)Section 92B

facts and circumstances of the case and in law, the TPO has erred in making an adjustment on account of interest on outstanding receivable to the extent of Rs. 24,57,22,921/- without appreciating that the same does not constitute a separate international transaction within the meaning ... facts and circumstances of the case and in law, the Ld. TPO has erred by charging interest on outstanding receivables, despite the fact that the Appellant had carried out working capital adjustment. The impact of outstanding receivables was subsumed in it and hence, no further adjustment on account of interest

JCIT, New Delhi vs. M/S. Daawat Foods Ltd., New Delhi

In the result, the appeal of the assessee is partly allowed as indicated above and the appeal of the Revenue is dismissed

ITA 2387/DEL/2017[2010-11]Status: DisposedITAT Delhi04 May 2023AY 2010-11

Bench: Shri G. S. Pannua N D Shri Challa Nagendra Prasad

For Appellant: Ms. Deepashree Rao, C.A
Section 10Section 14A

entity, namely, L.T. Foods Ltd. Vs. DCIT (supra) an identical issue has been decided observing as under:- 41. Ground No. 8.4 relates to interest on outstanding receivables. During the course of TP assessment proceedings, it was noticed from the invoice-wise details of rice sold to AE that the assessee

Dawat Foods Ltd., Gurgaon vs. ACIT, New Delhi

In the result, the appeal of the assessee is partly allowed as indicated above and the appeal of the Revenue is dismissed

ITA 1758/DEL/2017[2010-11]Status: DisposedITAT Delhi04 May 2023AY 2010-11

Bench: Shri G. S. Pannua N D Shri Challa Nagendra Prasad

For Appellant: Ms. Deepashree Rao, C.A
Section 10Section 14A

entity, namely, L.T. Foods Ltd. Vs. DCIT (supra) an identical issue has been decided observing as under:- 41. Ground No. 8.4 relates to interest on outstanding receivables. During the course of TP assessment proceedings, it was noticed from the invoice-wise details of rice sold to AE that the assessee

Teejay India Private Limited, Visakhapatnam vs. Assistant Commissioner of Income Tax, Dc/Ac 4(1), Visakhapatnam

In the result, appeal filed by the assessee is partly allowed

ITA 152/VIZ/2021[2016-17]Status: DisposedITAT Visakhapatnam23 Jan 2023AY 2016-17

Bench: Shri Duvvuru Rl Reddy, Hon’Ble & Shri S Balakrishnan, Hon’Ble

For Appellant: Sri Darpan Kirpalani CAFor Respondent: Sri MN Murthy Naik, CIT-DR
Section 10ASection 142(1)Section 143(2)Section 143(3)Section 36(1)(va)Section 92C

support services, INR 976,754 in respect of payment of interest on ECB and INR 505,133 on account of imputation of notional interest on outstanding receivables. A. Grounds of Appeal on Transfer Pricing Issues Grounds for manufacturing and sale of fabric 4. On the facts and in the circumstances ... appellant in determining the arm’s length interest rate paid on the external commercial borrowings availed. Grounds for imputation of notional interest on outstanding receivables. 7. On the facts and in the circumstances of the case, the Ld. DRP/AO/TPO erred in : 7.1. Considering overdue receivables from AEs as on international

Alcatel Lucent India Limited, Delhi vs. ACIT Central Circle 15, Delhi

In the result, the assessee’s appeal is allowed

ITA 366/DEL/2022[2017-18]Status: DisposedITAT Delhi19 Jan 2023AY 2017-18
For Appellant: Shri Ankul Goyal, AdvocateFor Respondent: Shri Rajesh Kumar, CIT DR
Section 143(3)Section 92C

have erred in using an SBI Prime Lending Rate ("PLR") based interest rate for computing interest on outstanding receivables without considering the fact that the Assessee has raised invoices to its AEs in foreign currency. 4 ITA No.366/Del./2022 3.6.1 That on the facts and circumstances of the case ... have erred in arbitrarily adding 300 basis point to the SBI PLR for computing interest on outstanding receivables, without giving any cogent reason 3.8 That on the on the facts and circumstances of the case and in law, the Ld. TPO and Ld. AO have erred by not restricting

