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2021 (9) TMI 1448 - AT - Income TaxTP Adjustment - Comparable selection - HELD THAT:- Companies functionally dissimilar with that of assessee into business of software development, technical services and other related services need to deselected as comparable. Working capital adjustment - A reading of Rule 10B(1)(e)(iii) of the Rules read with sec. 92CA of the Act, would clearly shows that the net profit margin arising in comparable uncontrolled transactions has to be adjusted to take into account the differences, if any, between the international transaction and the comparable uncontrolled transactions, which could materially affect the amount of net profit margin in the open market. Chapters I and III of OECD Transfer Pricing Guidelines contain guidelines on comparability analyses for transfer pricing purposes. Guidelines on adjustments to be provided is found in paragraphs 3.47-3.54 and in the Annex to Chapter III. The guidelines must be followed for computing arm's length principle, and for comparing comparable uncontrolled transactions. Reasonably accurate adjustments should be made to eliminate effect of any such differences. Accordingly we direct Ld. AO/TPO to grant working capital adjustment in accordance with law.
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