Interest on outstanding receivables: Transfer pricing implications
- There were outstanding balances of the Assessee’s Associated Enterprises with respect to payables and receivables during the year.
- The Dispute Panel Resolution did not consider the outstanding balances of its Associated Enterprises with respect to payables and receivables for estimating the notional interest for the purpose of Transfer Pricing adjustment.
- Hence, the revenue was in appeal before the Tribunal.
- The Tribunal placed reliance on the decision laid down in the case of M/s. Kony India Private Limited, wherein it was concluded that interest on outstanding receivables was an international transaction as per section 92B of the Act.
- Further, to examine exact outstanding invoices against which payment was not received, the methodology FIFO method shall be applied.
- Accordingly, following the same, the matter of interest on outstanding receivables was remitted back to the Transfer Pricing Officer.