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2018 (5) TMI 1808 - ITAT BANGALORETPA - addition made on account of adjustment to ALP survives - directions of the DRP results in reduction of the addition on account of adjustment to ALP as suggested by the TPO - Held that:- Companies functionally dissimilar with that of ITES segment of the Assessee need to be deselected from final list. Working capital adjustment - Held that:- The working capital adjustment ought to be allowed on actuals upon taking into consideration the correct value of receivables and payables. We are of the view that it would be appropriate to direct the TPO/AO to examine the grievance of the Assessee in this regard and re work the working capital adjustment in accordance with law. Foreign exchange fluctuation is operating in nature - the margin of the Assessee has to be computed upon including the gains from the said fluctuation - Held that:- In the light of Rule 10B(3) of the Rules and the business cycle in the relevant business, the comparability will not be materially affected if the foreign exchange gain is considered as reflected in the accounts of the comparable companies as available in public domain. Respectfully following the decision of the ITAT Bangalore in the case of SAP Labs (2010 (8) TMI 676 - ITAT, BANGALORE) we hold that the DRP was justified in directing the AO to consider the foreign exchange gain or loss as operating in nature. Therefore, in light of the above, this ground of the Revenue is liable to be dismissed Regarding 1% risk adjustment, it is settled position that assesses that are captive service providers assume less risk compared to companies in an uncontrolled situation and therefore, an adjustment is to be provided to the margins of the comparables to mitigate the said difference. This Hon'ble Tribunal has consistently upheld the above approach and has directed the grant of risk adjustment to the margins of the comparables. In this regard, reference may be made to the decision of ITAT Bangalore Bench in the case of Bearing Point Business Consulting (PR) Ltd. v. DOlT (2014 (4) TMI 997 - ITAT BANGALORE), where this Hon'ble Tribunal has directed the grant of risk adjustment in the case of an assessee placed similarly to that of the Assessee herein. No grounds to interfere with the order of the DRP in this regard and dismiss the relevant ground of appeal of the Revenue.
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