2024 (12) TMI 1775

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....he appellant has raised altogether 5 grounds of appeal contesting the order u/s 143(3) r.w. 144C(13) dated 28.12.2018 of Ld. AO passed w.r.t. recommendations of DCIT-TPO u/s 92CA(3) dated 31.10.2018. 3.0 Ground of appeal No.1 to 3 is general in nature and does not require any specific adjudication and hence dismissed. 4.0 Ground of appeal No. 4, in view of the decision in ground No.5 hereunder, is academic in nature and does not require any specific adjudication and hence dismissed. 5.0 The first issue arising from ground of appeal number 5 is regarding the non-grant of working capital adjustments by the Ld. TPO. The Ld. Counsel for the assessee submitted that the issue is squarely covered by the decision of Hon'ble Coordinate Benc....

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....sion of the ITAT., Chennai in the case of M/s. Foxteq Services India Pvt. Ltd. in ITA No. 174/Mds/2016, where it was held that without comparing working capital employed by comparable companies and that of the assessee, no adjustment can be made in respect of international transactions of the assessee. The learned CIT(A), after considering relevant facts has rightly held that the TPO is required to provide working capital adjustments in comparability with the comparable companies selected by the Assessing Officer for the purpose of determining arm's length price of international transactions of the assessee. 7. We have heard both the parties, perused material available on record and gone through orders of the authorities below. We ....

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.... reasonably accurate adjustments to mitigate the effects of such differences. (ii) On perusal of detailed submission relating to working capital adjustment, it is pertinent to note that working capital of the company have direct bearing in the profitability of the appellant and comparable companies. (iii) The appellant demonstrated this by presenting the working capital position and also furnished the details of the working capital days. It can be observed that a wide gap exists between the working capital cycle of the appellant and the comparable companies chosen i.e. 16.29 days of the appellant vis-a-vis 58.44 days of working capital cycle of the comparables. This difference would materially affect the operating margins ....

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....is of the considered opinion that the capital employed on the assessee, including working capital, is one of the relevant factors for the purpose of determining the arm's length price. Therefore, the capital employed by the assessee, including the working capital, and that of comparable companies needs to be taken into consideration. Without comparing working capital employed by the comparable companies and that of the assessee, this Tribunal is of the considered opinion that there cannot be any transfer pricing adjustment.. 12. Hence, I am of the considered view that for the purposes of transfer pricing analysis any difference arising on account of working capital positions is required to be factored, so as to make the comparabili....