The Delhi bench of ITAT in the case of Axis Risk Consulting Services Private Limited v. DCIT, held that if there are similar transactions of services with related parties as well as unrelated parties and the price charged or paid are comparable, it is taken to be at arm’s length price under the provisions of the Income Tax Act, 1961.
In present issue Assessee engaged in the business of information technology enabled consultancy solutions provider rendering integrated risk and technology solutions in India and internationally. The sole issue was regarding the adjustment by way of imputing interest @ 17.22% by the TPO on account of receivables from the AE.
During the proceedings TPO noted from the balance sheet that payments for the invoice are not yet received and also opinioned that such delayed payments have to be treated as unsecured loans advanced to the AEs on which he proposed to charge a normal rate of interest for the period of delay in receipt of the payment beyond the time stipulated in the services agreement.
Vishal Kalra & Ms. Reema Malik are the advocates appeared for the appellant, they contended that no adjustment should be made since Assessee has not been charging interest for both controlled and uncontrolled transactions. The counsel also showed the tabulation showing that no interest has been charged from AEs and non-AEs and also submitted invoice wise details of receivables from the third party customers which clearly indicated that no interest has been charged from both AE’S and Non-AE’S.
After having rival submissions and perused the document in the record, the bench found that the period of outstanding receivables is ranging between 38 days to 1718 days and in most of the invoices, average delay is more than 300 days.
Also, the Tribunal bench stated that if there are similar transactions of services with related parties as well as unrelated parties and the price charged or paid are comparable, then it is taken to be at arm’s length price.
Finally, the Tribunal held that no interest can be imputed on receivables with the AE and accordingly, the addition made by the TPO is directed to be deleted.
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