“working capital adjustment”

Transfer PricingSection 92CSection 92C508 judgments

The decision most relied on for working capital adjustment is Sony India (P) Ltd. v. DCIT (114 ITD 448), cited in 131 judgments on BharatTax.

Leading authorities on working capital adjustment

Sony India (P) Ltd. v. DCIT

114 ITD 448 · 2008 · ITAT

131

citing judgments

For transfer pricing purposes, functionally dissimilar entities that have significant business differences must be excluded from the list of comparables for benchmarking analysis. It also provides guidance on the non-allocation of advertisement, marketing, and promotion (AMP) expenses to other entities when incurred solely for the assessee's business.

Pr. CIT v. Kusum Health Care Pvt. Ltd.

398 ITR 66 · 2017 · High Court

100

citing judgments

Not every item of receivables appearing in the accounts of an entity dealing with foreign associated enterprises automatically constitutes an international transaction under Section 92B. A separate adjustment for interest on outstanding receivables is not permissible if the working capital adjustment has already factored in their impact.

Mentor Graphics (Noida) (P) Ltd. v. DCIT

109 ITD 101 · 2007 · ITAT

citing judgments

A working capital adjustment is mandated and a prerequisite for correctly determining the Arm's Length Price (ALP) under Rule 10B(1)(e) and Rule 10B(3) of the Income Tax Rules, 1962. This adjustment accounts for differences in working capital and outstanding receivables between the assessee and comparable companies.

Avenue Asia Advisors Pvt. Ltd. v. DCIT

398 ITR 120 · 2017 · High Court

citing judgments

The Delhi High Court holds that a detailed functional and working capital analysis, considering various factors, is essential before treating outstanding receivables as a separate international transaction for transfer pricing adjustments on notional interest. Simply making an adjustment based on receivables alone without such study distorts the transaction's character.

Indo Rama Synthetics (I) Ltd. v. CIT

330 ITR 363 · 2011 · Supreme Court

citing judgments

For Minimum Alternate Tax (MAT) under Section 115JB, the book profit must reflect the true working results of the company. Capital receipts that are not income cannot be included in book profit, and adjustments based on notes on accounts can be made to arrive at the real profit.

Huawei Technologies India Pvt. Ltd. v. JCIT

101 Taxmann.com 313 · 2019 · ITAT

citing judgments

Working capital adjustments are permissible and crucial for comparability analysis when determining the arm's length price of international transactions, especially when an assessee's claim for such adjustment has been denied.

ITO v. E Value Serve.com

75 Taxmann.com 195 · 2016 · Reported

citing judgments

In transfer pricing analysis, demanding daily balances for working capital adjustments is impractical and improper; adjustments should be based on opening and closing working capital. Transfer pricing inherently involves estimation to ensure comparability.

Genesis Integrating Systems India Pvt Ltd. v. DCIT

53 SOT 159 · 2012 · ITAT

citing judgments

Companies with significantly different turnovers (e.g., one above Rs. 200 crores and another below) cannot be considered comparable in transfer pricing analysis. Turnover is a relevant factor in assessing comparability.

Judgments citing working capital adjustment

Dy Commissioner of Income Tax, Mumbai vs. Bp India Pvt Ltd, Mumbai

In the result, the grounds of appeal raised by Revenue are

ITA 4873/MUM/2025[2012-13]Status: DisposedITAT Mumbai31 Dec 2025AY 2012-13

Bench: Shri Pawan Singh & Shri Girish Agrawalassessment Year: 2012-13 (Physical Hearing) Dy. Commissioner Of Income Tax, Bp India Pvt. Ltd. Room No.535, Aayakar Bhavan, Pb No. 19411, Technopolis Vs. Mumbai – 400020. Knowledge Park, Andheri, Mumbai- 400043. Pan No. – Aaccb2020Q (Appellant) (Respondent) C.O. No. 277/M/2025 In Ita No.4873/M/2025 Assessment Year: 2012-13

For Appellant: Ms. Chandni Shah/ Mr. AmolFor Respondent: Shri Bhagirath Ramawat (SR. D.R.)

