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2018 (8) TMI 1205 - AT - Income TaxTransfer pricing - assessee applied Transactional Net Margin Method (TNMM) as the Most Appropriate Method (MAM) and OP/OC ratio was taken as the Profit Level Indicator (PLI) in the TNMM analysis. The assessee had taken itself as the tested party and the PLI was computed at 19.41%. The assessee chose a set of nine comparables with a PLI of 22.41%. Thus, the assessee considered its international transaction to be at arm’s length. - The TPO drew a final set of nine comparables with an average PLI of 26.24% and proposed an adjustment of ₹ 13,20,31,648/- with respect to Arms’ Length Price (ALP) of the international transactions. Held that:- keeping in view the principle of consistency and also respectfully following the ratio laid down by the Coordinate Bench, we direct the TPO to examine the facts and allow the depreciation adjustment to the assessee In view of the facts being undisputed regarding the assessee not having raised any objection before the Ld. DRP regarding working capital adjustment to be granted to it as well as in view of the settled judicial precedent, we direct the TPO to re-compute the margins without making any negative working capital adjustment. Accordingly, this ground stands allowed. Issue of reimbursements - While agreeing with the contention of the assessee that reimbursements should be excluded from both the assessee’s margins as well as the margins of the comparables, we deem it fit to restore the issue to the TPO/Assessing Officer for examining the claim of the assessee in light of the evidences filed by the assessee along with its application dated 21.1.2016 and submitted to the office of DCIT – TP- 2(3)(1) New Delhi. Thus, this ground stands allowed for statistical purposes. Notional interest being charged on receivables - the adjustment made by the TPO/Ld. DRP on account of interest on receivables is not sustainable in the eyes of law in the case of the assessee as, undisputedly, the taxpayer is a debt free company. Consequently, this ground is also allowed in favour of the assessee. Other issues - Selection of comparable and disallowance u/s 14A r/w Rule 8D. The appeal of the assessee stands allowed
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