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2022 (7) TMI 1400 - AT - Income TaxTP adjustment in SWD segment - Comparable selection - application of different filters - assessee filed its objections before the DRP contending that the turnover filter should have an upper limit and the same is not applied by the TPO - DRP rejected the contention of the assessee stating that there is no correlation between the profit margins and the turnover of companies as far as service sector - HELD THAT:- We direct the AO / TPO to apply the appropriate upper turnover filter and exclude the companies having turnover in excess of Rs.200 crores. Exclusion of Inteq Software Ltd. on the basis that the RPT filter for AY 2014-15 fails while computing the margin of the company on an average - Margin of Inteq Software Ltd. for AY 2014-15 should not be considered and therefore direct to exclude this company from the comparables. Exclusion of Infobeans Technologies Ltd. on the basis that it is functionally not comparable for AY 2015-16 and therefore the margin of that year should be exclude while computing the average margin of that company - As relying on BORQS Software Solutions P. Ltd. case. [2021 (10) TMI 1351 - ITAT BANGALORE] we direct the AO to exclude the margin for AY 2015-16 of while arriving at the 3 year average profit of Infobeans Technologies Ltd. Working capital adjustment - TPO did not allow any adjustment on the working capital as upheld by DRP - In the view of the ruling in the case of M/s. Huawei Technologies India (P) Ltd.[2018 (10) TMI 1796 - ITAT BANGALORE] the basis of rejection of the relief by the DRP is no longer valid -We therefore direct the AO/TPO to consider the working capital adjustment in the light of the aforesaid ruling and allow appropriate adjustment in arriving at an arm’s length price. TP adjustment towards interest on outstanding receivables - TPO treated the outstanding receivables from AE as in the nature of loan facility given to the AE and imputed interest @ 6 months LIBOR plus 450 basis points which works out to 4.985% - HELD THAT:- Respectfully following the decision of the coordinate Bench of the Tribunal in the case of Barracuda Networks (I) P. Ltd. [2022 (5) TMI 322 - ITAT BANGALORE] we hold that interest on receivables is a separate international transaction and separate benchmarking is required to be done. We therefore remit the issue to the TPO for fresh examination and take into consideration the guidelines laid down in the aforesaid decision of the Tribunal. The TPO is also directed to verify and consider the fact that the payables from AE is more than the receivable from AE as submitted by the assessee. Disallowance of Depreciation on Goodwill - HELD THAT:- We notice the coordinate Bench of this Tribunal in the assessee’s own case [2022 (5) TMI 722 - ITAT BANGALORE] depreciation claimed by the assessee on goodwill acquired deserves to be allowed in accordance with law. AO is directed to compute depreciation in accordance with the principles laid down in case of Smifs Securities Ltd. [2012 (8) TMI 713 - SUPREME COURT] - We hold that depreciation on goodwill deserves to be allowed. We direct the AO to recompute the depreciation with similar directions as in AY 2015-16.
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