Action making arm’s length price ‘ALP’ adjustment challenged by the assessee

The Income Tax Appellate Tribunal has allowed an appeal by HSBC Electronic Data Processing India Private Limited, overturning an Arm's Length Price (ALP) adjustment of over Rs. 17 crore. The adjustment related to interest on receivables from overseas associated enterprises. The tribunal found that the adjustment was incorrectly calculated using State Bank of India's term deposit rates instead of the appropriate LIBOR rate for international transactions.

IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES “B” : HYDERABAD
(THROUGH VIDEO CONFERENCE)

BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER
AND
SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER

I.T.A. No. 2388/HYD/2018
Assessment Year: 2014-15

HSBC Electronic Data
Processing India Private
Limited,
HYDERABAD
[PAN: AAACH8235M]
(Appellant) 

Vs

Assistant Commissioner
of Income Tax,
Circle-2(2),
HYDERABAD
(Respondent)

For Assessee : Shri Rajan Vora, AR
For Revenue : Shri Ravi Kiran, CIT-DR

Date of Hearing : 16-06-2021
Date of Pronouncement : 18-06-2021

O R D E R

PER S.S.GODARA, J.M. :

This assessee’s appeal for AY.2014-15 arises against the ACIT, Circle-2(2), Hyderabad’s assessment dated 29-10-2018 framed in furtherance to the Dispute Resolution Panel (‘DRP’)-

1, Bengaluru’s directions dt.25-09-2018 in F.No.26/DRP-1/ BNG/2018-19, involving proceedings u/s.143(3) r.w.s.92CAb r.w.s.144C of the Income Tax Act, 1961 [in short, ‘the Act’]; respectively.

Heard both the parties. Case file perused.

2. The assessee’s sole substantive grievance pleaded in the instant appeal challenges correctness of the lower authorities’ action making arm’s length price ‘ALP’ adjustment of  Rs.17,31,66,150/- qua interest on receivables involving its overseas Associated Enterprises ‘AEs’. Suffice to say, it transpires at the outset that we need not delve much deeper qua the relevant facts pertaining to the instant issue. We find that assuming but not accepting that the learner lower authorities have rightly found the assessee’s interest receivables as beyond the period involving un-controlled transactions, the impugned adjustment is not liable to be sustained for the sole reason that the same has been made not as per ‘LIBOR’ rate applicable in case of international transactions but after taking State Bank of India’s term deposit(s) rate only.

3. Learned authorised representative relied on the following decisions of the co-ordinate benches in support of his arguments:

i. Progress Software Development Private Limited, ITA Nos.347 & 391/Hyd/2015, dt.15-03-2021;

ii. Valuemomentum Software Services Private Limited, ITA No.2197/Hyd/2017, dt.19-05-2021;

iii. Open Text Corporation India Private Limited, ITA No.152/Hyd/2017, dt.19-05-2021;

iv. Hexagon Capability Center India Private Limited, ITA No.2032/Hyd/2017, dt.26-11-2020;

4. Learned CIT-DR’s vehement contention is that the TPO as well as the DRP’s directions have rightly treated the foregoing bench mark as per the term deposit rates in the State Bank of India and therefore, the same deserves to be upheld. 

5. We find no merit in Revenue’s instant argument since such a short term deposit cannot be taken at par with an international transaction u/s.92B of the Act as the latter involves foreign currency and overseas market conditions. We keep in mind all these clinching aspects in light of the foregoing judicial precedents and direct the TPO to delete the impugned ‘ALP’ adjustment of Rs.17,31,66,150/- in issue. The assessee’s sole substantive ground to this effect stands accepted in the above terms.

 No other ground has been pressed before us in assessee’s Form-36 filed in tribunal.

6. This assessee’s appeal is allowed in above terms.

Order pronounced in the open court on 18th June, 2021

 Sd/-                                              Sd/-
 (LAXMI PRASAD SAHU)          (S.S.GODARA)
 ACCOUNTANT MEMBER         JUDICIAL MEMBER

Hyderabad,
Dated: 18-06-2021

Copy to :
1.HSBC Electronic Data Processing India Private Limited,Plot No.08, HSBC House, Survey No.64 (part), Madhapur,Hyderabad.
2.The Asst.Commissioner of Income Tax, Circle-2(2),Hyderabad.
3.Dispute Resolution Panel (DRP)-1, Bengaluru
4.Director of Income Tax (IT & TP), Hyderabad.
5.Addl. Commissioner of Income Tax (Transfer Pricing),Hyderabad.
6.D.R. ITAT, Hyderabad.
7. Guard File.