Interest on outstanding receivables: Transfer pricing implications
- During the year under consideration, there were outstanding receivables standing against Associated Enterprise and Non Associated Enterprise on which no interest was charged.
- However, the Transfer Pricing Officer was of the view that the receivables formed part of international transaction and interest was to be charged on the outstanding receivables received beyond the due date.
- The Tribunal placed reliance on the decision of Hon’ble High Court in Principal Commissioner of Income Tax Vs. Kusum Health Care Pvt. Ltd., wherein it was held that no adjustment could be made on account of notional interest on receivables by treating the continued debt balance as an international transaction.
- Further, when the taxpayer was debt free company, there was no question of charging any interest or receivables. In the present facts of the case, the Assessee was also a debt free company.
- Therefore, following the said case in the present facts of the case no adjustment could be made on account of outstanding receivables.