Section 234DSection 271(1)(c)

provisions of Rules 10B(2) and (3) read with Rule 10C of the Income-tax Rules, 1962 (the Rules") 1.6. not allowing the working capital adjustment to eliminate the differences on account of varying working capital position between the Assessee and the comparable companies, and 1.7. not allowing the risk ... challenged the inclusion of Excel Infoways Limited and not including Jindal Intellicom Ltd. in final set of comparable as well as not allowing working capital adjustment and risk adjustment by TPO. 7. The Ld. CIT (A) after considering the order of TPO, submission of Assessee and the material placed before

Deputy Commissioner of Income Tax, Circle-7(1)(1), Bangalore vs. Ms Zyme Solution Private Limited, Bangalore

Accordingly the appeal of the ld. AO and the CO of the assessee are partly allowed,

ITA 1885/BANG/2024[2013-14]Status: DisposedITAT Bangalore19 Dec 2025AY 2013-14

Bench: Shri Prashant Maharishi & Shri Keshav Dubeyassessment Year : 2013-14

For Appellant: Shri Narendra Jain, AdvocateFor Respondent: Shri N. Balusamy, Jt.CIT(DR)(ITAT), Bengaluru

Section 143(3)Section 92C

TPSR) computed the margins of the assessee at 10.01% and set of comparable companies margin was determined at 2.73% on Operating Cost without working capital adjustment. Assessee submits that it is at arm’s length. 5. The ld. TPO examined the TPSR wherein after examination same was rejected

Ntt Data Global Delivery Services Pvt Ltd, Bangalore vs. Assistant Commissioner of Income Tax Circle-5(1)(1), Bangalore

In the result appeal of the assessee is partly allowed for statistical purposes

ITA 2062/BANG/2017[2013-14]Status: DisposedITAT Bangalore18 Dec 2025AY 2013-14

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri Chavali Narayan, CAFor Respondent: Dr. Divya K.J – CIT

adjudicating the same. 38. The revised ground No. 21 of the assessee’s appeal is that the AO/DRP erred in not providing the working capital adjustment even though the TPO has accepted the same. 38.1 At the outset the ld. DR requested to issue a direction to allow the adjustment ... working capital adjustment as per the provisions of law. On the contrary, the ld. DR raised no objection on issuing such a direction. Accordingly, we direct the TPO to provide the necessary adjustment qua the working capital after necessary verification and as per law. Hence, the ground of appeal

Ntt Data Global Delivery Services Pvt Ltd, Bangalore vs. Assistant Commissioner of Income Tax, Circle-5(1)(1), Bangalore

In the result appeal of the assessee is partly allowed for statistical purposes

ITA 1720/BANG/2017[2013-14]Status: DisposedITAT Bangalore18 Dec 2025AY 2013-14

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri Chavali Narayan, CAFor Respondent: Dr. Divya K.J – CIT

Gainsight Software Private Limited, Hyderabad vs. DCIT., Circle-2(1), Hydersabad

In the result, the appeal filed by the assessee is allowed in terms of our observations given hereinabove

ITA 796/HYD/2024[2020-21]Status: DisposedITAT Hyderabad12 Dec 2025AY 2020-21

Bench: SHRI VIJAY PAL RAO, HON’BLE (Vice President), SHRI MANJUNATHA G, HON’BLE (Accountant Member)

Section 143(3)Section 144BSection 144C(13)Section 144C(5)Section 153Section 92D

facts and in the circumstances of the case and in law, Ld. AO / Ld. TPO / Ld. DRP erred in: • not granting working capital adjustment; and • not granting risk adjustment. 10. Levy of interest under section 234B / 234C On the facts and circumstances of the case

Dsm Shared Services India Private Limited, Hyderabad, Telangana vs. DCIT., Circle 8(1), Hyderabad

