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COURT:
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DATE: June 21, 2016 (Date of pronouncement)
DATE: August 20, 2016 (Date of publication)
AY: 2007-08
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CITATION:
Transfer Pricing: Argument that transaction of extending credit period to AEs cannot be regarded as “international transaction” in the absence of any income arising therefrom is not acceptable. Observations in Vodafone vs. UOI 368 ITR 1 (Bom) are in a different context. The transaction of extending credit period to AEs is closely linked with the transaction of providing services to the AE and is not a separate transaction. Both transactions have to be aggregated for determination of ALP

Extending credit period for realization of sales to the AE is a closely linked transaction with the transaction of providing services to the AE and therefore cannot be treated as an individual and separate transaction of advance or loan. Accordingly, we direct the A.O/TPO to redo the exercise of determination of ALP by considering the credit period allowed in realization of sales proceeds as closely linked transaction with the transaction of providing services to the AE and therefore both has to be clubbed and aggregated for the purpose of determination of ALP

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COURT:
CORAM: ,
SECTION(S): ,
GENRE:
CATCH WORDS: , , ,
COUNSEL:
DATE: November 27, 2015 (Date of pronouncement)
DATE: December 3, 2015 (Date of publication)
AY: 2006-07
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CITATION:
Entire law on transfer pricing implications of (i) allowing excess credit to AE's on account of sale of goods and (ii) issue of corporate guarantee to AEs (after insertion of Explanation i(c) to s. 92B by FA 2012) explained

If the international transaction of exports of goods which has been benchmarked on TNMM basis is duly accepted by the TPO, making an adjustment for interest on excess credit allowed on sales to AEs will vitiate the picture, inasmuch as what has already been factored in the TNMM analysis, by taking operating profit figure which incorporate financial impact of the excess credit period allowed, will be adjusted again separately as well because the interest levy for late realization of debtors is inextricably connected with the sales and is also part of operating income. When such an interest is includible in operating income and the operating income itself has been accepted as reasonable under the TNMM, there cannot be an occasion to make adjustment for notional interest on delayed realization of debtors

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