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10. Without prejudice to our grounds that the delay in receivables is not an international transaction, the learned CIT(A) has erred in law and on facts in directing to add appropriate spread on the LIBOR rates as against using the average LIBOR rates itself for computing notional interest on outstanding receivables.

11. Without prejudice to our grounds that the delay in receivables is not an international transaction, the learned CIT(A)/ AO / TPO has erred in law and on facts in not deducting the foreign exchange gain earned by the Appellant due to belated receipt of outstanding receivables from AE.

9. The ld.CIT(A) after considering the relevant submissions of the assessee and by following certain judicial precedents including the decision of the ITAT Bangalore Bench in the case of AMD India, TS-840-ITAT-2017(BANG), held that delay in realization of AE receivables beyond specified credit period amounts to indirect funding to AE which constitutes an independent international transaction which requires to be benchmarked independently irrespective of the fact that the transaction of the assessee with its AE are at Arms Length Price. The fact that the margin of the assessee was above Arms Length Price cannot be a justification because delay in receivables is a separate transaction which requires benchmarking under Chapter-X of the Act. Therefore, he opined that there is no error in the finding recorded by the TPO as well as the AO to arrive at a conclusion that delay in realization of receivables from AE is an international transaction and it needs to be benchmarked independently. As regards rate applied by the TPO by adopting PLR as base rate, the ld.CIT(A) noted that to consider a rate for benchmarking the receivables, the benefit and detriment that would be enjoyed and suffered by the parties to the transaction require consideration. Since the appellant is not in the business of financing, the PLR rate adopted by the TPO to benchmark the receivables may not reflect an arms length rate. The benefit that accrues to the AE should be evaluated at the beneficiary's end as to what interest it would have availed funds, had this arrangement have not in place. Since the AE is a non-resident, the rate applicable at the country of residence or any other international lending rate may be appropriate to evaluate the benefit derived by the AE and accordingly by taking note of facts, directed the AO to adopt the LIBOR rates with an appropriate spread befitting the credit standing of the AE. Aggrieved by the order of the CIT(A), the assessee as well as the Revenue are in appeal before us.

11. The ld.DR on the other hand submitted that the ld.CIT(A) has erred in directing the AO to adopt LIBOR rate as most appropriate rate without appreciating the fact that when the assessee has allowed credit period more than the agreed period of credit which drastically affects the assessee's working capital and hence the same needs to be benchmarked at the rate at which the assessee has borrowed funds from financial institutions for working capital arrangements. Since the assessee has working capital arrangements from banks and has paid interest in India, the AO as well as the TPO were right in applying PLR as the most appropriate rate for benchmarking notional interest on receivables from AE. But the ld.CIT(A) without appreciating the fact has directed the AO to adopt LIBOR rate without considering the binding precedent of the Chennai Tribunal in the case of M/s. Professional Access Software Development (P) Ltd., vs. DCIT [79 taxmann.com 25 (2017)].

13. Having said so, let us examine what is the appropriate rate for benchmarking international transactions for delay in realization of AE receivables. In order to impute interest on receivables, the benefit end detriment that it would be enjoyed and suffered by the parties to the transaction requires consideration. The assessee has allowed credit to its AE which is a non-resident, therefore the benefits that the AE derives from enjoying the long credit period for payment in respect of services rendered has to be measured in terms of the interest that would have been incurred by the AE in the country of residence. If we go by the standards, the LIBOR rate is most appropriate rate of interest in the international market and which is accepted by most of the countries. Therefore, it would be most appropriate if the LIBOR rate is applied as most appropriate rate of interest for imputing interest on delay in receivables from AE. In this case, the AO has imputed notional interest by adopting PLR as the base rate whereas the ld.CIT(A) has directed the AO to adopt LIBOR rate as the base rate for imputing the interest with an appropriate spread befitting the credit standing of the AE. Therefore, we are of the considered view the LIBOR + 200 basis point rate is most appropriate rate and hence, direct the AO/TPO to adopt LIBOR + 200 basis point for imputing interest on overdue receivable. As regards, the argument of ld.AR for assessee that the TPO has not given any credit period, we find that in any trade there is a credit period for payment to services or goods. Therefore the AO is directed to allow normal credit period allowed by the assessee, if any agreed credit period between assessee and AE. If there is no agreed credit period, then the AO is directed to allow standard credit period that the industry is allowing in this line of business.