In the result, appeal of the Assessee is allowed

ITA 1358/HYD/2024[2021-22]Status: DisposedITAT Hyderabad12 Dec 2025AY 2021-22

Bench: Shri Vijay Pal Rao & Shri Manjunatha G.आ.अपी.सं /Ita No.1358/Hyd/2024 Assessment Year 2021-2022 Dsm Shared Services India Private Limited, The Dcit, Circle-8(1), Hyderabad – 500 081. Hyderabad – 500 081. Vs. Telangana. Telangana. Pan Aadcd8407C (Appellant) (Respondent) िनधा"रती "ारा /Assessee By: Ca Aliasgar Rampurawala राज" व "ारा /Revenue By: Dr. Narendra Kumar Naik, Cit-Dr सुनवाई की तारीख/Date Of Hearing: 09.12.2025 घोषणा की तारीख/Pronouncement: 12.12.2025 आदेश/Order

For Appellant: CA Aliasgar RampurawalaFor Respondent: Dr. Narendra Kumar Naik, CIT-DR

Section 143(3)Section 144Section 144C(13)Section 153Section 92C(3)

above grounds, on the facts and circumstances of the case and in law, the Ld.AO/Ld. TPO erred in: I. not granting working capital adjustment; and II. not granting risk adjustment. Proportionate Adjustment 6. On the facts and circumstances of the case, and in law, without prejudice to the above ... length price: c. recharacterizing the trade receivables as unsecured loan extended to the AEs; d. not appreciating the fact that the working capital adjustment takes into account the impact of deferred receivables, if any, and 9. Without prejudice to Ground no. 7 & 8 above, on the facts

Cosmo Films Ltd., New Delhi vs. DCIT, Circle- 6(2), New Delhi

In the result, the appeal filed by the assessee is allowed

ITA 7849/DEL/2017[2013-14]Status: DisposedITAT Delhi12 Dec 2025AY 2013-14

Bench: Shri S.Rifaur Rahman & Ms. Madhumita Roycosmo Films Limited, Vs. Dcit, Circle 6 (2), 1008, Dlf Tower A, New Delhi. Jasola District Centre, New Delhi – 110 025. (Pan : Aaacc1152C) (Appellant) (Respondent) Assessee By : Dr. Rakesh Gupta, Advocate Shri Somil Aggarwal, Advocate Shri Deepesh Garg, Advocate Revenue By : Shri S.K. Jadhav, Cit Dr Date Of Hearing : 18.09.2025 Date Of Order : 12.12.2025 O R D E R Per S. Rifaur Rahman: 1. This Appeal Preferred By The Assessees Is Directed Against The Assessment Order Dated 27.10.2013 Passed By The Dcit, Circle 6 (2), Delhi Under Section 143(3) Read With Section 144C Of The Income-Tax Act, 1961 (For Short ‘The Act”) For Assessment Year 2013-14 Pursuant To The Directions Of The Dispute Resolution Panel U/S 144C(5) Of The Act Raising Following Grounds Of Appeal :-

For Appellant: Dr. Rakesh Gupta, AdvocateFor Respondent: Shri S.K. Jadhav, CIT DR

Section 143(3)Section 144CSection 144C(5)Section 92

income of the assessee may be revised upwards by an identical amount. 8.1 The case of assessee is that assessee had requested for working capital adjustment in the case of comparable. This was denied on the ground that the assessee has not demonstrated that there is a difference ... Delhi High Court in the case of Kusum Healthcare Private Limited, ITA 765/2016 if impact of credit period was factored in Working Capital Adjustment while determining the Arm’s Length Price, then no further adjustment was required for interest on receivables. However, the submissions were not accepted. It was mentioned

Deputy Commissioner of Income Tax, Circle-1(1)(1), Bangalore vs. Amd India Private Limited, Bangalore

In the result, the appeal filed by the assessee is partly allowed and the appeal filed by the ld

ITA 2032/BANG/2024[2013-14]Status: DisposedITAT Bangalore11 Dec 2025AY 2013-14

Bench: Shri Prashant Maharishi & Shri Soundararajan K.

