TaxTMI 
TaxTMI 
2015 (9) TMI 1547
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....cted for scrutiny and notices us/. 142(1) and 143(2) were issued. The Assessing Officer called for the various details and referred the case to the Transfer Pricing Officer [TPO] u/s. 92CA of the Income-tax Act, 1961 ["the Act"] for the determination of the arm's length price (ALP) in respect of international transactions entered into by the assessee. 4. The TPO in her transfer pricing order dated 31.10.2011 passed u/s. 92CA of the Act, made a transfer pricing adjustment of Rs. 21,131,649 to the ALP adopted by the assessee. The AO subsequently passed the final assessment order dated 30.01.2012 u/s. 143(3) r.w.s 144C(3) r.w.s. 144C(4) of the Act assessing the total income at Rs. 2,11,31,649 after allowing deduction of Rs. 1,80,54,350 u/s. 10A of the Act, resulting in a . demand of Rs. 86,55,052. 5. During the relevant financial year 2007-08, international transactions that took place between the assessee and its associated enterprises (AEs) was provision of SWD services to them at a price of Rs. 170,844,091, for which a TP adjustment was made by the TPO to an extent of Rs. 21,131,649. 6. It is stated that assessee was not in receipt of notice for hearing issued by the Ld. C....
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....Thirdware Solutions Ltd. 10. Wipro Ltd. (Seg) 11. Lucid Software Ltd. In short, out of the 20 comparables selected by the TPO, the assessee objected to 11 comparables listed above as functionally dissimilar and not to be included in the TP study. 10. With respect Avani Cimcon Technologies Ltd., it was the assessee's submission that the assessee offers diversified operations such as software solutions, software development, consulting and information technology services to various clients. The assessee was also a products development company and has developed innovative product lines such as Dxchange, CARMA etc. Reliance was placed on the decision of 3DPLM Software Solutions Ltd. in IT(TP)A No.1303/Bang/2012 for AY 2008-09 and Trilogy E-Business Software India (P) Ltd. in ITA No.1054/Bang/2011 for AY 2007-08. 11. We find that there is merit in the objection of the ld. counsel for the assessee and hence we direct that Avani Cimcon Technologies Ltd. be excluded from the list of comparables selected by the TPO. 12. With regard to the other 8 comparables selected by the TPO, the ld. counsel for the assessee submitted that these companies were func....
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.... P. Ltd. (ITA No.1054/Bang/2011 (AY 2007-08) - Systech Integrators India Pvt. Ltd., ITA No.1283/Bang/2012 (AY 2008-09) - Telcordia Technologies India Pvt. Ltd., ITA No.7821/Mum/2011 (AY 2007-08) 14. With regard to the other three comparables, the ld. counsel for the assessee submitted that these companies are also to be excluded from the list of comparables selected by the TPO for the following reasons:- 1. Avani Cimcon Technologies Ltd. Functionally different, diversified operations: The company offers software solutions, software development consulting and information technology services to various clients. Product development company The company has developed innovative product lines such as Dxchange, CARMA etc. It was submitted that the website of this company substantiates the same. 2. Infosys Technologies Full-fledged risk assuming entrepreneur Ltd. It is a giant company in the area of software development and assumed all risks leading to higher profits and is therefore not comparable with to the assessee which is a captive unit of the parent company and assumes only limited risks. Holds technology and marketing intangible It is actively engaged in ....
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....sentially an adjustment for the opportunity cost of making investments in working capital (i.e., inventories, accounts receivable/debtors and accounts payable/creditors) which require capital and operating assets. At arm's length, an uncontrolled entity will expect to earn a market rate of return on that capital, independent of its operations. However, the amount of capital required varies greatly, because the level of inventories, debtors and creditors measured as a percentage of the total cost varies. There is an effect on profits from investing in different levels of working capital due to differences reflected in cash collection cycle. Such differences in collection cycle imply differences in credits granted to customers and such a credit function is akin to an additional service for which markets are willing to pay. iv. High levels of working capital create costs either in the form of incurred interest or in the form of opportunity costs. Therefore, no profit maximizing/ entrepreneurial firm would hold working capital without a return. v. A working capital adjustment analysis seeks to adjust the profitability of each comparable company based on the working capital position ....
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....nces between the tested party and an uncontrolled comparable that would materially affect the profits determined under the relevant profit level indicator, adjustments should be made according to the comparability provisions of 1.482-1(d)(2). In some cases, the assets of an uncontrolled comparable may need to be adjusted to achieve greater comparability between the tested party and the uncontrolled comparable. In such cases, the uncontrolled comparable's operating income attributable to those assets must also be adjusted before computing a profit level indicator in order to reflect the income and expense attributable to the adjusted assets. In certain cases it may also be appropriate to adjust the operating profit of the tested party and comparable parties. For example, where there are material differences in accounts payable among the comparable parties and the tested party, it will generally be appropriate to adjust the operating profit of each party by increasing it to reflect an imputed interest charge on each party's accounts payable." x. Making a working capital adjustment is an attempt to adjust for the differences between the tested party and potential comparables with a....
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....Limited - ITA No.120/PN/2o11(AY 2006-07) (page 179-189 of Case Law Compendium, para 18 - 33) c. TNT India Private Limited - ITA No. 1442(BNG)/o8 (Page 281 of the Case Law Compendium, para 13.2) d. Sony India Private Limited- 1731/Del/2009 e. Mentor Graphics (Noida) Pvt. Ltd. Vs. DCIT (112 TTJ 408) (ITA No. 1969/D/2006) (AY: 2002- 03) (page 337 of Case Law Compendium, para 27) f. E-Gain Communications (P) Ltd. vs. ITO (118 ITD 243) (ITA No. 1685/Pn/2007) (AY: 2004-05) (page 247 - 249 of Case Law Compendium, para 36). 19. We find that the claim of the assessee for providing working capital adjustment is to be upheld and hence we direct the AO/TPO to work out the same. 20. The ld. counsel for the assessee also brought to our notice the grounds of appeal at paras 5 and 6 of the appeal memo. Para 5(a) reads as follows:- "That the CIT(A) based on mere surmise and conjecture had concluded that the assessee is not interested in pursuing the grounds raised in the appeal and accordingly erred in upholding the order of AO." 21. Ground No.5(b) states that the AO erred in treating an amount of Rs. 5,85,777 being expenditure incurred on computer spare parts and consumable....