XILINX INDIA TECHNOLOGY SERVICES PRIVATE LIMITED ,HYDERABAD vs. DY. COMMISSIONER OF INCOME TAX , CIRCLE-17(2), HYDERABAD

आयकर अपीलीय अधिकरण, हैदराबाद पीठ
IN THE INCOME TAX APPELLATE TRIBUNAL
Hyderabad ‘A’ Bench, Hyderabad

श्री विजय पाल राि, उपाध् यक्ष एिं
श्री मिुसूदन सािडिया, लेखा सदस् य के समक्ष ।
BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT AND SHRI MADHUSUDAN SAWDIA, ACCOUNTANT MEMBER

आ.अपी.सं /ITA No.1761/Hyd/2019
(निर्धारण वर्ा/Assessment Year:2015-16)

M/s. Xilinx India Technology
Services Private Limited,
Hyderabad.
PAN: AAACX0450C

Vs.
Dy. Commissioner of Income Tax,
Circle 17(2), Hyderabad.
(Appellant)

(Respondent)

निर्धाररती द्वधरध/Assessee by: Shri SP Chidambaram, Advocate
रधजस् व द्वधरध/Revenue by: Shri B. Bala Krishna, CIT-DR

सुिवधई की तधरीख/Date of hearing: 16/05/2025
घोर्णध की तधरीख/Pronouncement: 08/08/2025

आदेश/ORDER
PER MADHUSUDAN SAWDIA, A.M. :

This appeal is filed by M/s. Xilinx India Technology Private
Limited (“the assessee”), feeling aggrieved by the order passed by the Learned Assessing Officer (“Ld. AO”) u/s. 143(3) r.w.s. 92CA(3) r.w.s. 144C of the Income Tax Act, 1961 (“the Act”) dated

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any fresh investigation of facts. It was submitted that raising such a ground at the appellate stage is permissible in view of the decision of the Hon’ble Supreme Court in the case of National Thermal Power
Co. Ltd. vs. CIT [229 ITR 383 (SC)]. Accordingly, considering the nature of the issue and the fact that all relevant facts are already on record, we admit the additional ground raised by the assessee for adjudication.
5. The brief facts of the case are that the assessee is a company, engaged in the business of providing Software Development Services
(“ S”) to its Associated Enterprises (“AEs”). The assessee filed its return of income for the Assessment Year 2015-16 on 27.11.2015, declaring a total income of Rs.45,57,68,920/-. In view of the international transactions involved during the year under consideration, for determination of Arm’s Length Price (“ALP”), the case of the assessee was referred to Learned Transfer Pricing Officer
(“Ld. TPO”). The Ld. TPO vide his order dated 31.10.2018
suggested upward adjustment of Rs.18,87,93,975/- on account of S. Subsequently, the Ld. TPO passed a rectification order u/s.
154 of the Act on 31.12.2018 rectifying the upward adjustment to ITA No.1761/Hyd/2019 8

Rs.16,83,50,306/-. Accordingly, the Ld. AO passed the draft assessment order on 31.12.2018. 6. Aggrieved with the draft assessment order passed by the Ld. AO, the assessee preferred objection before the Ld. DRP. In pursuance to the directions of Ld. DRP dated 06.09.2019, the Ld. AO finalized the assessment on 31.10.2019 at total income of Rs.57,42,81,716/- by making addition of Rs.11,85,12,793/- on account of S.
7. Aggrieved with the final assessment order of Ld. AO, the assessee is in appeal before us. At the outset, the Ld. AR submitted that the assessee is pressing only ground nos.5, 10, 16, 17 & 19 of appeal and ground no.2 of the additional ground of appeal.
Accordingly, ground nos. 1,2,3,4,6,7,8,9,11,12,13,14,15,18,20 & 21
of the appeal and ground nos. 1 & 3 of the additional ground of the appeal are dismissed being not pressed.
8. Under ground no.5, the assessee is seeking exclusion of 11
comparables and under ground no.2 of the additional ground, the assessee is seeking exclusion of one comparable. However, the Ld.
AR submitted that, the assessee is pressing exclusion of only 6