For Appellant: Shri Padam Chand Khincha, CAFor Respondent: Shri Shashi Saklani, CIT(DR)(ITAT), Bengaluru

Section 143(3)Section 28

comparables. The assessee objected to them and ultimately 7 set of comparables were arrived at having average margin of 20.90%. The working capital adjustment was also granted at 1.86% and adjusted margin was derived at 19.04%. Accordingly a shortfall adjustment was worked out at Rs.10 ... respect to the interest on overdue receivable, he submits that no separate adjustment can be made in the hands of the assessee as working capital adjustment has been granted by the ld. TPO and it is subsumed in the TNMM and no addition could have been made on that basis

Adp Private Limited, Hyderabad, Telangana vs. DCIT., Circle 1(1), Hyderabad, Telangana

In the result, the appeal filed by the assessee is allowed in terms of our observations given hereinabove

ITA 332/HYD/2025[2021-22]Status: DisposedITAT Hyderabad10 Dec 2025AY 2021-22

Bench: SHRI VIJAY PAL RAO, HON’BLE (Vice President), SHRI MANJUNATHA G, HON’BLE (Accountant Member)

Section 143(3)Section 144BSection 144C(13)Section 144C(5)Section 153Section 195(2)Section 40

erred in not excluding comparable companies that are earning supernormal profits in comparison to the Assessee. 14. Ground 14: Working capital adjustments The Ld. TPO and the Hon'ble DRP erred in not adjusting the net margins of comparable companies for differences in working capital in accordance with the provisions ... fully funded by its Associated Enterprise with no working capital risk and no interest payments. d) Not appreciating the fact that the working capital adjustments undertaken take into account the impact of outstanding receivables of the controlled transactions vis-à-vis the uncontrolled transactions in determining the arm's length

Indeed India Operations Private Limited, Hyderabad vs. ACIT., Circle2(1), Hyderabad

In the result, appeal of the Assessee for the assessment year 2021-2022 is allowed

ITA 943/HYD/2024[AY 2020-21]Status: DisposedITAT Hyderabad10 Dec 2025

Bench: Shri Vijay Pal Rao & Shri Manjunatha G.आ.अपी.सं /Ita Nos.943 & 1359/Hyd/2024 Assessment Years 2020-2021 & 2021-2022 Indeed India Operations The Acit, Private Limited, Vs. Circle-2(1), Hyderabad – 500 081. Hyderabad. Telangana Pan Aadci5931J (Appellant) (Respondent) िनधा"रती "ारा /Assessee By: Mahima Goud, Advocate राज" व "ारा /Revenue By: Ms U Mini Chandran, Cit-Dr

For Appellant: Mahima Goud, AdvocateFor Respondent: MS U Mini Chandran, CIT-DR

Section 143(3)Section 144BSection 144C(13)Section 153Section 92C(3)

case and in law, the Ld. AO/Ld. TPO erred in and the Hon'ble DRP further erred in not appreciating that working capital adjustment under TNMM takes into account impact of outstanding receivables of the controlled transaction vis-à-vis the uncontrolled transaction. 5 ITA.Nos.943 and 1359/Hyd./2024

Calliduscloud (India) Private Limited, Hyderabad vs. DCIT., Circle- 1(1), Hyderabad

In the result, the appeal filed by the assessee is allowed in terms of our observations given hereinabove

ITA 1395/HYD/2024[2021-22]Status: DisposedITAT Hyderabad10 Dec 2025AY 2021-22

Section 143(3)Section 144BSection 144C(13)Section 144C(5)Section 153

rectifying mark-up computation of: i. Harbinger Systems Private Limited ii. Infosys Limited 5 M/s. Callidus Cloud (India) Private Limited (h) Not providing working capital adjustment. (i) Not providing risk adjustment. 4. Technical Support Services (‘TSS’) Segment (Tax Effect: ₹1,75,04,930/-) 4.1. Upward adjustment ... Effect: ₹8,29,030/-) 6.1. Adjustment of ₹32,93,986/- towards notional interest. 6.2. Errors include: a. Treating receivables as loans b. Ignoring working capital adjustment impact c. Ignoring that Appellant is debt-free d. Using SBI rate instead of LIBOR 7. Levy of Interest under Section 234A / 234B

Indeed India Operations Private Limited, Hyderabad vs. ACIT., Circle -(1), Hyderabad

