The Mumbai bench of Income Tax Appellate Tribunal (ITAT) held that no interest shall be levied on delayed realization of export proceeds from Associate Enterprises(AE).
In the case of Assessee Strides Pharma Science Limited the Transfer Pricing Officer made an addition towards the interest on delayed realization of export proceeds from associate enterprise and passed order. Accordingly, aggrieved by the order the assessee filed appeal before the tribunal.
During the adjudication Nitesh Joshii, the counsel for assessee argued that assessee is not charging interest on delayed realization either from the Associated Enterprises (AEs) or Non-AEs.
The assessee submitted that in case of some of the AEs, average realization period is 311 days, on which no interest was charged. Similarly, in case of some of the Non-AEs there has been a delay of over 300 days on which no interest has been charged.
Further the counsel pointed out that the average period of realization of sale proceeds is 29 days. Except 2 AEs, there is no delay in realization of sale proceeds. Since, the assessee had not charged interest on delayed payment of invoices from AEs as well as Non-AEs, no notional interest can be imputed on the proceeds received by the assessee belatedly from AEs
Anoop Hiwase, Department representatives argued that the average realization period from AEs is far greater than average realization period from Non-AEs. There are stray incidences of delay in recovery from Non-AEs.He also asserted that where there is disparity in period of recovery of receivables from AEs and Non-AEs, notional interest can be charged.
The tribunal observed that it is evident from documents on record that in some of the transactions with AEs and Non-AE, there is delay in recovery of receivables. The assessee has been following a uniform policy of not charging interest on delayed realization from AEs and Non-AEs.
Therefore the tribunal relied upon the decision of High Court in the case of Indo American Jewellery (supra) has held that “where there is complete uniformity in not charging interest from AEs and Non-AEs for delay in realization of export proceeds, the Assessing Officer was not justified in making addition of notional interest in respect of transactions with AEs in the course of transfer pricing proceeding”.
After analyzing the submission of both parties the bench comprising Vikas Awasthy (Judicial Member) and Amarjit Singh, (Accountant Member) held that imputing of interest on delayed payment of receivables from AEs is unwarranted.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
