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TMI Blog2016 (3) TMI 1384X X X X Extracts X X X X X X X X Extracts X X X X ..... need for making any negative working capital adjustment when assessee does not carry any working capital risk. In fact, TPO should have done necessary working capital adjustment to the profits of the selected comparables so as to make them comparable to the assessee. In view of this, we direct the TPO not to make negative working capital adjustment. It is undisputed that the Assessee is also a captive service provider such as the Assessee in the case decided by the Adaptec (India) P. Ltd. [ 2015 (6) TMI 288 - ITAT HYDERABAD ] and therefore making a negative working capital adjustment without appreciating the fact that the company does not bear any working capital risks, was not correct. There is no allegation in the case of the assessee that the assessee has used any borrowed fund for working capital or there is any risk of money lost in credit time provided to the customers. - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... onal High Court in the case of ACIT v. Tata Elxsi Ltd., 349 ITR 49 [Karn], wherein the Hon'ble High Court has held as under:- "10. The Bombay High Court had an occasion to consider the meaning of the word 'total turnover' in the context of Section 10A, in the case of CIT v. Gem Plus Jewellery India Ltd. [2011] 330 ITR 175 [2010] 194 Taxman 192 (Bom.). Interpreting sub-Section (4) of Section 10-A, it is held as under: Export turnover in Profits derived from Profits of the respect of the articles or export of articles or business of the X things or computer things or Computer = undertaking software software Total turnover of the business carried on by the undertaking "Under sub-section (4) the proportion between the export turnover in respect of the articles or things, or, as the case may be, computer software exported, to the total turnover of the business carried over by the under-taking is applied to the profits of the business of the undertaking in computing the profits of the business of the undertaking in computing the profits derived from export. In other words, the profits of the business of the undertaking are multiplied by the export turnover in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciated earlier must prevail as a matter of correct statutory interpretation. Any other interpretation would lead to an absurdity. If the contention of the Revenue were to be accepted, the same expression viz. "export turnover" would have a different connotation in the application of the same formula. The submission of the Revenue would lead to a situation where freight and insurance, though it has been specifically excluded from "export turnover" for the purposes of the numerator would be brought in as part of the "export turnover" when it forms an element of the total turnover as a denominator in the formula. A construction of a statutory provision which would lead to an absurdity must be avoided." The special bench of the Tribunal, in the case of ITO v. Sak Soft Ltd. [2009] 313 ITR (AT) 353/ 30 SOT 55 (Chennai) also had an occasion to consider the meaning of the word 'total turnover'. After referring to the various judgments of the High Court as well as the Supreme Court held as under: "53. For the above reasons, we hold that for the purpose of applying the formula under sub-section (4) of Section 10-B, the freight telecom charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver' in Section 10-A, there is nothing in the said Section to mandate that, what is excluded from the numerator that is export turnover would nevertheless form part of the denominator. Though when a particular word is not defined by the legislature and an ordinary meaning is to be attributed to the same, the said ordinary meaning to be attributed to such word is to be in conformity with the context in which it is used. When the statute prescribes a formula and in the said formula, 'export turnover' is defined, and when the 'total turnover' includes export turnover, the very same meaning given to the export turnover by the legislature is to be adopted while understanding the meaning of the total turnover, when the total turnover includes export turnover. If what is excluded in computing the export turnover is included while arriving at the total turnover, when the export turnover is a component of total turnover, such an interpretation would run counter to the legislative intent and impermissible. If that were the intention of the legislature, they would have expressly stated so. If they have not chosen to expressly define what the total turnover means, then, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the rival submissions as well as relevant material on record. There is no dispute that the assessee has not given the working of risk adjustment before the TPO. Therefore, the TPO did not work out any risk adjustment. On appeal, the CIT(Appeals) has directed the TPO to consider the case of risk adjustment if the working capital adjustment is found to be negative. We find that when the TPO has worked out the working capital adjustment on her own and not accepted the claim of the assessee, then by applying the principle of consistency, the risk adjustment of the assessee was also required to be considered by the TPO, though the assessee might have been asked to furnish the relevant details and working. Since in this case, the TPO herself has worked out the working capital adjustment, therefore, we direct the TPO to consider the claim of risk adjustment subject to filing of details by the assessee. Accordingly, we modify the finding of the CIT(Appeals), qua the decision. 12. In the Cross Objection, the assessee has raised various grounds, however, at the time of hearing, the Id. AR of assessee has submitted that the only effective grounds which are prayed by the assessee are ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by making a negative working capital adjustment for the differences in working capital between the assessee and the companies considered as comparables. The assessee does not agree with the learned TPO as : • The company does not bear any working capital risk since it is been fully funded by it's A.E. from its inception and has no working capital contingencies. • The company has never taken any loans till date from the date of incorporation nor has incurred any expense for meeting the working capital requirement." We have gone through the submissions and the order of the TPO. The assessee pleaded that the DRP has acceded such a plea in some other case. On examination, we find that the DRP, Hyderabad in the case of Cordys Software India P. ltd., for A.Y. 2008-09 in its directions dated 3·08.2012 has given a finding as under: "7.7.4 Thus, working capital adjustment is made for the time value of money lost when credit time is provided to the customers. The applicant is not an entrepreneur but a captive service provider. Its entire funding needs are provided by the A.E. This being so, the applicant does not stand to lose anything as it is compensa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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