TMI Blog2023 (1) TMI 399X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to section 92B of the Act. We also perused decision relied upon by Ld.AR. In our considered opinion, these are factually distinguishable and thus, we reject argument advanced by Ld.AR. Alternatively, it has been argued that working capital adjustment subsumes sundry creditors. In such situation computing interest on outstanding receivables and loan and advances to international transaction would amount to double taxation. Hon'ble Delhi Tribunal in case of Orange Business Services India Solutions Pvt. Ltd. 2018 (2) TMI 1151 - ITAT DELHI - we deem it appropriate to set aside the impugned order on this issue and remit the matter to the file of the Ld.AO/TPO for deciding it in conformity with the above referred judgment. Needless to say, the assessee will be allowed a reasonable opportunity of being heard in such fresh proceedings. Working capital adjustment for computing the margin of the comparables - HELD THAT:- As decided in Huawei Technologies India P. Ltd. 2018 (10) TMI 1796 - ITAT BANGALORE there would remain no comparable uncontrolled transactions for the purpose of comparison. The transfer pricing exercise would therefore fail. Therefore, in keeping with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of information under section 133(6) of the Act, which tantamounts to choosing secret comparable companies whose information were not available in public domain while undertaking the TP study for the respective financial year and without prejudice. not sharing the responses received under section 133(6) with the Appellant. 2.5 Conducting a fresh comparability analysis by rejecting certain filters applied by the Appellant in the TP documentation as below: Research and development (R D) 3% of sales Net fixed assets 200% of sales 2.6 Applying additional / modified filters in the fresh comparability analysis undertaken as below: Companies with export service income 75% of sales were selected Companies whose income from core service 75% of sales were selected (the Appellant had also applied this filter with a lower threshold of 50%) Companies with employee cost 25% of operating cost were selected Companies with different financial year ending were rejected 2.7. Using data, which was not contemporaneous, and which was not available in the public domain at the time of preparing the TP documentation. 2.8 Applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... routine operating cosfs to be for determining the mark-up of the comparable companies 3. That on the facts and in the circumstances of the case, the learned Panel and the learned AO erred in making an adjustment of INR 1,954,655 in respect of notional interest on outstanding receivables from associated enterprises (`AEs') to the income of the Appellant by considering overdue receivables from AEs as a separate international transaction under the provisions of section 92B of the Act. 3.1 That without prejudice, the learned AO / Panel ought to have considered the weighted average realization period of receivables for the Appellant, which is only 28 days in respect of the SWD services segment and 29 days in respect of the MSS segment. 3.2 That without prejudice, the learned AO / Panel erred in ignoring that, if at all a TP adjustment has to be sustained with respect to notional interest on overdue receivables. interest should be computed using LIBOR as against SBI short term deposit rate. 4. That on the facts and in the circumstances of the case, the learned Panel and the learned AO erred in not providing working capital adjustment for determining the arm&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services 3,56,17,182/- Receipts from provision of resource augmentation services 8,29,521/- Reimbursement of travel expenses 20,38,151/- Reimbursement of expenses received Resource augmentation services 74,61,814/- Reimbursement of expenses received others 52,63,595/- Remittance made on behalf of employees towards RSU 12,74,20,517/- Reimbursement of expenses paid towards ESPP Rs.5,90,21,834/- 2.4 The Ld.TPO noted that the assessee used TNMM as the most appropriate method and OP/OC as PLI to compute its margin under SWD and ITES segment. The assessee computed its margin at 11.4% for SWD segment and 7.99% for MSS segment. The assessee used following comparables under both the segments having SWD Segment: Sl.No. Name of the company Weighted average 1. CG-VAK Software Exports Ltd. 9.83 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under both the segment was within +/- 5% range, the assessee concluded its transaction under SWD and MSS segment to be at arms length. Dissatisfied with the approach by the assessee the Ld.TPO applied following filters: SWD segment: Filters applied by the Ld.TPO 1. Companies for which financial information for 1 out of 3years was not available rejected. 2. Companies having different financial year ending (i.e. not March 31,2016 or data of the company which does not fall within 12-month period i.e. 01-04-2015 to 31- 03-2016 rejected. 3. Companies whose SWD service income is less than 75% of its total operating revenues excluded. 4. Companies having more than 25% related party transactions of the sales excluded. 5. Companies who have export service income less than75% of the sales excluded. 