Case Number: ITA 931/DEL/2021
Appellant: Fujitsu Consulting India Pvt. Ltd., New Delhi
Respondent: ACIT, Circle-7(1), New Delhi
Assessment Year: 2016-17
Result: 2016-17
Case Filed on: 2021-08-02
Order Type: Final Tribunal Order
Date of Order: 2023-06-20
Pronounced on: 2023-06-20
Tribunal: IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH ‘I’ : NEW DELHI)
Before: SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER and SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER
Introduction
This appeal by the assessee, Fujitsu Consulting India Pvt. Ltd., pertains to the assessment year 2016-17 and is directed against the order of the Assessing Officer (AO) passed pursuant to the directions of the Dispute Resolution Panel (DRP). The primary issue revolves around the addition of INR 12,074,056 to the total income due to an adjustment in the arm’s length price (ALP) of the international transaction pertaining to interest on receivables.
Grounds of Appeal
The assessee raised the following grounds of appeal:
Facts of the Case
The assessee is engaged in providing software consulting, systems design, enterprise application, and computer programming services. During the assessment proceedings, the assessee submitted working capital adjusted margins of comparable companies to account for the impact of outstanding receivables. The AO/TPO rejected this economic analysis and imputed interest at the rate of 4.609% on inter-company receivables outstanding beyond 30 days, treating it as an unsecured loan to Associated Enterprises (AEs). This led to a transfer pricing adjustment of INR 12,074,056 in the draft assessment order.
Aggrieved by the draft assessment order, the assessee filed objections before the DRP. Subsequently, the TPO issued a rectified order increasing the adjustment amount to INR 12,074,056. The DRP upheld the TPO/AO’s actions while allowing a credit period of 60 days.
Aggrieved by the final assessment order, the assessee filed an appeal before the ITAT challenging the additions made by the AO/TPO and DRP.
Tribunal’s Observations
The Tribunal observed that an identical issue was considered in the immediately preceding assessment year (AY 2015-16) in ITA No. 5956/Del/2019, where the matter was remitted with certain directions to the TPO/AO. The Tribunal noted that the facts in the current assessment year were identical to those in the preceding year. Consequently, the Tribunal decided to remit the issue to the AO/TPO with the same directions.
The Tribunal held that the contention of the assessee that no interest was charged on outstanding receivables from unrelated parties needed due verification by the lower authorities. Therefore, the Tribunal restored this issue to the file of the TPO/Assessing Officer, directing the assessee to furnish necessary documentary evidence to demonstrate that no interest was charged on similar transactions with unrelated parties.
Decision
The appeal filed by the assessee was allowed for statistical purposes, and the issue was remitted to the AO/TPO for fresh examination.
Conclusion
This case underscores the importance of adhering to judicial precedents and the legislative intent regarding the treatment of outstanding receivables in transfer pricing cases. The Tribunal’s decision aligns with the principle that similar transactions with unrelated parties should be treated consistently to ensure fairness and accuracy in transfer pricing adjustments.
Order
In the result, this appeal filed by the assessee is allowed for statistical purposes. The above decision was pronounced in the open court on this 20th day of June 2023.
Signed:
(CHALLA NAGENDRA PRASAD)
JUDICIAL MEMBER
(SHAMIM YAHYA)
ACCOUNTANT MEMBER
Dated the 20th day of June 2023
Copy forwarded to:
AR, ITAT
NEW DELHI
Fujitsu Consulting India vs ACIT: Arm’s Length Price Dispute for AY 2016-17
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