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comparables i.e. i) Mindtree Limited, ii) Larsen & Toubro Infotech
Limited (“L&T Infotech”), iii) Persistent Systems Limited, iv)
Infosys Limited, v) Cybage Software Private Limited (“Cybage”) and vi) Tata Elxsi Limited. The relevant portions of the submission of the assessee regarding their request for exclusion of only these six comparables are reproduced as under :
“ Exclusion of Comparable Companies
Exclusion of 6 companies relying on the decision of Juri ictional tribunal in case of M/s. Infor (India) Pvt. Ltd. Vs. ACIT, Circle 2(1),
Hyderabad (ITA No.1689/Hyd/2019 Asst. Year : 2015-16)
The appellant hereby provides that, incase all of 6 companies mentioned below (raised in Ground no.5(b), (c), (e), (h), (i) and Additional Grounds) are excluded form the list of comparable, the appellant will be at arm’s length and other grounds shall become academic.”
9. As far as the exclusion of Tata Elxsi Limited is concerned, the Ld. AR submitted that although Tata Elxsi Ltd was initially included by the assessee in its transfer pricing documentation, it was a mistake.
Upon further analysis, it was found that Tata Elxsi Ltd is not functionally comparable, hence the assessee is seeking exclusion of the same for the first time before the Tribunal. Whether the exclusion can be sought for the first time before the Tribunal or not,

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the Ld. AR relied on the judgment of the Hon’ble Bombay High
8.2 of the said judgment, wherein the Hon’ble Court held that even if a company was included by the assessee in its transfer pricing study, it can be excluded if it is later shown to be non-comparable on merits.
Accordingly, the Ld. AR submitted that, the assessee may be allowed to raise objection for exclusion of Tata Elxsi Limited.
10. The learned Departmental Representative (“Ld. DR”) objected to the exclusion of Tata Elxsi Ltd on the ground that the Assessee itself had included it as a comparable in its transfer pricing study. It was argued that the Assessee should not be permitted to take a contrary stand at this stage. The Ld. DR submitted that once a comparable is accepted by the Assessee, it should be held bound by its own selection unless exceptional circumstances are shown.
11. We have heard both the parties and perused the material on record. The issue before us is whether Tata Elxsi Ltd, though originally included by the Assessee in its TP documentation, can be ITA No.1761/Hyd/2019 11

excluded on the ground that it is not functionally comparable. We find merit in the contention of the Ld. AR. The Hon’ble Bombay High
Court in the case of Pr. CIT Vs. Pfizer Limited (supra) has categorically held in paragraph 8.2 as under:
“ 8.2 So far as the first objection is concerned, the same is not sustainable as this Court in case of CIT V/s. M/s. Tata
Power Solar Systems Ltd (Income Tax Appeal No. 1120 of 2014 decided on 16.12.2016) which upheld the order of the Tribunal held that merely because an assessee had included a particular company as comparable, it would not by itself estop / prohibit a party from withdrawing it from the list of comparables. The entire object of transfer pricing study is an exercise to determine the ALP of the transaction entered into between the respondent assessee and its AE. Therefore, if an assessee in view of mistake or an incorrect advice does include and / or exclude a company from the list of comparables. It is not irrevocable / irreversible. Thus, if on facts, the assessee is liable to establish that the company if sought to include is not comparable, it is not to be included in the list of comparable. Thus, there is no merit in the first objection on behalf of the Revenue.”

