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2017 (11) TMI 178 - AT - Income TaxTPA - working capital adjustment - Held that:- As gone through the TP study of the assessee and also the TP order of the TPO. Though the AO has stated that the working capital adjustment is allowed, the working of such adjustment is not available on record and it is not evident that the margins of the assessee and the comparables are arrived at after such adjustment. The decisions relied upon by the learned Counsel for the assessee support this contention. Though, we agree with the assessee’s contention that no separate addition of interest on receivables is required after allowing working capital adjustment, in the absence of material on record, we are unable to give any relief to the assessee on this ground. Therefore, we deem it fit and proper to direct the AO to examine if the final margins of the comparables and the assessee have been arrived at after WC adjustment to hold the international transactions of the assessee to be at “ALP” and if it is found to be so, then we direct that no further addition on account of interest on receivables shall be made. However, in the event, it is found that WCA has not been made to the final margins which are compared to the margin of the assessee, then the AO shall allow the reasonable period of credit i.e. three months from the date of notice and on the outstanding balance exceeding such period, the interest at LIBOR rate may be applied for making the adjustment. Assessee’s appeal is treated as allowed for statistical purposes.
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