The Income Tax Appellate Tribunal (ITAT), Hyderabad Bench direct the Assessing Officer/learned TPO to adopt the same at 0.50% on the guaranteed amount.
The corporate guarantee as an international transaction, requiring benchmarking, follows Hon’ble Madras HC ruling in Redington (India) Ltd; Further, relying on coordinate bench ruling in assessee’s own case for AY 2018-19, ITAT directs AO/TPO to adopt guarantee fee at 0.50%; Separately, w.r.t TP adjustment qua interest on receivables, ITAT relies on Hon’ble Delhi HC ruling in McKinsey Knowledge Centre India Pvt. Ltd and Delhi ITAT ruling in Bharti Airtel Services Ltd to hold that “It is, therefore, not open for the assessee to agitate this question as to whether the interest on outstanding receivables is an international transaction requiring separate benchmarking time and again”.
The tribunal ruled that when once the clinical trial expenses incurred outside the approved R&D facilities, were approved by the prescribed authority the assessee is entitled to claim deduction under section 35(2AB) of the Act. Respectully following the same we hold the issue in favour of the assessee and allow weighted deduction in respect of the expenses incurred on clinical trials.
Issue Raised
Whether the interest on outstanding receivables is an international transaction requiring separate benchmarking and again.
Whether the interest rate prevailing in India should be applied, for the lender was an Indian company/assessee, or the lending rate prevalent in the United States should be applied, for the borrower was a resident and an assessee of the country.
Facts
The Assessee is a company engaged in manufacture and sale of bulk drugs, Acve Pharmaceutical Ingredients (APIs) and other pharmaceucal products. For the assessment year 2016-17, it filed the return of income on 28/11/2016. In respect of the international transactions of Corporate Guarantee fee and interest on receivables, the Transfer Pricing Officer (learned TPO) suggested upward adjustments incorporating which the learned Assessing Officer passed the dra assessment order. Assessee reported no objection for passing the final order pursuant to which the final assessment order was passed, which was challenged before the CIT(A). CIT(A), by way of order disposed of the appeal giving part relief on all the three counts, in respect of which both the assessee and Revenue preferred these appeals.
Case Name : ACIT V/s Aurobindo Pharma Ltd
Judicial Level & Location : Hyderabad ITAT
Case Number : ITA No. 320/Hyd/2023
Date of Ruling : 23/07/2024
Ruling in favour of: Assessee
Coram: K.Narasimha Chary (Judicial Member) And Madhusudan Sawdia, (Accountant Member)
Petitioner Advocate: M Vijay Kumar
Respondent Advocate: BG Reddy