Interest on receivables adjustment is unwarranted because the assessee is a debt-free business

PCIT Vs Inductis India Pvt. Ltd. (Delhi High Court)

Facts:

1. The case involves an appeal under Section 260A of the Income Tax Act related to Assessment Year 2012-13.
2. The respondent, an assessee, is a subsidiary providing IT services to associated establishments.
3. Scrutiny assessments were conducted regarding dividend income and international transactions.
4. Disallowances under Section 14A and adjustments related to delayed receivables were made.
5. The Dispute Resolution Panel (DRP) and Assessing Officer (AO) made additions to the income of the assessee.
6. The Tribunal allowed the assessee’s appeal, stating the issues were covered by precedents.

Observations:

1. Disallowance under Section 14A: The Tribunal found no borrowed funds used for investments, dismissing the disallowance.
2. Adjustments for delayed receivables: The Tribunal ruled that being a debt-free company, no interest adjustment was warranted.
3. Rejection of comparables: Prior court decisions supported the Tribunal’s exclusion of certain comparables.

Conclusion:

1. Disallowance under Section 14A: Tribunal’s decision aligned with precedents, no substantial question of law.
2. Adjustments for delayed receivables: Previous court rulings support the Tribunal’s decision due to the assessee being debt-free.
3. Rejection of comparables: Previous court decisions upheld Tribunal’s exclusion, concluding it as factual, not a legal question.

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