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TMI Blog2021 (8) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... . - IT (TP) A. No. 185/Bang/2018 - - - Dated:- 9-8-2021 - George George K. , Member ( J ) And B. R. Baskaran , Member ( A ) For the Appellant : K. R. Vasudevan , Advocate For the Respondents : Priyadarshi Mishra , Addl. CIT - DR ORDER Per George George K., JM The Tribunal has disposed of the above appeal vide its order dated 28.08.2019. The assessee filed MP No. 59/Bang/2020 for non-adjudication of the following two issues, namely- (i) Assessee's prayer regarding inclusion of Crystal Voxx Limited in the final list of comparable companies with respect of ITES segment (ground No. 4.7); (ii) Assessee's submission that negative working capital adjustment should not be allowed (ground No. 4.9). 2. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NF India Private Limited (supra). The relevant finding of the Hon'ble Tribunal in the case of FNF India Private Limited v. ACIT (supra) as regards the inclusion of the company Crystal Voxx Limited in the final list of comparables, reads as follow:- 24. In ground No. 13, the Assessee has prayed for inclusion of Crystal Voxx Ltd. as a comparable company. This company was not regarded as comparable company with the Assessee by the DRP for the reasons given in Para 2.15 of its order i.e., for the reason that in the financial results, the Auditors have mentioned that this company was predominantly a Business Process Outsourcing (BPO) company and therefore this company cannot be said to be an ITES company. The learned counsel for the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 4.1. The learned DR supported the order of the AO/TPO and the CIT(A). 4.2. We have heard rival submissions and perused the material on record. Admittedly in this case, the assessee is a capital service provider entirely funded by its AEs. In the following case laws, it has been held that when assessee is a capital service provider, there is no necessity to provide negative working capital adjustment. The relevant finding of the Hon'ble Tribunal in the case of E4E Business Solutions India Pvt. Ltd. (supra) reads as follow:- 12. The third issue is with regard to grant of negative working capital adjustment. Working capital adjustment is made for the time value of money lost when credit period is given to customers. It is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mandatory basis but rather on a case by case basis depending on the facts and circumstances. Economic rationale of Working capital of a business is the capital used in its day-to-day trading operations. Working capital is affected by numerous business incidences. It is very common for tested party and each of the potential comparables to differ materially in the amount of working capital (inventory, accounts receivables and payable). Such differences are mainly caused due to differences in the terms of purchase and sale, levels of inventory etc. For example: If the business advances a trade credit of (say) 60 days, its cash gets locked up for 60 days and reduces the working capital. It will have to borrow from open market to meet its workin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned DR takes the view that Working capital adjustment is required in all cases as any credit extended to customers will result in cash locked up and will result in the assessee borrowing money from the banks and incur additional cost towards interest on these borrowings which cost will have effect on the price charged. It is the reasoning in these decisions that under TNM method that every ingredient of profit margins of comparable companies are analysed, whether it is positive or negative. The decision proceeds on the basis of effect on price owing to working capital requirement. We are of the view that working capital adjustment itself is computed on the basis of outstanding current assets and liabilities at the year end. It means ..... X X X X Extracts X X X X X X X X Extracts X X X X
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