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2016 (9) TMI 1447 - AT - Income TaxTPA - selection of comparables - Held that:- Companies functionally dissimilar with assessee as pure software development service provider to be deselected from final list. Working capital adjustment - Held that:- CIT(A) has held that the action of the TPO in restricting working capital adjustment to 1.98% is correct. We find that 1.92% which comes out based on final list of comparables is lesser than 1.98% adopted by the TPO. The ld counsel for the assessee requested that working capital adjustment should be given at actual based on final comparables. Reliance was placed on the ITAT decision in ARM Embedded Technologies Pvt. Ltd., Vs. DCIT [2015 (8) TMI 1437 - ITAT BANGALORE]. Hence, we direct the TPO to rework the working capital adjustment. TPO is directed to provide appropriate working capital adjustment for the sales and marketing segment. As relying on the decision in the case of CSR India Pvt. Ltd., Vs ITO in IT(TP) [2013 (1) TMI 773 - ITAT BANGALORE] foreign exchange gain or loss should be considered as operating in nature for marketing support services. The Appellant’s margin is within 5% range of the average margin of the comparables. Thus, the international transactions of the Appellant should be considered to be at arm’s length. With these directions, we set aside the issues to the file of the TPO to rework the ALP.
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