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2021 (1) TMI 25 - AT - Income TaxTP Adjustment - comparable selection - HELD THAT:- Not only high turnover but even where the comparables have earned super normal profit, they also have to be excluded - Companies functinally dissimilar with that of assessee need to be deselected. Correct margin of the comparable companies - HELD THAT:- We find that the assessee is seeking correct computation of margins of E-Infochips Ltd, Thirdware Solutions Ltd, Persistent Systems Ltd and Tata Elxsi Ltd with regard to software development services and Infosys BPO Ltd and Microland with regard to ITeS services are concerned. We therefore, remit the issue to the file of the AO/TPO for computation of the correct margins of these companies. Working capital adjustment - HELD THAT:- We find that the TPO has not granted working capital adjustment for both SDS and ITeS transactions by holding that the assessee has failed to substantiate that WCA has an impact on the profit of the assessee vis-à-vis comparable companies. Even before us, the assessee has not shown how the working capital adjustment is required in the case of the assessee as comparable to the compared companies. Therefore, we do not see any reason to direct the AO/TPO to grant working capital adjustment to the assessee. Thus, ground is accordingly rejected. Interest on outstanding receivables - Case of the assessee that the interest on receivables is not an international transaction as notional interest cannot be brought to tax - HELD THAT:- We find that the A.Y before us is 2014-15 and hence, the interest on receivables is an international transaction as it is subsequent to the amendment to section 92B of the I.T. Act - We are inclined to accept the alternate argument of the assessee that since the receivables are in foreign currency, the rate of interest to be applied is at LIBOR + and nor SBIPLR rate. AO/TPO is directed accordingly.
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