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2022 (5) TMI 34 - AT - Income TaxTP Adjustment - assessee has submitted that the TPO has done fresh/TP analysis but did not furnish the search process and the accept/reject matrix, while selecting fresh set of comparables - Assessee is objecting to search process and key words used - HELD THAT:- This issue is not addressed by the TPO or DRP. On the issue of comparable selection, we observe that the DRP has not properly analyse the submissions of the Assessee. The DRP has made general observation that TNMM requires broadly similar comparables and exactly similar companies are not required. This is not proper reason and TPO/DRP are duty bound to specifically analyse the comparables submitted by the Assessee and the Assessee's objection to the comparable selected by the TPO. The Assessee is also duty bound to file the annual reports and make specific submissions with respect to the comparables. These aspects are not analysed in proper perspective. In these given facts and circumstances of the case, we deem it fit and proper that the issue with regard to determination of ALP should be remanded to the AO/TPO for determination a fresh in the light of observations made by us in this order. The AO/TPO shall afford assessee opportunity of being heard. Accordingly, the order of the AO is set aside and issue is remanded to the AO/TPO. Foreign exchange fluctuations adjustment - HELD THAT:- We observe that the TPO and the DRP have not properly analysed the submissions of the Assessee. There is no analysis whether there was any adverse foreign exchange fluctuations during the relevant assessment year, which is abnormal in nature and what is its effect on the operating margin of the Assessee and the comparables. These aspects needs to be analysed. In the given facts and circumstances of the case, we are of the view that it would be just and appropriate to set aside the impugned Order on this issue and remand the issue to the TPO. Not granting of working capital adjustment - HELD THAT:- We have considered the rival submissions and perused the material on record, including the judicial pronouncements cited. We find that the assessee has filed the computation of working capital adjustment before the DRP, but the DRP has not considered the same. We also find that the Co-ordinate Bench of this Tribunal in the case of Huawei Technologies India (P.) Limited [2018 (10) TMI 1796 - ITAT BANGALORE] has discussed all the reasons on the issue and held that working capital shall be allowed - Thus we also hold that the working capital adjustment is to be allowed as per actual on the final set of comparables. The TPO/AO are accordingly directed. TP adjustment to be restricted to AE transactions - HELD THAT:- We find that the Assessee has rightly contended that section 92 of the Act can be applied only in respect of international transactions i.e., transactions with AE - we hold that the transfer pricing adjustment should be restricted only to the AE related transactions of the assessee.
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