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2023 (2) TMI 556 - AT - Income TaxTP Adjustment - comparable selection - HELD THAT:- Cyber Media (India) Ltd. is into Advertisement of its wide range of clientele that includes advertisement through Magazine. Functionally in our view this company is not comparable with the assessee who is providing Marketing Services to its AE only and the same deserves to be excluded. Just Dial Ltd. company has earned revenue from operations at Rs.362,76,75,293/-. The break-up of this revenue has been given in schedule 20 which is sale from search related services, sale from other related services and other operating revenue. It is also an admitted fact that this comparable has a high turnover which is more than 200 crores as compared to the turnover of assessee which is approximately Rs. 10 crores. On this reasoning itself, this comparable deserves to be excluded. Working capital adjustment - We note that this issue is no longer resintegra as there has been various decisions passed by Coordinate Bench of this Tribunal as well as Hon’ble High Court upholding the working capital adjustment being allowed to assessee on actual. We therefore direct the Ld.AO/TPO to provide the working capital adjustment on actuals in accordance with Rule 10B(1)(e) of the Rules. Exclusion of Lumax Automotive Systems Ltd. and Mahle Filter Systems India Ltd. - We note that the instances of comparables shortlisted by the Ld.TPO are basically used in automotive industry whereas assessee is manufacturing filters that are used in pharmaceutical and food processing industries. Although it is correct that while adopting TNMM as the most appropriate method, only profit based comparison is made however, the start point for every comparison is the product which is the subject matter of the international transaction. In the present facts of the case though there is no primary difference in the product being filter however the industry to which the comparables are catering is different with that of assessee and therefore there will be a different economic analysis which would impact the manufacturing activity carried on by the comparables and the assessee. In our view, these comparables cannot be considered as good for assessee as assessee is catering to pharmaceutical industry which is much more sensitive than the automotive industry. Non-granting working capital adjustment - We have already dealt this issue in ground no. 5(iv) hereinabove. Respectfully following the same, we direct the Ld.AO/TPO to compute working capital adjustment in accordance with Rule 10B(1)(e). Selection of MAM - assessee had selected TNMM as the most appropriate method by using OP/OR as the PLI - HELD THAT:- AR submitted that when the issue was raised before the Ld.CIT(A), the Ld.CIT(A) held that RPM should be the most appropriate method. Before us, the Ld.AR did not object for adopting RPM to be the most appropriate method however he submitted that no comparability analysis has been carried out in respect of the same to determine the arms length margin under the trading segment. DR also agreed to the submissions of the assessee. Based on the joint submission, we are of the opinion that the trading segment of the assessee needs to be denovo analysis by the Ld.AO/TPO by using RPM as the most appropriate method. We also direct the Ld.AO to grant Working Capital Adjustment on actuals based on the details filed. TPO is directed to carry out bench marking analysis of the trading segment by considering appropriate comparables and to compute the arms length price of the transaction in accordance with law. Disallowance u/s. 40(a)(ia) - Non deduction of TDS on computer software purchases - HELD THAT:- We note that section 40(a)(i) can be invoked only when an expenditure has been claimed by the assessee. In the instant case the purchase of software has been capitalized and the depreciation is an allowance and not an expenditure. Therefore, section 40(a)(ia) cannot be invoked for non-deduction of TDS. As relying on Tally Solutions (P) Ltd. [2020 (12) TMI 1160 - KARNATAKA HIGH COURT] we are of the opinion that no disallowance can be made u/s. 40(a)(ia) in the present facts of the case. Accordingly, the addition made by the Ld.AO stands deleted. - Decided in favour of assessee.
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