TaxTMI 
TaxTMI 
2019 (10) TMI 1636
X X X X Extracts X X X X
X X X X Extracts X X X X
....rojected by the assessee in the various grounds of appeal filed before the Tribunal is with regard to the addition of Rs. 2,10,63,030 consequent to determination of arm's length price (ALP) of an international transaction of rendering software development services by the assessee to its Associated Enterprise (AE) under the provisions of section 92 of the Act. 3. The assessee was incorporated on 21.12.2000 as a wholly owned subsidiary of GoRemote International Corporation, USA which was subsequently acquired by iPass US in February, 2006. The assessee provides software development services (SWD services) to iPass US and is remunerated on cost + 16% mark up basis for the above services. In this appeal, there is no dispute with regard t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Adjusted margin 30.62% Operating Cost 171,434,124 Arms Length Price (ALP) 1 (130.62% of Operating Cost) 223,826,253 Price received 202,864,223 Shortfall being adjustment u/s. 92CA 21,063,000 5. Insofar as the adjustment on account of working capital is concerned, the assessee submitted before the DRP that the assessee was captive service provider of the AE. The assessee submitted that it is not an entrepreneur, but a captive service provider; all expenses incurred are recovered along with a mark-up. Further, the Assessee does not have borrowings from AEs or third parties. Relevant extracts of the financial statement of the Assessee were furnished as follows :- SOURCES OF FUNDS ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t be made. This argument did not find favour with the DRP and the DRP upheld the action of TPO with the following observations :- " We perused the Annexure-C of the order of the TPO in which the negative working capital adjustment at - 5.80% has been arrived at in applying the similar principles which have been applied in the preceding assessment year which resulted in positive working capital adjustment. The assessee cannot take a contradictory stand by accepting the positive working capital adjustment in the preceding year (which resulted in reduction of adjustment u/s 92CA) and not accepting the negative working adjustment computed on the same principles (which resulted in enhancement of adjustment u/s 92 CA of the Income Tax Ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gative working capital adjustment worked out by the Ld. AO/TPO. 14. Ld.AR submits that this issue stands covered in favour of assessee by decision of this Tribunal in case of F & F India Private Limited in ITA No.195/Bang/2016 & 495/Bang/2017 for assessment year 2011-12 and 2012-13 passed on 03/07/19. 14.1 Ld. CIT DR placed reliance upon the authorities below however could not controvert that this issue is covered by decisions relied upon by Ld.AR. We have perused the submissions advanced by Ld sides in the light of records placed before us. 14.2 We have also perused the decision relied upon by Ld. counsel. It is observed that this issue has been decided by this Tribunal in F & F India Pvt. Ltd.,(Supra) a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se anything as it is compensated on a total cost plus basis. The TPO probably was carried away by the large amount of receivables appearing in the books of the applicant. But the applicant is running its business without any working capital risk while comparable companies have such a risk for them. If at all any working capital adjustment is to be made to this situation, only a positive adjustment has to be made to the comparables so that they are brought on par with the applicant. In view of the same, the Panel directs that negative working capital adjustment to the arithmetic mean margin of the comparables shall not be made." In view of the above, the Panel directs that negative working capital adjustment to the arithmetic mean m....