TMI Blog2017 (7) TMI 1193X X X X Extracts X X X X X X X X Extracts X X X X ..... ag in sale recoveries in the case of the assessee and that of the three comparable concerns selected by the TPO. The difference in such time lag is applied to the Prime Lending Rate (PLR) to compute the working capital adjustment. On this basis, an adjustment of 5.90% was determined, which was required to be applied to the operating margins of the three comparable concerns. The CIT (A), in our view, made no mistake in accepting the plea of the assessee for allowing of such working capital adjustment. The said action of the CIT (A), in our view, is liable to be affirmed. We hold so - ITA.No.113/Hyd/2016 - - - Dated:- 7-7-2017 - SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI RIFAUR RAHMAN, ACCOUNTANT MEMBER For the Appellant : Shri Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce the profit margin of the company. 5. The RBI has replaced the PLR with base rate. Hence, it is more judicious to adopt base rate as against PLR. The DRP erred in directing to adopt average PLR in compounding working capital adjustment. 2. Brief facts are that the assessee, who is an indirect subsidiary of Infor Global Solutions Intermediate Holdings Limited, is engaged in the business of sale of user license of enterprise application software to the external parties, rendering software development, software related services and back office services to the Group companies. Thus, the assessee is a captive service provider and provides comprehensive enterprise application and enterprise resource planning software at Hyderabad centre. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd brand value, the Ld DR though fairly admitted that this issue is covered against the Revenue by the decision of the Hon ble Delhi High Court decision in the case of CIT vs. Agnity India Technologies (P.) Ltd [2013] 36 taxmann.com 289 (Delhi) but relied on orders of the TPO / AO. Since, the issue is covered in favour of the assessee by the above cited decision, this ground of appeal is rejected. 4. As regards Ground no.4, Ld DR submitted that the DRP, taking into consideration that the company E4e Healthcare Business Services Private Limited is engaged in the forward contracts, and that such forward contracts have influence in the margin of the company and further, that there is no consistent approach in accounting of bad debts, has di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the DRP has appreciated the functional dissimilarities and has, thus, rightly directed their exclusion. Having regard to the rival contentions and the material on record, we find that the DRP has directed the exclusion of the above companies on the following grounds:- (1) Accentia Technologies Limited:- This company is engaged in e-prescription and document management including coding, billing, bills payments management, account receivables management and ad-hoc reporting. This company is providing specified services as against the routine ITES services provided by the assessee. (2) Acropetal Technologies Limited:- On perusal of the annual report of this company which shows that the revenue is earned from engineering design s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso into KPO services, the Ld DR has not been able bring on record any material to rebut the findings of the DRP. In view of the same, we do not see any reason to interfere with the order of the DRP. Accordingly, Ground no.2 is also rejected. 7. As regards Ground no.5, the Ld DR submitted that the assessee has shown a sum of ₹ 5,31,98,803/- as receivables for shared services segment at the end of the year out of total receivables of ₹ 72,30,51,562/-. The assessee was asked to submit the details of raising invoices and subsequent receipts and also proposed to charge interest @ 12% p.a. The assessee objected to the charging of interest stating that the receivable is a continuing debit balance, arising as a result of internation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect to the working capital differences between the tested party and the potentially comparable concerns. In the present case, the assessee has not incurred any interest expenditure and therefore, the stand of the Revenue is that no adjustment is to be allowed with respect to the working capital differences vis- -vis the comparable concerns. In our considered opinion, the aforesaid objection of the Revenue is not in a correct perspective as it does not take into consideration other factors which have a bearing on the working capital requirements. No doubt, incurrence of interest expenditure for the funds used in business impact the operating margins. So however, the period of credit allowed to the customers also is a factor which would imp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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