6. Companies with employee cost less than 25% of turnover excluded. 7. Companies having positiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. 36.90 13. Infosys Ltd. 38.61 14. Aspire Systems (India) Pvt. Ltd. 39.28 15. Cybage Software Pvt. Ltd. 66.45 35th Percentile 24.83 Median 27.34 65th Percentile 3 0.89 MSS Segment: Sl. No. Name of the Company Mark-up on Total Costs (WC unadj) (in %) 1. Quadrant Communications Ltd. -0.34 2. Esha Media Research Ltd. -1.60 3. Goldmine Advertising Ltd. 5.94 4. Pressmine Advertising Ltd. 12.99 5. Ugam Solutions Pvt. Ltd. 17.75 6. Majestic Research Services Solutions Ltd. 20.94 7. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee raised objection before the DRP. The directions by the DRP are as follows: (i) The DRP directed recomputation of margin of CG-VAK Software Exports Ltd., Aspire Systems (India) Pvt. Ltd., Cybage Software Pvt. Ltd., Nihilent Ltd. and Cigniti Technologies Ltd under SWD segment. In MSS segment, Quadrant Communications Ltd., Goldmine Advertising Ltd., Pressman Advertising Ltd., Ugam Solutions Pvt. Ltd., Killick Agencies Marketing Ltd. and Scarecrow Communications Ltd. Were directed by the DRP for recomputation of margin. (ii) Further, the DRP directed the inclusion of Benchmark IT Solutions India Pvt. Ltd., while the other objections of the Appellant on inclusion and exclusion of comparables came to be rejected. (iii) All other objections of the assessee on inclusion and exclusion of comparables came to be rejected. 2.10 The Ld.AO passed the final assessment order in line with the directions of the DRP, by recomputing the TP adjustment at Rs.16,79,59,549/- for SWD segment and TP adjustment originally proposed was incorporated. 2.11 Aggrieved by the impugned order, the assessee preferred the appeal before this Tribunal. 3. The Ld.AR submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d scope. Based on the specification document, ARM India team executes the specifications. The services provided by ARM India are in the nature of projects / assignments identified by ARM UK and sub-contracted to ARM India from time to time. There has not been any change in the operating model followed by ARM India in the provision of contract software development services to ARM UK and ARM US in the prior three years. ARM India is compensated with a cost plus arm's length mark-up of 15% for the provision of contract software development services. b) Contract marketing and sales support services: ARM India also provides marketing and sales support services for ARM UK products in India. These services are provided under the marketing and sales support services agreement entered into with ARM UK. The marketing and sales support services include conducting market research and forecasts, distribution of promotional materials and the use of advertising materials provided by ARM UK, participation in trade shows, technical symposium and addressing inquiries and information requests from customers. There has not been any change in the operating model followed by ARM India in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l solutions, infrastructure management services, platform-based service which cannot be equated to the routine software service provider like the assessee. The Ld.AR submitted that this company is also engaged in activities such as cloud computing, infrastructure management, analytics information management, etc., and that No segmental details are available. The LdAR submitted that this company is also engaged in trading IT related products has cost of brought out items and has won awards and recognitions for innovative products. He relied on pages 969, 979, 922, 986 of the annual report paper book in support. The Ld.AR submitted that this company is a market leader and enjoys significant benefits on account of ownership of marketing intangibles, intellectual property rights and business rights and brand value. As a result of this high brand value, the company enjoys a high bargaining power in the market. He relied on pages 943, 946, 920, 1011 of the annual report paper book in support. Referring to page 1023, 1015 the Ld.AR submitted that this company has significant onsite activities. Further, he submitted that during the year under consideration, this company has extraordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r functional dissimilarities. On the contrary, the Ld.DR relied on the orders passed by the authorities below. We have perused the submissions advanced by both sides in light of records placed before us. 16. We note that the decision of Hon ble Delhi Tribunal in case of Global Logic India Ltd.,(supra) considered these comparables for assessment year 2016-17 and has held them to be functionally not similar with a captive service provider like that of the assessee before us. Further The assessee in Global Logic India Ltd.,(supra) is also as captive service provider as observed by Hon ble Delhi Tribunal therein. Hon ble Tribunal observed as under: COMPARABLE COMPANIES SOUGHTTO BE EXCLUDED BY THE TAXPAYER LARSEN TOUBRO INFOTECH LTD. (L T) 14. The taxpayer sought to exclude L T from the final set of comparables chosen by the ld. TPO for the purpose of benchmarking its international transactions qua