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Tax Publishers Adjustment made due to receivables from AE's whether built into the TNMM benchmarking *Facts:* Assessee a BPO entity was carrying receivables from its AE's; that were benchmarked using TNMM approach. Interest on market prevailing LIBOR + spread was adopted for benchmarking on these receivables by the TPO and additions sustained. Assessee's appeal was that when the benchmarking of TNMM was done the working capital adjustments were also duly considered thus there is no separate addition required to be made thereafter by the TPO. On appeal by the assessee to the ITAT - Held in favour of the assessee that once benchmarking under TNMM method has considered working capital adjustments thereafter again making "outside" adjustments are uncalled for. *Applied:* Pr. CIT v. Kusum Healthcare P.Ltd. (2018) 99 taxmann.com 431 (Delhi) : 2017 TaxPub(DT) 4367 (Del-HC) M/s. Bharti Airtel Services Ltd. v. DCIT in ITA No. 3183 & 6272/Del-2018 dated 31-3-2022 Rockwell Automation India Pvt. Ltd. v. ACIT in ITA No. 6806/Del/2018 dated 05-05-2022 *Dissented:* Ameriprise India P. Ltd. v. ACIT (2015) 62 taxmann.com 237 (Del-Trib) : 2019 TaxPub(DT) 4701 (Del-Trib) *Ed. Note:* The method of TNMM application is also illustrated in the below screenshot with +/- 5% range application. The issue of making separate addition on receivables of AE is a vexed issue. Initially whether this was a TP transaction was the issue. Then the amended law brought this also into TP ambit. Next came the issue of what is the appropriate interest rate whether domestic or international country specific rates will need to be applied? This was confirmed as country specific international country rates will need to be used for benchmarking. Then came the issue of netting AR/AP which was also half way agreed. Then came the issue of TNMM whether on gross basis or to be seen after working capital adjustment basis. This has gone in the assessee's favour as of now. *Case:* Effective Teleservices (P) Ltd. v. DCIT 2023 TaxPub(DT) 2469 (Ahd-Trib)

Tax Publishers

Adjustment made due to receivables from AE's whether built into the TNMM benchmarking

Facts:

Assessee a BPO entity was carrying receivables from its AE's; that were benchmarked using TNMM approach. Interest on market prevailing LIBOR + spread was adopted for benchmarking on these receivables by the TPO and additions sustained. Assessee's appeal was that when the benchmarking of TNMM was done the working capital adjustments were also duly considered thus there is no separate addition required to be made thereafter by the TPO. On appeal by the assessee to the ITAT -

Held in favour of the assessee that once benchmarking under TNMM method has considered working capital adjustments thereafter again making "outside" adjustments are uncalled for.

Applied:

Pr. CIT v. Kusum Healthcare P.Ltd. (2018) 99 taxmann.com 431 (Delhi) : 2017 TaxPub(DT) 4367 (Del-HC)

M/s. Bharti Airtel Services Ltd. v. DCIT in ITA No. 3183 & 6272/Del-2018 dated 31-3-2022

Rockwell Automation India Pvt. Ltd. v. ACIT in ITA No. 6806/Del/2018 dated 05-05-2022

Dissented:

Ameriprise India P. Ltd. v. ACIT (2015) 62 taxmann.com 237 (Del-Trib) : 2019 TaxPub(DT) 4701 (Del-Trib)

Ed. Note: The method of TNMM application is also illustrated in the below screenshot with +/- 5% range application. The issue of making separate addition on receivables of AE is a vexed issue. Initially whether this was a TP transaction was the issue. Then the amended law brought this also into TP ambit. Next came the issue of what is the appropriate interest rate whether domestic or international country specific rates will need to be applied? This was confirmed as country specific international country rates will need to be used for benchmarking. Then came the issue of netting AR/AP which was also half way agreed. Then came the issue of TNMM whether on gross basis or to be seen after working capital adjustment basis. This has gone in the assessee's favour as of now.

Case: Effective Teleservices (P) Ltd. v. DCIT 2023 TaxPub(DT) 2469 (Ahd-Trib)