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2019 (1) TMI 1548 - ITAT HYDERABADTP adjustment - selection of comparable - HELD THAT:- Assessee has been treated as an ITeS back office service provider thus companies functionally dissimilar with that of assessee need to be deselected from final list. Comparability of Capgemini Business services (India) Limited and Hartron Communications Limited rejected Provisions for bad and doubtful debts and bad debts written off as part of operating expenses - HELD THAT:- We find that the DRP has also followed certain decisions of the Tribunal to hold that the provision for bad and doubtful debts do not form part of operating expenses. We agree with the findings of the Coordinate Bench in KENEXA TECHNOLOGIES (P.) LTD. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE -2 (1) , HYDERABAD [2014 (11) TMI 587 - ITAT HYDERABAD] that the provision of bad and doubtful debts is part of the operating expenses. Therefore, respectfully following the decision of the Coordinate Bench, we direct the AO/TPO to consider the provision for bad and doubtful debts both in the assessee as well as comparable cases as part of operating expenses. This ground of appeal is accordingly allowed. Working capital adjustment - denial on the ground that there is a negative working capital adjustment and therefore, no adjustment shall be made - HELD THAT:- In the case of M/s Intoto Software (India) P Ltd vs. ITO, Bengaluru [2013 (10) TMI 599 - ITAT HYDERABAD] the decision of the Hyderabad Bench of the Tribunal in the case of Adaptec (India) P Ltd vs. ACIT [2015 (6) TMI 288 - ITAT HYDERABAD] was considered to direct the AO not to make any negative working capital adjustment. Respectfully following the same, we direct the AO not to make any negative working capital adjustment. Correct numbers with respect to average receivables/payables of the comparables selected in the TP order - we direct the TPO to adopt the correct figure of average receivables/payables for computing the working capital adjustment. Assessee’s grounds are accordingly treated as allowed for statistical purposes.
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