TMI Blog2021 (3) TMI 1400X X X X Extracts X X X X X X X X Extracts X X X X ..... that the issue relating to negative working capital has been examined by the co-ordinate bench of Tribunal in the case of ACIT vs. M/s e4e Business Solutions India P Ltd [ 2020 (12) TMI 1255 - ITAT BANGALORE] and it was held that negative working capital adjustment is not required in the case of a captive service provider, since it is fully insulated by its AE against working capital risks.Thus we direct the AO/TPO not to make negative working capital adjustment. - IT(TP)A No.84/Bang/2017 - - - Dated:- 11-3-2021 - SHRI GEORGE GEORGE K., JUDICIAL MEMBER AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER For the Appellant : Shri K.R. Vasudevan, A.R. For the Respondent : Shri Pradeep Kumar, D.R. ORDER PER B.R. BASKARAN, AC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enesys International Corpn. Ltd. 30.09% 3 ICRA Techno Analytics Ltd. 17.24% 4 Infosys Ltd. 43.10% 5 Larsen Toubro Infotech Ltd. 25.47% 6 Mindtree Ltd. 15.01% 7 Persistent Systems Ltd. 27.20% 8 R.S. Software (India) Ltd. 15.34% 9 Sasken Communication Technologies Ltd. 12.15% 10 Spry Resources India Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Tribunal s order. The Tribunal held that L T Infotech Ltd., was a software product company and segmental information on SWD services was not available. The Tribunal also noticed that the appeal filed by the revenue against the tribunal s order was dismissed by the Hon ble Delhi High Court in ITA No.682/2016. (c) Persistent Systems Ltd., was excluded from the list of comparable companies on the ground that this company was a software product company and segmental information on SWD services was not available. The Tribunal in coming to the above conclusion referred to the decision rendered by ITAT Delhi Bench in the case of Cash Edge India Pvt. Ltd. v. ITO ITA No.64/Del/2015 order dated 23.9.2015 and the decision of Hon ble Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ords, it is a risk-insulated service provider to the parent. The only customer of the company is its parent company. The ld. counsel for the assessee has relied on a host of ITAT decisions, the main decision being that of M/S. Software AG Bangalore Technologies Pvt. Ltd.(supra) which in turn has relied on the decision of ITAT Hyderabad in the case of Adaptec (India) Private Limited and contended that no negative working capital adjustment is called for. The ld.DR s reliance is on the decision in the case of Technotree Convergence P. Ltd. (supra) wherein it was held that negative working capital adjustment has to be allowed. 13 Comparables chosen operate under varied economic conditions. Therefore, while comparing a company to that of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness by way of interest on borrowing from the open market. Working capital adjustments seeks to adjust for the differences in time value of money between tested parties and potential comparables with an assumption that differences should be reflected in profits Working capital adjustment has a strong rationale in economic theory. It facilitates to increase the comparability between the tested party and comparables working in an industry which is competitive. Working capital adjustment can work out to be positive or negative. A positive working capital adjustment (WCA) will tend to reduce the arm s length PLI while a negative WCA will tend to increase the arm s length PLI. 14. We find that the facts of the Assessee s case are similar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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