Interest on outstanding receivables: Transfer pricing implications
Outcome: In favour of Assessee
- The ground of appeal raised by the Assessee was in respect of transfer pricing adjustment made by the Transfer Pricing Officer on account of interest due on outstanding receivables from Associated Enterprises.
- The Tribunal placed reliance on the decision in Assessee’s own case, wherein reliance was placed on the decision of Hon’ble Delhi High Court in the case of Principal Commissioner of Income Tax Vs. Kusum Health Care Pvt. Ltd.
- It was observed that no adjustment could be made on account of notional interest on receivables by relying upon Explanation (i), (a) & (c) of section 92B by treating the continued debt balance as an international transaction.
- In the present facts of the case, the Assessee had not availed any loan from Associated Enterprises or unrelated third party and was not incurring any interest cost. Further, there was similar delay in receipt of receivables from others and the Assessee was not charging any interest on delay in receipt of receivables against services rendered to unrelated third party.
- Therefore, following the conclusion laid down by the said case, no adjustment could be made on account of interest due on receivable from its Associated Enterprises.