TaxTMI 
TaxTMI 
2025 (9) TMI 571
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....) TP adjustment in respect of interest on overdue receivables of Rs. 10,62,805. (ii) Claim for allowance of interest on Compulsory Convertible Debentures [CCDs] of Rs. 6.11 crores; & (iii) Disallowance of Rs. 0.09 crores u/s. 40(a)(i) of the Act in relation to payment made towards the cross charge. 3. The brief facts of the case show that assessee is a company who filed its return of income on 31.12.2020 being wholly owned subsidiary of TE Singapore engaged in providing shared services in the areas of Information Technology, Finance back-office, Human Resource, customer support for TE group for which it is compensated on cost plus mark-up basis. 4. As assessee has entered into international transactions, reference u/s. 92CA was made after issuing notice u/s. 143(2) of the Act, which was approved by the PCIT and thereafter the TPO passed an order u/s. 92CA(3) of the Act on 11.5.2023 proposing an adjustment of Rs. 7,95,56,559. 5. Subsequently a draft order was passed on 12.9.2023 which was objected before the ld. DRP. The ld. DRP passed its directions. Based on the directions, the TP adjustment of Rs. 7,74,88,000 was reduced to Nil, interest on delaye....
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....ee has claimed working capital adjustment. He submits that at page 46 a detailed note of working capital adjustment is provided wherein if the working capital adjustment is provided, the median margin of the assessee is 11.35% and at page 49 the post net working capital adjustment was also provided. He further referred to para 4 at page 23 of 43 of DRP directions wherein the working capital adjustment was not granted. He referred to the direction and submitted that it is held by the DRP that reasonable actuarial adjustment is not possible as the difference in working capital in working capital requirement itself is based on various assumptions. Further the assessee has failed to demonstrate such material differences as to warrant an adjustment. He submits that denial of working capital adjustment to the assessee is not proper. If the same is granted automatically the difference in ALP of interest on overdue receivable will obliterate. 10. The ld. CIT(DR) relied on the order of the TPO and direction of the DRP stating that assessee's working capital adjustment is difficult to measure and hence not granted. 'The ld. DR further argued that adjustment is with respect to interest on ....
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..... No doubt, the working capital adjustment represents one of the most sophisticated comparability adjustment in TP analysis to determine the ALP. The main point of working capital adjustment rests on economic reality with difference in inventory levels, payment terms and credit arrangement materially impact the profit of the comparables or the tested party. The theory behind working capital adjustment is based on the business reality with independent parties in market would factor in the cost of financing with commercial terms. It is also important that TNMM is applied as the most appropriate method, the differences in the working capital structure between the tested party and the comparables can significantly sway profit margin comparison. The complexities of the capital adjustment increase when jurisdictions, currencies, regulatory environments and other factors change, but that cannot deter to make appropriate adjustment to the ALP. It cannot be denied that working capital adjustments may be complex, but should be granted. It becomes more necessary when material differences exist between the working capital structure and of tested party and comparable companies. The material dif....
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....extent of Rs. 65,83,293 and therefore the balance sum of Rs. 5,45,30,728 which was supposed to be claimed in the return of income was inadvertently missed while filing return of income. The assessee also pressed into service the provisions of section 94B stating that assessee company is eligible to claim 30% of the Earnings Before Interest, Tax, Depreciation and Amortization, etc. as interest expenses. 17. The ld. DRP held that the assessee has made a fresh claim during the assessment proceedings without filing a revised return, so cannot be entertained. It was further held that assessee is assisted by knowledgeable auditors and therefore the claim is correctly rejected by the AO. The AO also followed the decision of the Supreme Court in the case of Goetze India Ltd., 204 CTR (SC) 182 that assessee can make claim for deduction only by filing revised return within the time allowed. 18. The ld AR submits that assessee has merely requested to correct the claim of expenditure. The ld. AR's argument is that total expenditure payable is Rs. 6.11 crores, out of which assessee has already claimed finance cost of Rs. 65,83,000/- and therefore it is merely a correction of the claim and....
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....ommunication by email dated 11.5.2023 from DCIT, Circle 7(1)(1), Bangalore, asking for the object of filing revised return. The assessee replied to the same on 15.5.2023. The assessee also explained the respective computation of total income and the manner of accounting. However, as there is no response, the claim was made before the AO which was rejected by applying the decision of Hon'ble Supreme Court in the case of Goetze India Ltd. We find that the claim is also made before us to grant the above deduction. The Hon'ble Karnataka High Court has categorically held that there is no fetter on the right of assessee to make a fresh claim before the appellate authority, even if the same is not claimed in the original return of income, if no revised return of income is filed. Such is the mandate in 128 taxmann.com 1. It is also the claim of assessee that deduction of above sum is already considered in assessee's own case for AY 2017-18 as well for AY 2018-19. In view of this, we restore the issue of allowability of interest expenditure back to the file of the ld. AO, with a direction to the assessee to substantiate the claim and its quantification, which the ld. AO may examine an....