Veolia India Pvt. Ltd., New Delhi vs. ACIT, Circle- 26(1), New Delhi

In the result, appeal of the assessee is partly allowed

ITA 6011/DEL/2017[2013-14]Status: DisposedITAT Delhi19 Jan 2023AY 2013-14

Bench: Sh. G.S. Pannu & Sh. Saktijit Deyassessment Year: 2013-14 Veolia India Pvt Ltd. Acit B-1, Marble Arch, 9, Prithvi Vs Circle – 26 (1) Raj Road, New Delhi New Delhi Pan No. Aabcv7389R (Appellant) (Respondent)

Section 143Section 92Section 92B

adjustment as the entity level results have already been accepted. Thus, ultimately the TPO proceeded to determine the arm’s length rate of interest on outstanding receivables by applying six month’s LIBOR plus 400 basis points and accordingly suggested an adjustment of Rs.9,21,270/-. The adjustment so proposed

M/S. Applied Materials India Private Limited, Bangalore vs. Deputy Commissioner of Income Tax, Circle- 1(1)(1), Bangalore

In the result, the appeal filed by the assessee stands partly allowed

ITA 2582/BANG/2019[2015-16]Status: DisposedITAT Bangalore30 Dec 2022AY 2015-16

Bench: Shri Chandra Poojari & Smt. Beena Pillai

For Respondent: Shri T. Suryanarayana

that interest on outstanding trade receivables is an international transaction and its ALP has been correctly determined. He thus submitted that the Interest on outstanding receivables have been rightly constituted as independent international transaction 7.7 We have perused the submissions advanced by both the sides in the light ... section 92 B of the Act. Alternatively, it has been argued that working capital adjustment subsumes sundry creditors. In such situation computing interest on outstanding receivables and lones and advances to international transaction would amount to double taxation. Hon'ble Delhi Tribunal in case of Orange Business Services India Solutions

Essar Investments Ltd, Mumbai vs. DCIT 5(1), Mumbai

In the result, the present appeal is partly allowed

ITA 2195/MUM/2014[2009-10]Status: DisposedITAT Mumbai28 Dec 2022AY 2009-10
For Appellant: Shri Vijay MehtaFor Respondent: Ms. Samruddhi D Hande
Section 143(3)Section 144CSection 144C(5)

view, the transfer pricing adjustment of INR 4,57,88,125/- made by the TPO/Assessing Officer (by treating the aforesaid amount as interest on outstanding receivables) is clearly in the nature of secondary adjustment and cannot be sustained in the absence of specific provision in the Act providing

Excellence Data Research Private Limited, Hyderabad, Chennai vs. ACIT, Circle-17(1), Hyderabad

The appeal stands partly allowed in terms of our above order

ITA 461/HYD/2017[2012-13]Status: DisposedITAT Chennai06 Dec 2022AY 2012-13

Bench: Hon’Ble Shri Mahavir Singh & Hon’Ble Shri Manoj Kumar Aggarwal, Am

For Appellant: Shri S.P. Chidambaram (Advocate)-Ld. ARFor Respondent: Dr. S. Palanikumar (CIT) –Ld. DR
Section 143(3)Section 144C(5)Section 92C

Information Technology enabled Services ('ITeS') by the Appellant to its Associated Enterprises ('AEs'); and b. Rs. 1,01,05,554 for notional interest on outstanding receivables from its AEs. 3. That on the facts and circumstances of the case and in law, the AO/DRP erred in rejecting transfer pricing documentation ... receivables from its AEs. 15. That on the facts and circumstances of the case and in law, the AO/DRP erred in charging notional interest on outstanding receivables from its AEs, disregarding the fact that such outstanding receivables had arisen out of the service transaction and not a separate international transaction