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for A.Y. 2015-16 dated 19.10.2020, where under similar facts and circumstances, the Tribunal excluded these three companies from the final set of comparables. Accordingly, the Ld. AR prayed before the bench for exclusion of Mindtree Ltd., L&T Infotech and Infosys Ltd.
from the set of comparables.
12.1 As regards the exclusion of Persistent Systems Ltd. and Tata
Elxsi Ltd., the Ld. AR submitted that these comparables were also excluded by this Tribunal in the case of Infor (India) Pvt. Ltd. Vs.
ACIT (supra) due to non-availability of segmental information. It was submitted that in absence of proper segmental data, these companies could not be reliably compared with a routine software development service provider like the assessee.
12.2 Regarding Cybage, the Ld. AR submitted that although functionally comparable, the profit margin of Cybage was abnormally high at 60.17% to 66.27%, which is not achievable under normal market conditions. It was submitted that the assessee’s margin was only 18.76%, while the average margin of the remaining comparables
(excluding Cybage) was 24.21%, with a range between 2.76% to ITA No.1761/Hyd/2019 14

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Further, this Tribunal has persistently held that, companies with proportionately high turnover should be excluded and the application of tolerance range of turnover of ten times on both sides of assessee’s turnover was proper. There is no dispute about the fact that the turnover of Mindtree Ltd., L&T Infotech, and Infosys
Ltd. are more than 10 times than the turnover of the assessee, which clearly breaches the tolerance range of turnover of ten times on both sides of assessee’s turnover . Accordingly, we direct the exclusion of Mindtree Ltd., L&T Infotech, and Infosys Ltd. from the final set of comparables.
14.1.2 Further, we observe that, the Ld. TPO did not apply the turnover filter of 10 times (both upward and downward) to other comparables as well. Therefore, in the interest of justice, we deem it appropriate to direct the Ld. TPO, to apply the turnover filter uniformly to all the comparables left after exclusion by this order.
14.2 As regards the exclusion of Persistent Systems Ltd. and Tata
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has dealt with the exclusion of these comparables, which are to the following effect :
“ 6.3. With regard to Tata Elxsi Ltd., Thirdware Solutions Ltd.
and Persistent Systems Ltd., are concerned for the A.Ys. 2013-
14 & 2014-15, this Tribunal directed the TPO (AO) to exclude the 03 companies from the list of final list comparables for non- availability of segmental details. For the sake of clarity and convenience, we extract para Nos. 7.7 & 7.8 which reads as under:-
“7.7. As regards Tata Elxsi Ltd, Thirdware Solutions Ltd and Persistent Systems Ltd are concerned, we find that their comparability to the assessee has been considered in the assessee’s own case for the A.Y 2007-08 and it is submitted that there is no change of activities of either the assessee or the comparables during the relevant A.Y before us i.e. A.Y 2014-15. 7.8. The learned DR has not rebutted this contention of the assessee. Therefore, respectfully following the decision of the Coordinate
Bench at Mumbai in ITA
No.520/Mum/2012 dated 4.12.2018, in the case of Infor

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Global Solutions India (P.) Ltd. v.Deputy Commissioner of Income Tax, we direct the exclusion of these three companies from the final list of comparables. For the sake of ready reference, the relevant paras are reproduced hereunder:
“29. We have considered rival submissions and perused materials on record. The primary and fundamental reason on the basis of which assessee seeks rejection of the aforesaid comparable is, it is also engaged in the development of product and segmental details are not available. Notably, in case of LSI Technologies India (P.)
Ltd. (supra), the Co-ordinate Bench while examining the comparability of the aforesaid company to a software development service provider, has rejected this company as a comparable considering the fact that it is engaged in product development and product design services. The same view has been reiterated by the Tribunal in the other decisions cited by the learned Authorised Representative.
Since, many of these decisions pertain to the impugned assessment year, respectfully following the aforesaid decisions of the Tribunal, we direct the Assessing Officer to exclude this company from the list of comparables.
35. We have considered rival submissions and perused materials on record. On a perusal of the documents placed in the paper book it appears that this company is engaged in various activities including development of niche product and development services. Thus, the company is functionally different from the assessee. Considering the aforesaid aspect, the Coordinate Bench in case of Telcordia Technologies India (P.) Ltd. (supra), which is for the very same assessment year, has excluded this company as a comparable. Similar view has also been ITA No.1761/Hyd/2019 20