ITA 1359/HYD/2024[2021-22]Status: DisposedITAT Hyderabad10 Dec 2025AY 2021-22

Bench: Shri Vijay Pal Rao & Shri Manjunatha G.आ.अपी.सं / Ita Nos.943 & 1359/Hyd/2024

Section 143(3)Section 144BSection 144C(13)Section 153Section 92C(3)

Saxon Global India Private Limited, Hyderabad vs. ITO., Ward-3(1), Hyderabad

In the result, the appeal filed by the assessee is allowed in terms of our observations given hereinabove

ITA 1334/HYD/2024[2021-22]Status: DisposedITAT Hyderabad10 Dec 2025AY 2021-22

Section 144C(5)Section 92C

Applying related party filter at 25% on revenue and expenditure. 11. Adjustments to Margin a The authorities below erred in not providing the working capital adjustment on the facts and circumstances of the case. b. The TPO and the AO erred in denying an appropriate risk adjustment for the year

Ntt Data Business Solutios Private Limited, Hyderabad vs. DCIT, Circle-5(1), Hyderabad

In the result, appeal of the Assessee is allowed

ITA 489/HYD/2022[2018-19]Status: DisposedITAT Hyderabad10 Dec 2025AY 2018-19

Bench: Shri Vijay Pal Rao & Shri Madhusudan Sawdiaआ.अपी.सं /Ita No.489/Hyd/2022 Assessment Year 2018-2019 Ntt Data Business The Dcit, Solutions Private Limited, Hyderabad. Circle-5(1), Vs. Pin -500081. Hyderabad. Pan Aadci1557Q (Appellant) (Respondent) िनधा"रती "ारा /Assessee By: Ca Aliasgar Rampurawala राज" व "ारा /Revenue By: Ms U Mini Chandran, Cit-Dr

For Appellant: CA Aliasgar RampurawalaFor Respondent: MS U Mini Chandran, CIT-DR

Section 143(3)Section 144

facts and in the circumstances of the case and in law, the Ld. AO/Ld. TPO/ Hon'ble DRP erred in: a) not granting working capital adjustment and b) not granting risk adjustment. 14. On the facts and circumstances of the case, and in law, without prejudice to the above grounds ... considering deferred receivables as separate international transaction for arriving at an arm's length price: c) not appreciating the fact that the working capital adjustment takes into account the impact of deferred receivables on the profitability, and d) levying interest by adopting State Bank of India ('SBI") short term deposit

Massimo Dutti India Private Limited, Gurgaon vs. ACIT, Circle-1(1), Gurgaon

In the result, the appeal of the Assessee is allowed

ITA 2252/DEL/2022[2018-19]Status: DisposedITAT Delhi08 Dec 2025AY 2018-19

Bench: Shri M. Balaganesh & Shri Vimal Kumarmassimo Dutti India Pvt. Ltd, Vs. Acit, Unit No. 1 (Office 1) 8Th Floor, Circle-1(1), Ambience Island, Nh-8, Gurgaon Gurugram, Hayana-122 002 (Appellant) (Respondent) Pan: Aajcm0103G Assessee By : Shri Ravi Sharma, Adv Ms. Shruti Khimta, Adv Ms. Kashish Gupta, Ca Revenue By: Shri S. K. Jadav, Cit Dr Date Of Hearing 11/09/2025 Date Of Pronouncement 08/12/2025

For Appellant: Shri Ravi Sharma, AdvFor Respondent: Shri S. K. Jadav, CIT DR

Section 143(3)Section 144C(5)Section 92C

Since the Learned TPO while applying TNMM as the MAM for benchmarking the import of finished goods did not grant the working capital adjustment to the Assessee, the Learned DRP directed the Learned TPO to re-verify the working capital adjusted margins of the comparable companies supplied by the Assessee

Brightcom Group Limited (Formerly Known As Lycos Internet Limited), Hyderabad vs. Asst. Commissioner of Income Tax, Circle-16(1), Hyderabad

In the result, the appeal filed by the assessee is allowed in terms of our observations given hereinabove

