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2018 (11) TMI 1652 - AT - Income TaxTP Adjustment - Comparable selection criteria - HELD THAT:- Following the decisions of ITAT in [2017 (4) TMI 1448 - ITAT BANGALORE] , we uphold the directions of DRP in directing to exclude the said companies in both SDS and ITES segments for computation of ALP. Accordingly, we dismiss ground No. 2 raised by the revenue in this regard Negative working capital adjustment - HELD THAT:- In the case of Adaptec (India) P. Ltd., [2015 (6) TMI 288 - ITAT HYDERABAD] the coordinate bench held that there is no need for making any negative working capital adjustment when the assessee does not carry any working capital risk and in fact the TPO should have done necessary working capital adjustment to the profits of the selected comparables so as to make them comparable to the assessee. Following the said decision, we uphold the order of DRP in directing the TPO to delete the negative working capital adjustment. Accordingly, ground Nos. 3 & 4 are dismissed. Including bad debts and provisions of bad debts as provisions of expenses for the purpose of computing P&L of comparable companies - HELD THAT:- Tribunal in KENEXA TECHNOLOGIES (P.) LTD. VERSUS Dy. CIT [2014 (11) TMI 587 - ITAT HYDERABAD] has held that bad debts and provision for bad and doubtful debts are part of the operating expenses and that the margins of the companies should be computed by including bad debts and provisions of bad debts as provisions of expenses for the purpose of computing P&L of comparable companies. Tribunal has followed the decision of the Coordinate Bench of the Tribunal at Delhi in the case of Sony India (P) Ltd vs. DCIT [2008 (9) TMI 420 - ITAT DELHI-H] . Respectfully following the same, we remand the issue to the file of the AO with a direction to recompute the margins of the companies by including the bad debts/provision for bad and doubtful debts as operating income of those companies as well as the assessee. Thus, this ground is allowed for statistical purposes. Foreign exchange fluctuation as operating - HELD THAT:- We find that this issue is squarely covered by the decision of the coordinate bench in the case of M/s Open Text Corporation India Pvt. Ltd. [2018 (5) TMI 1381 - ITAT HYDERABAD] where in it was held that the foreign exchange fluctuation loss is not abnormal only to the assessee. Such fluctuation would affect the margins of the comparable companies as well as long as the transactions are in the same currency. - Following the said decision, we dismiss this ground of appeal of the assessee.
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