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TMI Blog2020 (4) TMI 319X X X X Extracts X X X X X X X X Extracts X X X X ..... nd is only undertaking preliminary tactical managerial functions. Assessee also does not undertake any marketing/business development activity. Further it is observed that assessee do not undertake any key risks. Based upon the above in our view the comparables needs to be revisited. Working capital adjustment has been restricted by Ld.TPO and upheld by DRP at 1.63% which is contrary to provisions of transfer pricing rules. As held by various decisions of coordinate benches of this Tribunal, we direct Ld.TPO to recompute working capital adjustment in actual, and to consider the same for purposes of computing arm s length margin. Risk adjustment on ad hoc basis at 1%, it is observed that there is no scientific manner which has been applied by DRP. Assessee is a low risk bearing company and therefore while computing risk adjustment risks assumed by the comparables for earning revenue in the particular segment needs to be analysed. Assessee is directed to provide for necessary details in respect of all the comparables finally selected. Ld.AO/TPO shall then compute the risk as adjustment in accordance with law. Transfer pricing issues raised by assessee is set aside to Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n at 6.36%. S.No. Name of Comparables Margine 1. Akshay Software Technologies Ltd 1.30% 2. CG-Vak Software and Exports Ltd -4.21% 3. Goldstone Technologies Ltd -10.67% 4. Halios Matheson Information Technology Ltd 9.24% 5. LGS Global Ltd 6.45% 6. Ascent Software International Ltd -9.66% 7. R.S Software (India) Ltd 8.65% 8. R Systems International Ltd 6.56% 9. Aztecsoft Ltd 1.75% 10. Calibrepoint Business Solutions Ltd -5.42% 11. Cat Technologies Ltd 16.72% 12. KPIT Cummins Infosystems Ltd 7.34% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. Larsen and Toubro Infotech Ltd 19.83% Arithmetic mean 24.82% Ld.TPO, thus computed proposed adjustment at ₹ 29,89,22,549/-. 2.5. Ld.AO restricted working capital adjustment to 1.63%. He also denied any risk adjustment for the reason that assessee failed to establish the difference in risk level of the tested party and uncontrolled comparables and that no reasonably accurate adjustments could be made for want of a scientific method for computing the quantum of risk adjustment. Aggrieved by proposed adjustment, assessee raised objections before DRP. 2.6. Assessee raised objections regarding filters applied by Ld.TPO; companies with different accounting period were not considered companies with employee cost less than 25% were rejected; companies with export sales less than 75% of operating revenue was rejected. DRP upheld these filters. 3. DRP while considering the objections raised by assessee excluded comparables being E-Zest Solutions, Infosys Ltd., Persistent Systems, Tata Elxsi Ltd. As regards the working capital adjustment restricting it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n various decisions of coordinate benches of this Tribunal where, TPO has been directed to provide working capital adjustment by taking actual data, without putting any upper limit. 6.2. Also, Ld.CIT.DR submitted that, DRP while excluding certain comparables did not carry out FAR analysis. She also submitted that DRP provided risk adjustment at 1% on ad hoc basis without having a scientific approach. She submitted that there are various factors that needs to be considered for providing risk adjustment which assessee has to establish in its case having regards to the comparables finally selected. She submitted that, order passed by DRP on all these issues are very cryptic. 7. We have perused submissions advanced by both sides in light of records placed before us. We have perused order passed by Ld.TPO and DRP in great detail. The contentions raised by both sides are found to be true. It is observed that Ld.TPO has considered entity level revenue as well as cost for computing margin of assessee which was compared with the segmental margin of comparables. This is in total contradiction to transfer pricing law laid down by legislature. DRP failed to adjudicate this objection r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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