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TMI Blog2017 (5) TMI 1814X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices Pvt. Ltd., Accordingly, we set aside this issue to file of Ld. TPO for re-computing working capital adjustment in the light of financial report of M/s. ICRA Management Consulting Services Pvt. Ltd. - In the result this ground raised by assessee stands allowed for statistical purposes. TPO computed net operating margins of two comparable companies, by excluding provision of doubtful debts from operating expenses - To the facts of the present case also the revenue has not disputed the provision of doubtful debts being excessive in the hands of the assessee for the year under consideration. It is also observed that the DRP had directed TPO to have consistent treatment in terms of items includable/excludable in non-operative profit, with assessee as well as with comparables which evidently has not been followed by Ld. TPO. Respectfully following the view taken by this Tribunal in the case of Techbooks International Pvt. Ltd. [ 2015 (7) TMI 473 - ITAT DELHI ] we direct Ld. TPO to treat provision of doubtful debts in the case of BVG India Ltd and Cameo Corporate Services Ltd., as operating as well. Accordingly, this ground raised by assessee stands allowed - Sh. O. P. Kan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of Ground No. 2 and Ground No. 3 . 3. Brief facts of the case are as under: Assessee filed its return of income for the year under consideration on 29.11.2012 declaring a total income of Rs. 2,43,08,640/-. The case was selected for scrutiny and notice under section 143(2) of the Act was issued alongwith notice under section 142(1) of the Act alongwith questionnaire. In response to statutory notices, representatives of assessee appeared before Ld. AO from time to time to furnish submissions as required and called for. 4. Ld. DCIT observed that assessee is engaged in business of providing support services with respect to footwear and apparel manufactured in India. It was observed that as per Form 3 CEB, assessee during the year had undertaken international transactions with its associated enterprises. Ld. AO, therefore, in accordance with provisions of section 92CA of the Act, referred matter to transfer pricing officer (TPO) for determining arms length price. Ld.TPO rejected economic analysis undertaken by assessee and made adjustment amounting to Rs. 1,65,98,268/- with respect to international transactions of provision of support services as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital adjustment. However, for this purpose, the DRP East of the view that the average of opening and closing balance of the inventory and of trade receivables/VFL, trade debtors/creditors, for the relevant year may be adopted which may broadly give their representative level of working capital over the year. Even if there is some difference with respect to the representative level, it will not affect the compatibility at the same method will be applied to all cases. Same is the case with segmental data. 9. Ld. Counsel submitted that TPO did not provide any reason for not computing working capital margin of M/s ICRA Management Consulting Services Pvt. Ltd., as per direction of DRP. He thus requested to direct Ld. TPO to rectify error in computation of working capital adjusted margin of M/s ICRA Management Consulting Services Pvt. Ltd. 10. Ld. CIT DR agrees with the submissions advanced by Ld. counsel regarding the oversight that has crept in the computation of working capital margin. Ld. CIT (DR) submitted that for the purposes of working capital margin of M/s ICRA Management Consulting Services Pvt. Ltd., the issue may be set aside to Ld. TPO for consideration as per direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied upon computation placed at page 401 of paper book read with, break up of other expenses, being schedule 19, forming part of Notes to the financial statements at page 33 of paper book, which is reproduced hereinbelow: Computation of operating profits in assessee s case(pg.401): Adidas technical services private limited Notes to the financial statements (All amounts in rupees, unless otherwise stated) 19. Other expenses 17. Ld. Counsel submitted that DRP in its directions directed Ld.TPO to consider consistent approach, while considering expenses as operating/non-operating in the case of both assessee as well as comparable companies, which has not been followed by Ld.TPO. 18. On the contrary, Ld. CIT (DR) submitted that, Ld.TPO did not consider provision for doubtful debts in the case of these 2 comparables as, it has appeared in the financials of these companies for the first time in the year under consideration. He submitted that Ld.TPO compared financials of these comparables with that of preceding 3 years financials, based on which Ld.TPO excluded provision for doubtful debts from being included as operating e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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