https://www.taxtmi.com/caselaws?id=470842 Negative working capital adjustment is impermissible when determining the arm's length price of software development services provided by a captive service provider that bears no working capital risk. Where the associated enterprise funds the provider's requirements and the provider has no working-capital borrowings, a working capital adjustment must account for differences in the time value of customer credit between the provider and comparable companies. Because comparable companies bear working capital risk while the captive provider does not, any adjustment to align comparables can only be positive. The Assessing Officer was directed not to reduce the arithmetic mean margin through a negative working capital adjustment. en-us Fri, 25 Oct 2019 00:00:00 +0530 Tue, 11 Aug 2026 13:11:00 +0530 TaxTMI RSS Generator https://www.taxtmi.com/caselaws?id=470842 Negative working capital adjustment is impermissible when determining the arm's length price of software development services provided by a captive service provider that bears no working capital risk. Where the associated enterprise funds the provider's requirements and the provider has no working-capital borrowings, a working capital adjustment must account for differences in the time value of customer credit between the provider and comparable companies. Because comparable companies bear working capital risk while the captive provider does not, any adjustment to align comparables can only be positive. The Assessing Officer was directed not to reduce the arithmetic mean margin through a negative working capital adjustment. Case-Laws Income Tax Fri, 25 Oct 2019 00:00:00 +0530 https://www.taxtmi.com/caselaws?id=470842