9911796707
TMI Blog2024 (6) TMI 1052X X X X Extracts X X X X X X X X Extracts X X X X ..... 16 in the second round of proceedings before the ITAT. The Tribunal in IT(TP)A No.2309/Bang/2019 vide order dated 28.9.2020 set aside the issue of working capital adjustment to the file of AO/TPO. Subsequently, the TPO discussed the issue in para 4.2 to 4.2.4 and rejected the claim of assessee to allow working capital adjustment and made TP adjustment of Rs.1,08,78,064 which was incorporated in the draft assessment order. The assessee raised objections before the DRP. 2. The DRP after discussing the working capital adjustment in para 3.1 rejected the claim of the assessee. The DRP observed that the assessee has not demonstrated with any data or information as to the impact of such difference on the price, cost or profits. The 'Accounts pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrolled comparable transactions the same need to be adjusted to improve the reliability of the transfer pricing analysis. The Appellant submits it is engaged in business of energy management solutions. For companies engaged in manufacturing, the working capital cycle plays as important role and optimum utilization of working capital components like raw materials, receivables, inventory and payables is very important. 2.3 The Appellant is given long credit period by the related party and is therefore not exposed to the working capital risks unlike comparable companies. The Appellant has tabulated below various ratios for comparison: Ratios Acme Cleantech Solutions Limited Nu Tek India Limited Appellant Debt-to-Capitalization Ratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.7 The Appellant also places reliance on following decisions wherein working capital adjustment was granted: * M/s Euronet Services India Pvt Ltd vs DCIT [IT(TP)A No.962/Bang/2022, dated 31.08.2023] [Page 178 of PB-II] * Parexel International Clinical Research (P.) Ltd vs ACIT [2023] 152 taxmann.com 355 (Bangalore-Trib.); * Parexel International (India) (P.) Ltd vs ACIT [2023] 156 taxmann.com 609 (Hyderabad -Trib.); * Medtronic Engineering and Innovation Centre Pvt Ltd vs DCIT [ ITA No.225/Hyd/2021, Hyderabad Tribunal] 2.8 Based on all the above, the appeal and submits that working capital adjustment computed by the Appellant should be granted." 4. The ld. AR submitted that the details were provided to the TPO, however he has re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re working capital adjustment done without such break up would result in computation being skewed. (iv) Cost of capital would be different for different companies and therefore working capital adjustment made disregarding this different based on broad approximations, estimations and assumptions may not lead to reliable results. 16. The CIT(A) also placed reliance on a decision of Chennai ITAT in the case of Mobis India Ltd. v. Dy. CIT [2013] 38 taxmann.com 231/[2014] 61 SOT 40. That decision was based on the factual aspect that the Assessee was not able to demonstrate how working capital adjustment was arrived at by the Assessee. Therefore nothing turns on the decision relied upon by the CIT(A) in the impugned order. In the matter of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd closing working capital deployed. The Bench has also observed that that in Transfer Pricing Analysis there is always an element of estimation because it is not an exact science. One has to see that reasonable adjustment is being made so as to bring both comparable and test party on same footing. Therefore there is little merit in CIT(A)'s objection on working adjustment based on unavailable daily working capital requirements data. There is also no merit in the objection of the CIT(A) regarding absence of segmental details available of working capital requirements of comparable companies chosen and absence of details of trade and non-trade debtors of comparable companies as these details are beyond the power of the Assessee to obtain, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of net profit margin in the open market. If for reasons given by CIT(A) working capital adjustment cannot be allowed to the profit margins, then the comparable uncontrolled transactions chosen for the purpose of comparison will have to be treated as not comparable in terms of Rule 10B(3) of the Rules, which provides as follows: "(3) An uncontrolled transaction shall be comparable to an international transaction if- (i) none of the differences, if any, between the transactions being compared, or between the enterprises entering into such transactions are likely to materially affect the price or cost charged to paid in, or the profit arising from, such transactions in the open market; or (ii) reasonably accurate adjustments c ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