expressed in the other decisions cited by the learned
Authorised Representative. Thus, keeping in view the decisions of the Tribunal referred to above, we hold that this company cannot be a comparable to the assessee.
38. We have considered rival submissions and perused materials on record. Though, it may be a fact that the assessee may not have objected to selection of this company before the Transfer Pricing Officer, however, the assessee raised objections against selection of this company before the DRP as well as before us. The grievance of the assessee is, the company being involved in development of products and since no segmental details are available in the annual report, it cannot be treated as comparable. The Co-ordinate Bench in Tech Mahindra
Ltd. (supra) having found this company to be involved in development of software product and trading in software licenses has held that it cannot be a comparable to a software development service provider. Similar view has been expressed in the other decisions cited before us by the learned Authorised Representative. Since, many of these decisions relate to very same assessment year, following the ratio laid down in these decisions, we hold that this company cannot be a comparable to the assessee”.
6.3.1. In respect of Thirdware Solutions Ltd., the assessee also relied on the decision of the ITAT, Pune Bench in the case of Apoorva Systems Pvt. Ltd., Vs. DCIT, Circle-1(1), Pune TS 40
ITAT 2017 (Pune) wherein the coordinate bench of the tribunal held that the companies are functionally different hence it is to be excluded from the list of final companies.
6.3.2. Both the Ld.AR and Ld.DR submitted that there is no change in the facts either in the case of assessee’s company or ITA No.1761/Hyd/2019 21

in the case of comparables. No major changes in the activities of the comparables of the assessee’s have been brought to our notice. Therefore, respectfully following the view taken by the coordinate bench of the tribunal in the earlier years, we direct the TPO (AO) to exclude the Tata Elxsi Ltd., Thirdware
Solutions Ltd. and Persistent Systems Ltd. from the final list of the comparables.”
14.3 On perusal of above, we find that, this Tribunal had excluded these companies due to lack of segmental data. In the absence of any contrary findings placed before us by the Revenue following the same principle, we direct the exclusion of Persistent Systems Ltd. and Tata
Elxsi Ltd. as well.
14.4 With respect to exclusion of Cybage, we find merit in the argument of the Ld. AR that the profit margin of over 60% is significantly higher than the rest of the comparables, which range between 2.76% to 40.29%, thereby making Cybage an outlier. The inclusion of such an outlier would distort the arm’s length margin. We have also gone through the decision of this Tribunal in the case of Infor (India) Pvt. Ltd. vs ACIT(supra) as relied upon by the Ld. AR,

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wherein at para nos.6.4 & 6.4.1 of its order, this Tribunal has dealt with the exclusion of Cybage, which are to the following effect :
“ 6.4. Ld.AR requested for exclusion of Cybage Software Pvt. Ltd. from the final list of comparables and argued that though Cybage Software
Pvt. Ltd. is comparable functionally, the profit margin is very high as much as 60.81 to 68.17% which is not possible in normal conditions.
Ld.AR submitted that the assessee company’s margin is 15.32% against the average margin of comparables selected by the assessee at 10.70%.
Therefore, requested to exclude the Cybage Software Pvt. Ltd. from the final list of comparables. The Ld.AR argued that the average margin of other companies is ranging from 11.88% - 41.12% as evidenced from the final list of comparables selected by TPO and average of Cybage
Software Pvt. Ltd. worked out to 66.27% which is more than 1/3rd average of the rest of the companies. Therefore, argued that Cybage
Software Pvt. Ltd. is not a comparable in view of highest margins. The assessee also objected before the AO for taking Cybage Software Pvt.
Ltd. as comparable stating that it is functionally dissimilar and diversified activities engaged in product development and insufficient information available in the public domain. Both the Ld.TPO and the Ld.DRP rejected the contentions of the assessee. The Ld.DR supported the orders of the lower authorities.
6.4.1. We have considered the rival submissions and observe that Cybage
Software Pvt. Ltd., though comparable company, the margin declared by the Cybage Software Pvt. Ltd. is abnormally high which is as much as 68.17% in the year under consideration and average margin is at 66.27%. The Ld. TPO has excluded the loss companies and also the companies which are with lowest margins as argued by the Ld.AR and ITA No.1761/Hyd/2019 23