SDS on the grounds inter alia that it is functionally dissimilar; that its segmental data is not available; that L T is a huge brand with ownership of intangibles and on account of extra ordinary event; and on the ground that this company was rejected in taxpaye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed three business segments. The first segment is service cluster which includes banking, financial services, insurance, media and entertainment, travel and logistics and healthcare. The second segment industry cluster which includes Hi Tech and consumer electronics, consumer, retail and Pharma, energy and process, auto Mobile and aerospace, plant equipment and industrial machinery, utilities and E C. The third segment, is telecom segment which refers to product engineering services (PES) which has been discontinued in this year. Regarding the PES, in Director's report, (available on page S-1225 of the Annual Report or page 96 of PB-2), it is reported as under : TRANSFER OF PRODUCT ENGINEERING SERVICES (PES) BUSINESS TO L T TECHNOLOGY SERVICES LIMITED (LTTSL) AND WINDING UP OF GDA TECHNOLOGIES INC. (GDA INC.) As part of business restructuring undertaken within L T Group, it was decided to consolidate the engineering services business under a separate subsidiary of L T, L T Technology Services Ltd. (LTTSL). Pursuant to this, the Company initiated and completed transfer of its Product Engineering Services (PES) Business Unit to LTTSL effective January 1, 2014, PES Business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dinary event under which Larsen Toubro Infotech Ltd. initiated and completed transfer of its Product Engineering Services Business (PES) Unit to L T Technology Services Ltd. w.e.f. January 1, 2014 as part of the business restructuring undertaken within the Larsen Toubro group. Though the initiation started from 1-1-2014 but the whole effect of the transaction was during the year under consideration. Further, Larsen Toubro Infotech Ltd. during the year under consideration acquired Information Systems Resource Centre Private limited ( ISRC ) thereby making it wholly owned subsidiary and because of such extraordinary event of acquisition, the said concern cannot be held to be a valid comparable and thus has to be excluded from the final set of comparable. Accordingly, we hold so. 20. In view of the facts inter alia that L T is into various segments having no segmental financials, having huge brand value and intangibles is not a suitable comparable vis- -vis taxpayer which was working as a captive entity and that contention raised by the ld. DR that under TNMM minor dissimilarities do not affect the overall comparability is not sustainable because though it is a taxpayer&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ftware development service provider which has been affirmed by Hon'ble Delhi High Court in ITA 17/2016 order dated 6-1-2016. So, we order to exclude Thirdware from the final set of comparables. INFOBEANS TECHNOLOGIES LTD. (INFOBEANS) 44. The taxpayer sought exclusion of Infobeans as a comparable again on ground of functional dissimilarity, it also being into providing services viz. software engineering services primarily in Custom Application Development (CAD), Content Management Systems, Enterprise Mobility, Big Data Analytics, UX UI, Automation Engineering Services, as is evident from its financials, available on page 123 of the annual report paper book. 45. The taxpayer also brought on record profile of the Infobeans at pages 58 to 60 of the appeal memo wherein it is claimed by the Infobeans that it is providing wide range of services under four verticals i.e. services, automation, enterprise and industries and under the automation services verticals, the company is providing advanced robotic process automation services. Since Infobeans is into diversified activities it cannot be a suitable comparable vis- vis the taxpayer which is a routine software d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gineering and solutioning for Internet of Things (IoT), product engineering and professional services to ISVs and enterprises, IP products, IT services, development of software products and offers complete product life cycle services without there being separate segmental information disclosed in its Annual Report for such activities . He placed reliance on page 1421, 1592, 1608, 1641 of the annual report paper book. It is submitted that Persistent Systems made significant investments towards research and development activities in the relevant previous year. Persistent has collaborated with researchers from IGIB, JNU, IISER-Pune and NCL to develop SanGeniX - an DNA sequencing using Next Generation Sequencing (NGS) technology), eSkIN-will help discovery of new pharmaceutical and cosmetic products to empower pharmaceuticals and cosmetic companies to predict the effects of their products on human skin). He placed reliance on page 1421 of the annual report paper book. Persistent has established persistent labs which focuses on latest technologies viz., gesture computing, machine learning etc. Using the innovations of Persistent labs. The Ld.AR further submitted that this company part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed assets in the nature of intellectual