TaxTMI 
TaxTMI 
2020 (7) TMI 852
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....appeals of both parties relate to the transfer pricing adjustment made by AO/TPO. 3. The assessee is engaged in the business of software designing, programming, development, testing and related services. 4. At the outset, both the parties submitted that the tax effect involved in the grounds urged by the revenue in its appeal is less than Rs.50.00 lakhs. Accordingly it was submitted that, as per the CBDT circular No.17/2019 dated 8.8.2019, the revenue is precluded from pursuing the present appeal. In view of the above submissions, we dismiss the appeal of the revenue in limini. 5. In the appeal filed by the assessee, various grounds relating to transfer pricing adjustment have been raised. The assessee has also raised additional gr....
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.... and are of the view that the negative working capital adjustment ought not to have been made by the TPO. The Bangalore Bench of ITAT in IT(TP)A Nos.195/Bang/2016 & 459/Bang/2017 for Assessment years: 2011-12 & 2012-13 in the case of FNF India Private Limited Vs. ACIT order dated 3.7.2019 had an occasion to deal with identical issue and the Tribunal held as follows: "14. In Gr.No.11 the Assessee has contended that the TPO and the DRP erred in adding to the average arithmetic profit margin of the comparable companies chosen by the TPO, negative working capital adjustment. On the above ground, it is undisputed that the Hyderabad Bench of the ITAT in ITA.No. 206/Hyd/2014 for Assessment Year 2009-2010 in the case of Adaptec (India) P. ....
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.... its inception and has no working capital contingencies. The company has never taken any loans till date from the date of incorporation nor has incurred any expense for meeting the working capital requirement." We have gone through the submissions and the order of the TPO. The assessee pleaded that the DRP has acceded such a plea in some other case. On examination, we find that the DRP, Hyderabad in the case of Cordys Software India P. ltd., for A.Y. 2008-09 in its directions dated 03.08.2012 has given a finding as under : "7.7. 4 Thus, working capital adjustment is made for the time value of money lost when credit time is provided to the customers. The applicant is not an entrepreneur but a captive service provider. Its e....
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....the case decided by the ITAT Hyderabad Bench and therefore making a negative working capital adjustment without appreciating the fact that the company does not bear any working capital risks, was not correct. Following the aforesaid decision, we allow Gr.No.11 raised by the Assessee. All other grounds relating to Transfer Pricing were not pressed. The grounds with regard to Charging of interest u/s.234A and 234 B of the Act has been challenged on the ground of improper computation. The AO is directed to verify the correctness of the claim of the Assessee and if found correct compute correct liability of interest u/s. 234A and 234 B of the Act." 21. Respectfully following the aforesaid decision of the Tribunal, we hold that the acti....