which was not disputed by the department. Following the same analogy
Cybage Software Pvt. Ltd. required to be excluded. The TPO or DRP has not gone into the reasons for such huge margins. Without having complete information we are unable to accept the contention of the Ld.TPO and DRP to include Cybage Software Pvt. Ltd. as comparable, therefore we direct the TPO / AO to exclude Cybage Software Pvt. Ltd.
from the final list of comparables.”
14.5 On perusal of above, we find that, this Tribunal on the ground of high profit margin has excluded Cybage from the set of comparbales. Accordingly, respectfully following the decision of this Tribunal, we direct the exclusion of Cybage from the final list of comparables.
14.6 In view of the above findings and respectfully following the decision of this Tribunal, in the case of Infra (India) Pvt. Ltd. Vs.
ACIT (supra), we direct the Ld. AO/TPO to exclude these six companies i.e. Mindtree Ltd., L&T Infotech, Infosys Ltd., Persistent
Systems Ltd., Tata Elxsi Ltd. and Cybage from the final set of comparables. The Ld. AO/TPO is accordingly directed to recompute the ALP in accordance with law, after excluding the above comparables.

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Rs.30,16,85,768/- and revenue from sale of products is only
Rs.1,64,63,671/-. It was thus argued that product revenue accounts for only 5% of the total revenue, and the remaining 95% is from S.
Therefore, the sale of product is minor in proportion and does not warrant exclusion of the company from the list of comparables.
15.1 Further, with regards to the observation of the Ld. DRP regarding intangible assets, the Ld. AR contended that the Ld. DRP has not demonstrated how the presence of intangibles has affected the revenue or profitability of Daffodil Software Ltd. It was submitted that no working or evidence has been furnished either by the Ld. DRP to show that the said intangibles led to abnormal profits or rendered the company functionally different. Accordingly, it was submitted that Daffodil Software Ltd. is functionally comparable to the Assessee, and its exclusion on the basis of insignificant product revenue and unexplained intangible holdings is unjustified.
15.2 With regards to inclusion of Evoke Technologies Pvt. Ltd.
the Ld. AR submitted that, the Ld. TPO excluded Evoke Technologies
Pvt. Ltd. from the list of comparables on the ground that financials

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from the company’s overseas operations were not audited, and therefore, segmental results for India could not be reliably used for benchmarking. The Ld. AR strongly objected to the exclusion of Evoke Technologies Pvt. Ltd. and invited our attention to page no.15
of the TPO’s order, where the rejection was based on lack of audited financials for the foreign branch operations. In response, the Ld. AR drew our attention to Note No. 2.30 on Segment Reporting forming part of the company’s audited annual report, which is placed at page
1884 of the paper book. It was submitted that this note clearly provides separate audited financial details for Indian operations and overseas operations, and therefore, audited segmental information for India is available and can be used for comparability analysis. In support of his submission, the Ld. AR relied upon the decision of this Tribunal in the case of Indeed India Operations Pvt. Ltd. vs. DCIT, order dated 10 August 2022, (2022) 143 taxmann.com 212, wherein the Tribunal at paragraph 13.5 of the order remanded the issue of comparability of Evoke Technologies Pvt. Ltd. to the file of the Ld.
TPO on the ground of subsequent availability of financials of the company . Accordingly, the Ld. AR prayed that the matter be ITA No.1761/Hyd/2019 27

