TMI Blog2018 (7) TMI 2061X X X X Extracts X X X X X X X X Extracts X X X X ..... ONS P. LTD.[ 2016 (6) TMI 1375 - ITAT BANGALORE] we hold that working capital adjustment has to be allowed at 2.54% as computed by the TPO and cannot be restricted to 1.63% as done by the TPO. - IT(TP)A No. 493/Bang/2016 - - - Dated:- 20-7-2018 - SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER For the Appellant : Shri Narendra Kumar J Jain, Advocate For the Respondent : Shri C.H. Sundar Rao, CIT(DR-I)(ITAT), Bengaluru. ORDER Per N.V. Vasudevan, Judicial Member This is an appeal by the assessee against the final order of assessment dated 19.01.2016 of the ACIT, Circle 4(1)(2), Bangalore passed u/s. 143(3) r.w.s. 144C of the Income-Tax Act, 1961 [ the Act ] relating to assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SI. No. Name of the Company Operating Margin on Cost Adjusted Margin on Cost 1 Acropetal Technologies Ltd (seg) 31.98% 26.90% 2 E-Zest Solutions Ltd 21.03% 17.31% 3 E-Infochips Ltd 56.44% 53.93% 4 Evoke Technologies Pvt Ltd 8.11% 6.48% 5 I C R A Techno Analytics Ltd. 24.83% 21.10% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total Operating Revenue (C) 27,63,36,605 Short fall being Adjustment u/s 92CA (B - C) 1,99,70,326 4. Aggrieved by the directions of the TPO directing the shortfall in the price charged by the Assessee to its AE at a sum of ₹ 1,99,70,326/- and suggesting an addition to the total income of the Assessee, the assessee filed objections before the Dispute Resolution Panel (DRP). The DRP gave directions to exclude the comparables selected by the TPO having turnover of more than ₹ 200 crores. Accordingly, Infosys Technologies Ltd, Larsen Toubro Infotech Ltd, Mindtree Ltd, Persistent Systems Solutions Ltd, Persistent Systems Ltd, Sasken Commun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from the list of comparable companies. It is not in dispute that the functional profile of assessee in the decision cited by the ld. counsel for the assessee and in the present case are identical. It was also brought to our notice that the comparables chosen by the TPO in the present case and in the case of M/s. Electronic Imaging India Pvt. Ltd. (supra) are identical. In these circumstances, we are of the view that the decision rendered by the Tribunal in the aforesaid case would be equally applicable in the present case also. The Tribunal in the aforesaid decision held that Acropetal Technologies Ltd. cannot be functionally compared with a software development service provider and that it was a software product company. In the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions on the comparability of the aforesaid 4 companies, we hold and direct exclusion of the aforesaid 4 companies from the list of comparable companies. The TPO is directed to compute the arithmetic mean of comparable companies after excluding the 4 companies. 13. The other issue which was argued before us by the ld. counsel for the assessee is the issue with regard to computation of working capital adjustment. In this regard, it is seen that the TPO in his order at page 16 in para 10 computed the adjustment on account of working capital at 2.54%. He, however, restricted working capital adjustment only to a sum of 1.63%. 14. The submission of the assessee before the DRP was that working capital adjustment ought to have been allowed at ..... X X X X Extracts X X X X X X X X Extracts X X X X
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