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2015 (10) TMI 738 - ITAT PUNEWorking Capital Adjustment to the profit of the assessee - whether assessee is not eligible for the benefit of +/- 5% as standard deduction in view of provisions of section 92C(2) - selection of comparables - Held that:- On account of peculiar circumstances under which the assessee is carrying on its business i.e. providing services to its associate enterprises only with mark-up of 10% on the cost and where there is no adversity on account of working capital, then such working capital adjustment is to be made in the hands of the companies, which are picked up as comparables to bring the same to the level of the assessee, while benchmarking the international transactions entered into by the assessee. Thus, an endeavour is to be made to bring the results of comparables at par with the results of the tested party as if the same are working in the same environment. In the case of the assessee, where it is benefited on account of its transactions entirely with its associate enterprises on the basis of an Agreement, under which it is entitled to a mark-up of 10% on cost, working capital adjustment on such account merits to be allowed to the assessee. The OECD has provided guidelines for such working capital adjustment and the said guidelines are one of the accepted modes of computing working capital adjustment. In view thereof, we hold that the assessee is entitled to the working capital adjustment, which in turn is to be computed as per the OECD guidelines. The assessee has filed the computation of working capital adjustment to the results of the comparables before us and the same were also filed before the Assessing Officer and some adjustment has been allowed on account of working capital adjustment by the Assessing Officer, while giving effect to the order of CIT(A). However, the errors pointed out by the assessee vide different communications to the Assessing Officer / TPO and the concerned Commissioner, have not been carried out till date. Accordingly, we direct the Assessing Officer to complete the exercise of working capital adjustment to be allowed to the assessee within a period of 45 days from the date of this order, after affording reasonable opportunity of hearing to the assessee. Upholding the order of CIT(A) with regard to the allowability of working capital adjustment, we dismiss the grounds of appeal raised by the Revenue. In view of the concession of the learned Authorized Representative for the assessee that in case the working capital adjustment is allowed to it, then the margins shown by the assessee in respect of international transactions with its associate enterprises was within +/- 5% of the margins shown by the list of comparables, we do not adjudicate the issues raised in the appeal filed by the assessee.
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