remanded to the Ld. TPO for fresh consideration of Evoke
Technologies Pvt. Ltd. as a potential comparable, after duly verifying the segmental audited data available in the financial statements.
16. Per contra, as far as inclusion of Daffodil Software Limited and Evoke Technologies Pvt. Ltd. are concerned, the Ld. DR relied on the order of Ld. TPO / DRP.
17. We have heard the rival contentions and gone through the material available on record. As far as the inclusion of Daffodil
Software Ltd. is concerned, we found that the Ld. DRP has rejected the inclusion of Daffodil Software Ltd. primarily on two grounds i.e that the company has revenue from sale of software products amounting to Rs.1,64,63,671/, and that it holds intangibles worth
Rs.3,15,75,892/-. On perusal of Note No. 20 (Revenue from Operations) of the audited financial statements of Daffodil Software
Ltd. (placed at page 1676 of the paper book), we note that the total operating revenue of the company is Rs.30,16,85,768/-, hence, the product revenue of Rs.1,64,63,671/- constitutes only 5% of total revenue and the remaining 95% is from S. In view of the above,

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we find that the sale of software products is not the primary activity of the company. The product revenue is minor and incidental, and does not significantly affect the functional profile of the company. Further, as regards the presence of intangible assets, we find that no specific evidence or computation has been placed by the Revenue before us demonstrate that such intangibles have influenced the profitability or risk profile of Daffodil Software Ltd. The mere presence of intangible assets, without showing their functional impact, cannot be a ground for exclusion. Therefore, in our considered view minor product revenue or intangibles do not by themselves render a company non- comparable unless they affect margins or risks materially.
Accordingly, we are of the view that Daffodil Software Ltd. is functionally comparable to the Assessee and should be included in the final list of comparables.
17.1
As far as the inclusion of Evoke Technologies Pvt. Ltd. is concerned, we noted that, the Ld. TPO had excluded Evoke
Technologies Pvt. Ltd. from the list of comparables solely on the basis that financials of its overseas branch operations were unaudited, thereby questioning the reliability of overall financials and segmental

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reporting. However, on perusal of Note No. 2.30 (Segment Reporting) of the audited financial statements of Evoke Technologies Pvt. Ltd., placed at page 1884 of the paper book, we find that the company has provided separately audited figures for Indian operations and overseas operations, including revenues, operating expenses, and segment results. This clearly suggests that audited segmental information for India is available and capable of being used for ALP benchmarking.
We have also gone through the decision of this Tribunal in the case of Indeed India Operations Pvt. Ltd. vs. DCIT (supra), while dealing with a similar situation, held as under in para 13.5:
“ 13.5 it is noticed from the order passed by the TPO , that this company was excluded by the TPO on account of the nonavailability of the current year data at the time of preparation of the TP study by the assessee .DRP has rejected the inclusion of this company, on account of the fact that various companies were excluded only on account of nonavailability of the information at the relevant time . Though it is correct that the tribunal in the above cited order had directed to include Evoke Technologies, as comparable however in the present case there is no examination of the profile of the Evoke Technologies on the parameters laid down by Rule 10 B of Income Tax Rules 1962, with the assessee. In the light of the above we deem it appropriate to remand back the inclusion of evoke technologies to the file of TPO with the direction

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to consider whether this company is functionally similar on the touchstone of the parameters laid down in the rule 10 B of the Rule or not. However, in case the assessing officer / TPO had rejected the inclusion of other similarly situated companies while connecting the TP study on the ground of nonavailability of the current year data, then it will be open for the TPO /assessing officer to examine any other company for the purposes of benchmarking the international transaction. With the above said directions the ground raised by the assessee is allowed for statistical purposes.”
17.2 Respectfully following the above decision of this Tribunal, we find merit in the Ld. AR’s contention and accordingly, set aside this issue to the file of the Ld. TPO, with a direction to verify the segmental audited data available for Indian operations and decide afresh whether Evoke Technologies Pvt. Ltd. qualifies as a comparable company.
18. Ground no.16 & 17 of the assessee relates to computation of margin. In this regard, the Ld. AR invited our attention to para no.
2.10.1 at page 11 of the Ld. DRP’s order, and submitted that there exists a reconciliation error between the computation of margin as determined by the Assessee and that computed by the Ld. TPO. It was submitted that the Ld. DRP has already noted this discrepancy

