TaxTMI 
TaxTMI 
2017 (5) TMI 1814
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....sment order under Section 143(3) of the Income-tax Act, 1961 ("the Act") after considering the incorrect adjustments proposed by the Assistant Commissioner of Income-tax, Transfer Pricing Officer - I(1 )(1), New Delhi ("TPO") in his appeal effect order passed in pursuance of the directions of the Hon'ble Dispute Resolution Panel ("DRP"). 2. The learned TPO/AO have erred in calculation of working capital adjusted operating margin over operating cost of ICRA Management Consulting Services Ltd. 3. The learned TPO/AO have erred in following an inconsistent approach with respect to treatment of certain expenses as operating/non-operating in the case of comparables vis-a-vis the assessee while computing their operating margins respectiv....
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....ntatives of assessee appeared before Ld. AO from time to time to furnish submissions as required and called for. 4. Ld. DCIT observed that assessee is engaged in business of providing support services with respect to footwear and apparel manufactured in India. It was observed that as per Form 3 CEB, assessee during the year had undertaken international transactions with its associated enterprises. Ld. AO, therefore, in accordance with provisions of section 92CA of the Act, referred matter to transfer pricing officer (TPO) for determining arms length price. Ld.TPO rejected economic analysis undertaken by assessee and made adjustment amounting to Rs. 1,65,98,268/- with respect to international transactions of provision of support services as....
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....h is reproduced herein: 8. Trade receivables (unsecured) over 6 months 6. Ld. Counsel submitted that by excluding the provision for doubtful debts, working capital adjustment of this comparable has been computed at 6.62% by Ld. TPO. He submitted that Ld. TPO, while calculating working capital adjustment has taken trade receivables at nil, because of which OP/OC comes to 6.62%. The computation of working capital as per Ld.TPO is reproduced herein: 8. Ld. Counsel submitted that DRP had accepted contention of assessee and had directed TPO to allow working capital by observing as under: "The TPO is directed to allow working capital adjustment. However, for this purpose, the DRP East of the view that the average of opening and closing ba....
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....gement Consulting Services Pvt. Ltd., placed in the paper book (the computation has been reproduced hereinabove) it is observed that there are sufficient trade receivables during the year under consideration. It has been submitted by Ld. Counsel that all these details were before Ld. TPO during assessment proceedings and again during the rectification proceedings under section 154 of the Act. 13. Under such circumstances, and in the interest of natural justice, we are of the considered opinion that these figures needs to be considered while deriving working capital adjustment of M/s. ICRA Management Consulting Services Pvt. Ltd., Accordingly, we set aside this issue to file of Ld. TPO for re-computing working capital adjustment in the ligh....
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....RP in its directions directed Ld.TPO to consider consistent approach, while considering expenses as operating/non-operating in the case of both assessee as well as comparable companies, which has not been followed by Ld.TPO. 18. On the contrary, Ld. CIT (DR) submitted that, Ld.TPO did not consider provision for doubtful debts in the case of these 2 comparables as, it has appeared in the financials of these companies for the first time in the year under consideration. He submitted that Ld.TPO compared financials of these comparables with that of preceding 3 years financials, based on which Ld.TPO excluded provision for doubtful debts from being included as operating expenses, and treating it as extraordinary. He relied upon the orders of Ld....