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2021 (10) TMI 395 - AT - Income TaxTP Adjustment - comparable selection - functional dissimilarity - CAT Technologies Ltd. and Lucid Software Ltd. - HELD THAT:- Nothing has been brought on record to demonstrate that the company is not functionally similar to the assessee. Merely because the aforesaid two companies have reported negative margin in the impugned assessment year, they cannot be considered as incomparable. In fact, in assessee's own case in subsequent assessment years CAT Technologies Ltd. has been accepted as a comparable. Thus we direct the assessing officer to include CAT Technologies Ltd. and Lucid Software Ltd. as comparables. Silverline Technologies Ltd. comparable has shown abnormally high negative margin in two consecutive assessment years. Therefore, in our considered opinion, it will not be safe to include this company as a comparable. Infobean Technologies Ltd. cannot be considered as a comparable as it is into diversified activities including developing customized software, whereas, segmental details relating to various segments are not available in the annual report. Considering the aforesaid aspect, the co-ordinate bench in case of Skillnet Solutions Pvt. Ltd. vs. DCIT [2021 (2) TMI 1208 - ITAT MUMBAI] has rejected this company from being treated as a comparable to a software development service provider. Thirdware Solutions Ltd. company cannot be considered as a comparable to a software development service provider. Cyber Infrastructure Pvt. Ltd., on perusal of the annual report of the company placed in the paper book, we find that it has reported revenue from software development services as well as business process outsourcing (BPO) services. However, segmental details relating to the revenue earned are not discernible from the annual report.Thus, in absence of substantial details/data relating to various segments of the comparables, they cannot be included in the list of comparables. Denial of working capital adjustment and risk adjustment - TPO alleging that the assessee neither claimed such adjustment in the TP study report nor furnished the detailed working justifying the adjustment - HELD THAT:- Though, in assessment year 2012-13, the DRP had rejected assessee's claim of working capital adjustment; however, the ground raised by the assessee before the Tribunal on the issue became academic as the assessee otherwise got the desired relief. Pertinently, while deciding allowability of working capital adjustment in assessee's own case in assessment year 2005-06, the Tribunal has held that such adjustment is allowable. In view of the aforesaid, we restore the issue to the AO for re-examining the working of working capital adjustment furnished by the assessee and decide the issue accordingly. Insofar as risk adjustment is concerned, both the TPO and learned DRP have rejected assessee's claim alleging that no working of such adjustment has been furnished - It is the case of the assessee that such working was furnished both, before the TPO and learned DRP - we direct the assessing officer to examine the working of risk adjustment furnished by the assessee and decide the issue as per law. Grounds allowed for statistical purpose.
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