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and accordingly issued a direction to the Ld. TPO to verify the computation and recompute the margin correctly, if required. The Ld.
AR thus prayed that a similar direction may also be issued by this Tribunal to ensure that the Ld. TPO gives effect to the DRP’s instruction and carries out the margin computation in accordance with law.
19. Per contra, the Ld. DR did not make any objection.
20. We have heard the rival contentions and gone through the material available on record. On perusal of relevant portion of the DRP’s order at paragraph 2.10.1 it is evident from the record that the Ld. DRP has already directed the Ld. TPO to verify the margin computation of the Assessee and rectify any discrepancy, if found.
We found no reason to interfere with the directions issued by the Ld.
DRP. However, to ensure proper and effective implementation of the same, we direct the Ld. TPO to strictly comply with the Ld. DRP’s directions and carry out the verification and rectification of the Assessee’s margin computation in accordance with law, after granting due opportunity of hearing to the Assessee.

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of the year. They defer with the changes in working capital cycle and the regularity of sale and circulation. Hence, the adjustment on account of WCA cannot be granted in the absence of details working of working capital cycle.
23. We have considered the rival submissions and gone through the relevant records. It is not in dispute that the assessee had placed on record the working and supporting data for claiming WCA, both before the Ld. TPO and the Ld. DRP. However, the authorities below have not examined the workings in detail nor recorded reasons for denial, other than making generic observations. We find merit in the assessee’s claim that WCA is a well-accepted principle in transfer pricing benchmarking, especially when differences in receivables, payables, and inventory levels exist between the tested party and comparables. We have gone through the decision of this Tribunal in the case of Cavium Networks India (P.) Ltd. Vs. ACIT (supra), wherein at para no.4 to 4.2 the Tribunal has held as under:
“4. We have heard rival contentions against and in support of the impugned addition. We express our agreement with the Revenue’s arguments supporting the TPO’s conclusion that such free of cost

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import services indeed form international transaction as per provisions of the Act. The fact however remains that the impugned addition made in the TPO’s order has not taken into account any comparable or market condition(s) regarding captive service provider segment. Nor the TPO has adopted any of these methods, direct or indirect, provided in the Income Tax Rules so as to make the impugned adjustment. We find no reason to sustain the same on merits therefore. This impugned adjustment of Rs.87,55,542/- is directed to be deleted.
4.1. Lastly comes working capital adjustment issue which has been denied to the assessee right from the TPO to the DRP’s directions.
Mr Mohrana has referred to the DRP directions under challenge not only observing that the assessee had not provided the corresponding details of working capital of the comparables in issue but also taking note of the tribunal's decision in Mobis India
Limited in ITA 2112/Mds/2011. 4.2. Mr Bafna on the other hand has taken us to page 241 of appeal paper book indicating the assessee to have duly placed on record all the relevant details of the comparable entities. This tribunal’s coordinate bench decision in Yahoo (supra) has already taken note of Mobis India Ltd. (supra) to hold that the corresponding assessee therein had failed to provide details in the issue which is not the case before us. We thus accept assessee's working capital adjustment in principle and direct the TPO to verify the necessary facts as per law.”
24. On perusal of above, we found that the Tribunal has accepted the WCA in principle and directed the Ld. TPO to verify the ITA No.1761/Hyd/2019 35

necessary facts as per law. Following the same reasoning, we accept the assessee’s claim in principle and direct the Ld. TPO to verify the computation of WCA based on the details already filed and any additional clarification to be submitted, and thereafter allow appropriate adjustment as per law.
25. In the result, the appeals filed by the assessee is partly allowed for statistical purposes.
Order pronounced in the open Court on 8th Aug., 2025. (VIJAY PAL RAO) (MADHUSUDAN SAWDIA)
VICE PRESIDENT ACCOUNTANT MEMBER
Hyderabad,
Dated: 08.08.2025. * Reddy gp

Copy of the Order forwarded to :

BY ORDER,