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of <h1>Tribunal directs re-examination of transfer pricing adjustments emphasizing functional comparability and judicial precedents.</h1> <h3>M/s. Ocwen Financial Solutions Private Limited Versus. The Assistant Commissioner of Income-tax Special Range – 5 Bangalore.</h3> M/s. Ocwen Financial Solutions Private Limited Versus. The Assistant Commissioner of Income-tax Special Range – 5 Bangalore. - TMI Issues Involved:1. Grant of working capital adjustment.2. Exclusion of certain comparables.3. Inclusion of certain comparables.Detailed Analysis:Issue 1: Grant of Working Capital AdjustmentThe assessee claimed that the Transfer Pricing Officer (TPO) did not allow any adjustment for working capital, which was also not granted by the Dispute Resolution Panel (DRP). The assessee relied on the case of M/s. Huawei Technologies India (P) Ltd. v. JCIT, where the Tribunal held that working capital adjustments should be allowed as per actuals. The Tribunal noted that the DRP's basis for rejection was no longer valid in light of this ruling. The Tribunal directed the AO/TPO to consider the workings in light of the ruling in the Huawei Technologies case and allow appropriate adjustments.Issue 2: Exclusion of ComparablesThe assessee sought exclusion of Infosys BPO Limited, SPI Technologies Pvt. Ltd., and Eclerx Services Limited on grounds of functional dissimilarity. The Tribunal referred to its previous rulings in similar cases, such as M/s. Global E-Business Operations Pvt. Ltd., where these companies were excluded due to functional dissimilarities. The Tribunal directed the TPO to exclude these companies from the list of comparables and re-compute the Arm's Length Price (ALP) of the international transaction.Issue 3: Inclusion of ComparablesThe assessee sought inclusion of Informed Technologies Limited, Ace BPO Services Pvt. Ltd., and Crystal Voxx Limited as comparables. The Tribunal referred to previous cases, including M/s. Global E-Business Operations Pvt. Ltd., where these companies were considered for inclusion. The Tribunal restored the issue to the files of the AO/TPO for de novo consideration, directing them to examine whether these companies could be included as comparables. Specifically, the Tribunal noted that in the case of Ace BPO Services Pvt. Ltd., the TPO had accepted it as a comparable in the assessment year 2015-2016, and thus, the issue was restored for fresh consideration.Conclusion:The appeal was partly allowed, with directions to the AO/TPO to re-examine the issues of working capital adjustment and the inclusion/exclusion of certain comparables in accordance with the Tribunal's findings and relevant case law. The Tribunal emphasized the need for functional comparability and adherence to established judicial precedents in transfer pricing assessments.
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