property. He placed reliance on 1904, 1944, 1984 of annual report paper book. The company owns significant brand value and focuses immensely on brand building. The Ld.AR submitted that, this company heavily focuses on research and development activity and incurs significant expenditure for this account and for the financial year relevant to assessment year under consideration, the company incurred research and development expenses of Rs. 415 crores. He placed reliance on page 1942 of annual report paper book. The Ld.AR submitted that, this company for the year under consideration has earned abnormally high profit with margin of 38.61%, which makes it incomparable with the assessee. The Ld.AR submitted thus submitted that this company is not functionally similar with that of assessee who is a captive service provider to its AE. It is also submitted that these comparables are not functionally similar with that of the assessee as has been observed by Coordinate Bench of this Tribunal in following cases: 1. Decision of Hon ble Mumbai Tribunal in case of Red Hat India Pvt. Ltd. vs. Addl. CIT reported in (2022) 136 taxmann.com 52. 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecords placed before us. We note that this company earns its revenue from power generation and it has nothing to do with the rendering of software development service. In fact, we note that this company is a full fledged entrepreneur in the business of power generation and therefore is not comparable functionally with a captive software service provider like assessee. Nothing is been placed by the Revenue contrary to the above observation. We therefore respectfully following the above view, direct the Ld.AO/TPO to exclude Aspire System India Pvt. Ltd. from the final list. 23. Nihilent Technologies Limited It is submitted that, this company is functionally dissimilar to the assessee and therefore ought to be rejected from the final list of comparables. It is submitted that, services rendered by this company are wide in range and diversified. The Ld.AR submitted that, the company is engaged in diversified activities. It is submitted that, it renders services in the nature of consulting, software development and product development, provision of business consulting in the area of the enterprise transformation, change and performance management, digital transformation, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is- -vis assessee, who is a low risk entity working on cost + markup model. Hence, Nihilent is ordered to be excluded as a comparable. Nihilent Ltd. 46. The assessee sought exclusion of Nihilent Ltd. as a comparable on the ground that it is functionally dissimilar vis- -vis assessee. This objection was also raised before the Ld. DRP but rejected. The assessee relied upon website of the company which is made available at page A 412 of the paper book wherein Nihilent Ltd. is shown to be engaged in providing advanced analytics, artificial intelligence, blockchain, business intelligence, data signs, cloud services etc. The annual financials of this company available at page A412 A413 of the paper book shows that it is rendering Enterprise transformation and change management, Digital transformation services and Enterprise IT services but segmental financials are not available as is apparent from its financials available at page A305, A412 A413 of the paper book. When this company is into various segments but segmental financials are not available it cannot be a valid comparable vis- -vis assessee which is a routine software development service provider working on cost + marku ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we direct the Ld.AO/TPO to exclude Cybage Software Pvt.Ltd., from the final list. 25. R.S Software (I) Pvt.Ltd: It is submitted that, this company is engaged in diversified activities, which are not similar to the services rendered by the assessee. The company is into custom application development, quality assurance and testing, application maintenance and support, strategic consulting, in respect of which, segmental details are unavailable. The company is engaged in development of platform services and is rendering data analytics services, which are different from the routine SWD services rendered by the assessee. The data analytics services rendered by the company will fall within the definition of KPO services, which are incomparable to the services rendered by the assessee. It is submitted that this company conducts research and development work in the areas of real time analytics, MDM, proximity, payments, digital commerce, mobile payments, testing, automation, personalised loyalty in payments and merchant management in payments laboratory. On the contrary, the Ld.DR relied on the orders passed by the authorities below. We have perused the submissions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DRP has failed to do so, we are of the view that the issue regarding inclusion of the aforesaid companies as comparable companies should be set aside to AO/TPO for fresh consideration in the light of the information available in public domain. Thus ground No. 7 is treated as allowed for statistical purposes. Respectfully following the above view, we remit the comparables back o the Ld.AO/TPO for fresh consideration in the light of information available in public domain. Accordingly this ground stands allowed for statistical purposes. 