Interest on Receivables comes within the ambit of ‘ International Transaction ’: ITAT [Read Order]

International Transaction

The Delhi bench of Income Tax Appellate Tribunal ( ITAT )while hearing the case of Pitney Bowes Software India vs Addl. CIT has held that Interest on receivables comes within the ambit of ‘ International Transaction ’.

In present case Appellant is a company incorporated in India, which is subsidiary of Pitney Bowes Software Inc., USA, they engaged in the business of providing solutions with the help of technologies.

The current issue arose against the transfer pricing adjustment of Rs.11,57,791/- on account of Interest on delay in realization of receivables from the associated enterprises (AEs). No relief was provided by DRP which leads to the equal amount of addition.

The bench comprising of Vice President R.S. Syal and Judicial Member Suchitra Kamble deprived of the arguments raised by Assessee before TPO that interest on receivables is not an international transaction.

Because with the introduction of new explanation to section 92B with retrospective effect from 1.4.2002. Clause (i) of this Explanation, described the international transaction as “Once any debt arising during the course of business has been ordained by the legislature as an international transaction, it is, but, natural that if there is any delay in the realization of debts arising during the course of business, it is liable to be visited with the TP adjustment on account of interest income short charged or uncharged”.

The bench said foregoing discussion reveals that non-charging or undercharging of interest on the excess period of credit allowed to the AE for the realization of invoices amounts to an international transaction and the ALP of such an international transaction is required to be determined.

Accordingly tribunal set aside the issue by declaring that interest on receivable is termed as the international transaction.

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