ITA 1862/HYD/2017[2013-14]Status: DisposedITAT Hyderabad03 Dec 2025AY 2013-14

Section 145Section 92BSection 92C

assessee also raised the additional grounds on 19.11.2019 which read as under : “6. The Ld. AO/DRP ought to have appreciated the fact that working capital adjustment itself takes the impact of outstanding receivable on profitability. Accordingly no separate adjustment is warranted on outstanding receivables. 7. The Ld. AO/DRP ought

Epam Systems India Private Limited, Hyderabad vs. DCIT, Circle -8 (1), Hyderabad

In the result, both the appeals of the Assessee are allowed

ITA 83/HYD/2022[2017-18]Status: DisposedITAT Hyderabad26 Nov 2025AY 2017-18

Bench: Shri Vijay Pal Rao & Shri Manjunatha G.आ.अपी.सं /Ita Nos.83 & 498/Hyd/2022 Assessment Years 2017-2018 & 2018-2019 Epam Systems India The Dcit & The Acit, Private Limited, Vs. Circle-8(1), Hyderabad – 500 081 Hyderabad. Pan Aaacw2012R (Appellant) (Respondent) िनधा"रती "ारा /Assessee By: Ca Shreyas Sardesai राज" व "ारा /Revenue By: Ms U Mini Chandran, Cit-Dr

For Appellant: CA Shreyas SardesaiFor Respondent: MS U Mini Chandran, CIT-DR

Section 143(3)

called for and the stand taken by the learned AO/TPO/DRP in this regard is misconceived, erroneous and incorrect. 2:0 Erroneous rejection of working capital adjustment in respect of margin computation of the Appellant: 2:1 The learned AO/TPO have erred in disallowing working capital adjustment on the margin ... Appellate. 2:2 The learned AO/ TPO has erred, both in laws and on facts, in incorrectly disallowing for the working capital adjustment to eliminate the difference in the working capital requirement of the Appellant and the comparable companies. 2:3 The Appellant submits that the learned AO/TPO be directed

Epam Systems India Private Limited, Hyderabad vs. ACIT, Circle-8(1), Hyderabad

In the result, both the appeals of the Assessee are allowed

ITA 498/HYD/2022[2018-19]Status: DisposedITAT Hyderabad26 Nov 2025AY 2018-19

For Appellant: CA Shreyas SardesaiFor Respondent: MS U Mini Chandran, CIT-DR

Section 143(3)

Dsv Air & Sea Private Limited, Mumbai vs. ACIT, Cirle-3(1)(1), Mumbai

In the result, this ground of appeal is allowed for statistical purpose

ITA 3653/MUM/2024[2020-21]Status: DisposedITAT Mumbai21 Nov 2025AY 2020-21

Bench: Shri Pawan Singh& Smt.Renu Jauhri(Physical Hearing)

Section 143(3)Section 144C(13)Section 144C(5)Section 153Section 253Section 254(1)Section 92CSection 92C(3)

additionally introduced comparable companies. Grant of economic adjustments 16. erred in not allowing the Appellant the benefit of the working capital adjustment which is required to be undertaken in its case to account for the difference in working capital levels between the comparable companies and the Appellant. 17. erred ... appeal; thus, this ground of appeal is treated as not pressed and dismissed as such. 12. Ground No. 16 relates to not allowing working capital adjustment. The ld AR of the assessee submits that working capital adjustment is the most common adjustment applied word wide by the taxpayer, especially when

Sap India Private Limited, Bangalore vs. Jurisdictional Assessing Officer - Deputy Commissioner of Income Tax Circle 6(1)(1), Bangalore

The appeal of the assessee is allowed to the extent indicated above

ITA 1519/BANG/2024[2020-21]Status: DisposedITAT Bangalore17 Nov 2025AY 2020-21

Bench: Shri Prashant Maharishi & Shri Soundararajan K, Jm

Section 143Section 144BSection 144C

limited, Quick Heal technologies Ltd and Tally solutions private limited and some other comparable from the comparability analysis. He submits that unjustifiable the working capital adjustments is denied to the assessee. With respect to the claim of the interest on outstanding receivables, the learned authorised representative has stated that receivables