27. Ground No. 2.12 : That Killick Agencies Marketing Ltd., Scarecrow Communications Ltd., and iRunway India Pvt. Ltd., ought to be excluded from the final list of comparables under the IteS segment, as these companies are functional dissimilar to the assessee. 28. Killick Agencies Marketing Ltd. It is submitted that this company is engaged in sale of dredging equipment, which used for excavation purposes under the water, which are not comparable to the services rendered by the assessee. It is also submitted that this company earns major portion of its revenue from commission and service income, whereas, the assessee ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comparable has been excluded by the revenue itself in the preceding assessment years for being functionally different. We therefore direct exclusion of this company from the final list. 30. iRunway India Pvt. Ltd. The company is involved in providing services in nature of patent licensing, patent valuation and portfolio analysis, product testing, end-to-end litigation support, source code analysis, among other technology and litigation support services, which is functionally different as compared to the assessee. The company also generates intangibles internally. We therefore direct exclusion of this company from the final list. Accordingly this ground raised by the assessee stands partly allowed. 31. Ground No. 2.13 is in respect of following comparables that the assessee is seeking to include under the MSS segment: Cheers Interactive India Pvt.Ltd., MCI Management India Pvt.Ltd. and Showhouse Event Management India Pvt. Ltd., It is submitted that these companies are engaged in providing MSS services. It is submitted that these comparables were not considered by the Ld.TPO, as they did not appear in the search matrix carried out by him, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32.2 The Ld.AR placed reliance on decision of Delhi Tribunal in Kusum Healthcare Pvt.Ltd vs. ACIT reported in (2015) 62 Taxmann.com 79, deleted addition by considering the above principle, and subsequently Hon'ble Delhi High Court in Pr. CIT vs. Kusum Health Care Pvt. Ltd., reported in (2017) 398 ITR 66 (Del), held that no interest could have been charged as it cannot be considered as international transaction. He also placed reliance upon decision of Delhi Tribunal in case of Bechtel India vs DCIT reported in (2016) 66 taxman.com 6 which subsequently upheld by Hon'able Delhi High Court vide order dated 21/07/16 in ITA No. 379/2016, also upheld by Hon'ble Supreme Court vide order dated 21/07/17, in CC No. 4956/2017. 32.3 It has been submitted by Ld.AR that outstanding receivables are closely linked to main transaction and so the same cannot be considered as separate international transaction. He also submitted that into company agreements provides for extending credit period with mutual consent and it does not provide any interest clause in case of delay. She argued that, the working capital adjustment takes into account the factors related to delayed receivab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess period of credit to the associated enterprises without charging an interest during such credit period would not amount to international transaction whereas section 92B(1) of the Income-tax Act, 1961 refers to any other transaction having a bearing on the profits, income, losses or assets of such enterprises?' 32.6 The Ld.AR submitted that, while answering above question, Hon'ble Bombay High Court referred to amendment to section 92B by Finance Act, 2012 with retrospective effect from 1.4.2002. Setting aside view taken by Tribunal, Hon'ble Bombay High Court restored the issue to file of Tribunal for fresh decision in light of legislative amendment. It was thus argued that non/undercharging of interest on excess period of credit allowed to AEs for realization of invoices, amounts to an international transaction and ALP of such international transaction has to be determined by Ld.TPO. In so far as charging of rate of interest is concerned, he relied on decision of the Hon'ble Delhi High Court in CIT vs. Cotton Naturals (I) Pvt. Ltd (2015) 276 CTR 445 (Del) holding that currency in which such amount is to be re-paid, determines rate of interest. He, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as observed that there are several factors which need to be considered before holding that every receivable is an international transaction and it requires an assessment on the working capital of the assessee. Applying the decision in Kusum Health Care (supra), the Hon'ble High Court directed the TPO to study the impact of the receivables appearing in the accounts of the assessee; looking into the various factors as to the reasons why the same are shown as receivables and also as to whether the said transactions can be characterized as international transactions. In view of the above, we deem it appropriate to set aside the impugned order on this issue and remit the matter to the file of the Ld.AO/TPO for deciding it in conformity with the above referred judgment. Needless to say, the assessee will be allowed a reasonable opportunity of being heard in such fresh proceedings. Accordingly these ground raised by assessee stands allowed for statistical purposes. 