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2023 (4) TMI 843 - ITAT BANGALORETP Adjustment - comparable selection - SWD Services Segment - HELD THAT:- Companies functionally dissimilar with that of assessee need to be deselected from final list. ITeS Segment - We notice that in the order giving effect to the DRP directions, the TPO had considered 14 comparables, the 35th percentile of the average margin of which is 10.43% and the 65th percentile is 19.54%. We also notice that the operating margin of the assessee as has been considered by the TPO works out to 15.16% (rectification petition filed u/s. 154). Therefore, we see merit in the submission of the ld. AR that the assessee’s margin is within the arm’s length even as per the TPO’s order. We also notice that the TPO in spite of the fact that the assessee’s margin is within the range, has proceeded to make a TP adjustment which, in our view, is not warranted. We therefore direct the TPO to consider the submissions made by the assessee in the rectification petition dated 22.8.2022 and pass the order accordingly. Working capital and Risk adjustment - TPO did not give working capital adjustment for the reason that the assessee has demonstrated that there is a difference in the level of working capital employed by the assessee vis-à-vis the comparables - HELD THAT:- Working capital adjustment should be allowed and direct the AO/TPO to examine the issue afresh after affording the Assessee opportunity of being heard. Interest on outstanding receivables - TPO considered the interest on receivable as a separate international transaction and accordingly which is upheld by the DRP - HELD THAT:- As relying on Tivo-Tech Pvt. Ltd. [2023 (2) TMI 837 - ITAT BANGALORE] we hold that the interest on delayed receivable be calculated at LIBOR + 2%. It is ordered accordingly.
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