TMI Blog2015 (1) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO in the order passed pursuant to the TPO’s order rejecting the assessee’s claim. The relevant discussion is made in para 8.6 of DRP’s direction. It is noticed that the authorities below failed to consider the assessee’s claim of allowing working capital adjustment on merits and simply rejected at the same at threshold by canvassing a view that the same is allowable only in manufacturing sector or trading sector etc. We are unable to accept the view taken by the authorities below. The Delhi Bench of the Tribunal in Mercer Consulting (India) Pvt. Ltd. vs. DCIT in [2014 (7) TMI 715 - ITAT DELHI] has held that the claim for working capital adjustment cannot be dismissed without examining the same on merits. In that case also, the auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made in respect of Software development segment and IT enabled services (ITES) segment. In the present round, the dispute is only in relation to ITES segment. The assessee applied Transactional Net Margin Method (TNMM) as the most appropriate method with the Profit level indicator (PLI) of OP to OC. In the final analysis, the TPO chose four comparable cases and worked out the arithmetic mean of their profits at 19.22%. Since the difference between the assessee s profit rate and that of comparables was more than 5%, standing at 5.68%, the TPO proposed TP adjustment of ₹ 5,70,25,104/-. That is how the AO passed the impugned order. The ld. AR has brought to our notice that because of certain mistakes in the profit rates of the comparabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the authorities did not admit the assessee s claim of working capital adjustment on merits by holding that such an adjustment is possible only in the case of manufacturers/traders. In that case, the Tribunal after setting aside the order of the AO/TPO remitted the matter to the file of AO/TPO for examining the assessee s claim for grant of working capital adjustment on merits and thereafter, allowing the same, if available. The ld. AR pointed out that the TPO himself has allowed working capital adjustment for the immediately two succeeding assessment years. 4. Without going into the actual calculations, we set aside the impugned order to this extent and remit the matter to the file of AO/TPO for considering the assessee s claim of workin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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