33. Ground No.4 is raised as the Ld.AO/TPO did not grant the working capital adjustment for computing the margin of the comparables. 33.1 The contention of Ld.AR is that, the Ld.AO/TPO/DRP erred in not p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to in sub-clause (ii) arising in comparable. uncontrolled transactions is adjusted to take into account the differences, if any, between the international transaction [or the specified domestic transaction] and the comparable uncontrolled transactions, or between the enterprises entering into such transactions, which could materially affect the amount of net profit margin in the open market; (iv) the net profit margin realised by the enterprise and referred to in sub-clause (i) is established to be the same as the net profit margin referred to in sub-clause (iii); (v) the net profit margin thus established is then taken into account to arrive at an arm's length price in relation to the, international transaction [or the specified domestic transaction]; (f) ...... (2) For the purposes of sub-rule (1), the comparability of an international transaction [or a specified domestic transaction] with an uncontrolled transaction shall be judged with reference to the following, namely:- (a) the specific characteristics of the property transferred or services provided in either transaction; (b) the functions performed, taking into account assets e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions of comparable uncontrolled transactions. In this context, to be comparable means that: None of the differences (if any) between the situations being compared could materially affect the condition being examined in the methodology (e.g. price or margin), or Reasonably accurate adjustments can be made to eliminate the effect of any such differences. These are called comparability adjustments. 3. In Paragraph 13 to 16 of the aforesaid OECD guidelines, need for working capital adjustment has been explained as follows: 13. In a competitive environment, money has a time value. If a company provided, say, 60 days trade terms for payment of accounts, the price of the goods should equate to the price for immediate payment plus 60 days of interest on the immediate payment price. By carrying high accounts receivable a company is allowing its customers a relatively long period to pay their accounts. It would need to borrow money to fund the credit terms and/or suffer a reduction in the amount of cash surplus which it would otherwise have available to invest. In a competitive environment, the price should therefore include an element to reflect these pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclude by observing that the purpose of working capital adjustments is to improve the reliability of the comparables. 15. In the present case the TPO allowed working capital adjustment accepting the calculation given s by the Assessee. The CIT(A) in exercise of his powers of enhancement held that no adjustment should be made to the profit margins on account of working capital differences between the tested party and the comparable companies for the following reasons: (i) The daily working capital levels of the tested party and the comparables was the only reliable basis of determining adjustment to be made on account of working capital because that would be on the basis of working capital deployed throughout the year. (ii) Segmental working capital is not disclosed in the annual reports of companies engaged in different segments and therefore proper comparison cannot be made. (vi) Disclose in the balance sheet does not contain break up of trade and non-trade debtors and creditors and therefore working capital adjustment done without such break up would result in computation being skewed. (vii) Cost of capital would be different for different compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A)'s objection on working adjustment based on unavailable daily working capital requirements data. There is Also no merit in the objection of the CIT(A) regarding absence of segmental details available of working capital requirements of comparable companies chosen and absence of details of trade and non-trade debtors of comparable companies as these details are beyond the power of the Assessee to obtain, unless these details are available in public domain. Regarding absence of cost of working capital funds, the OECD guidelines clearly advocates adopting rate(s) of interest applicable to a commercial enterprise operating in the same market as the tested party. Therefore this objection of the CIT(A) is also not sustainable. 17. In the light of the above discussion we are of the view that the CIT(A) was not justified in denying adjustment on account of working capital adjustment. Since, the CIT(A) has not found any error in the TPO's working of working capital adjustment, the working capital adjustment as worked out by the TPO has to be allowed. We may also add that the complete working capital adjustment working has been given by the Assessee and a copy of the same ..... X X X X Extracts X X X X X X X X Extracts X X X X
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