2016 (6) TMI 1375 - AT - Income Tax

Rectification of mistake - TP Adjustment - Working capital adjustment - as per assessee lower authorities have erred in not giving working capital adjustment in the final assessment order even though it was given in order passed u/s.92CA. Even otherwise, working capital adjustment is incorrectly computed - HELD THAT - Tribunal had allowed the ground of the assessee, though second part of the ground was not specifically dealt with. Not dealing with the second part of the ground regarding incorrect computation of working capital is a mistake apparent on record. There can be no dispute that working capital adjustment has to be calculated from the final list of comparables and cannot be restricted. We therefore modify para 43 of the order and direct the AO / TPO to give working capital adjustment based on actual figures computed from the final list of comparables. MP filed by the assessee is allowed.

Summary

Issues:
1. Working capital adjustment not fully adjudicated by the Tribunal.

Detailed Analysis:
The Appellate Tribunal ITAT BANGALORE addressed a miscellaneous petition where the assessee raised a grievance regarding the working capital adjustment not being fully adjudicated. The assessee contended that the Tribunal had directed a limited working capital adjustment of 0.23% based on the TPO's recommendation, while the actual adjustment worked out by the TPO was 2.60%. The Tribunal observed the ground raised by the assessee related to the working capital adjustment not being granted in the final assessment order, despite being directed in the order passed under section 92CA. The TPO had restricted the working capital adjustment to 0.23%, but the AO failed to implement this adjustment in the final assessment order.

Furthermore, the Tribunal acknowledged that the AO had omitted to give the working capital adjustment as recommended by the TPO. Consequently, the Tribunal directed the AO to provide the working capital adjustment of 0.23% as per the TPO's recommendation, thereby allowing the assessee's ground. However, the Tribunal recognized that not addressing the incorrect computation of the working capital adjustment was a mistake on record. It emphasized that the working capital adjustment should be calculated based on actual figures from the final list of comparables and should not be restricted.

In conclusion, the Tribunal allowed the miscellaneous petition filed by the assessee, modifying the order to direct the AO/TPO to grant the working capital adjustment based on actual figures computed from the final list of comparables. The order was pronounced in the open court on June 3, 2016.