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“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
85
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
84
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
74
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
67
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
60
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
57
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

Corning Technologies India Pvt. Ltd., Gurugram vs. DCIT, Gurugram

In the result, the appeal of the assessee is allowed

ITA 886/DEL/2017[2012-13]Status: DisposedITAT Delhi17 Sept 2021AY 2012-13

Bench: Sh. Kul Bharatdr. B. R. R. Kumar(Through Video Conferencing)

For Appellant: Sh. M. P. Lohia, CAFor Respondent: Sh. Surenderpal, CIT DR
Section 143(3)Section 144CSection 92C

captive liason and marketing service provider for its AE. Hence, we hold that “Just Dial” cannot held to be a right comparable. Working Capital Adjustment: 11. With regard to capital adjustment, we find that the ld. DRP allowed the working capital adjustment, however the AO failed to take the cognizance

JCIT, Special Range-1, New Delhi vs. American Express (India) Pvt. Ltd., New Delhi

In the result, the Cross-objection filed by the assessee is dismissed

ITA 4487/DEL/2018[2012-13]Status: DisposedITAT Delhi16 Sept 2021AY 2012-13

Bench: Shri R.K.Panda & Shri Kul Bharatassessment Year : 2012-13 American Express (India) Pvt.Ltd., Vs Jcit, Metropolitan Saket, 7Th Floor, Office Special Range-I, Block, District Centre, Saket, New Delhi-110002. New Delhi-110017. Pan-Aaaca8163F Appellant Respondent

Section 143(3)Section 253Section 40

Delhi High Court in the case of Kusum Healthcare Pvt.Ltd. in ITA No.6814/Del/2014 dated 26.03.2015, directed the Assessing Officer to allow working capital adjustment to the appellant by calculating its profit margin in accordance with formula stipulated by DRP for Assessment Year 2009-10 and give relief to the appellant ... company under normal trade practices was unjustly charged, having heard both the counsel, we are of the considered opinion that if working capital adjustment is granted, then no separate adjustment or interest receivables is required.We are fortified in our decision by the decision of the Hon’ble Delhi High Court

American Express (India) Pvt. Ltd., New Delhi vs. JCIT, Special, Range-1, New Delhi

In the result, the Cross-objection filed by the assessee is dismissed

ITA 3769/DEL/2018[2013-14]Status: DisposedITAT Delhi16 Sept 2021AY 2013-14

Bench: Shri R.K.Panda & Shri Kul Bharatassessment Year : 2012-13 American Express (India) Pvt.Ltd., Vs Jcit, Metropolitan Saket, 7Th Floor, Office Special Range-I, Block, District Centre, Saket, New Delhi-110002. New Delhi-110017. Pan-Aaaca8163F Appellant Respondent

Section 143(3)Section 253Section 40

Delhi High Court in the case of Kusum Healthcare Pvt.Ltd. in ITA No.6814/Del/2014 dated 26.03.2015, directed the Assessing Officer to allow working capital adjustment to the appellant by calculating its profit margin in accordance with formula stipulated by DRP for Assessment Year 2009-10 and give relief to the appellant ... company under normal trade practices was unjustly charged, having heard both the counsel, we are of the considered opinion that if working capital adjustment is granted, then no separate adjustment or interest receivables is required.We are fortified in our decision by the decision of the Hon’ble Delhi High Court

JCIT, Special, Range-1, New Delhi vs. American Express (India) Pvt. Ltd., New Delhi

In the result, the Cross-objection filed by the assessee is dismissed

ITA 3148/DEL/2018[2013-14]Status: DisposedITAT Delhi16 Sept 2021AY 2013-14

Bench: Shri R.K.Panda & Shri Kul Bharatassessment Year : 2012-13 American Express (India) Pvt.Ltd., Vs Jcit, Metropolitan Saket, 7Th Floor, Office Special Range-I, Block, District Centre, Saket, New Delhi-110002. New Delhi-110017. Pan-Aaaca8163F Appellant Respondent

Section 143(3)Section 253Section 40

Delhi High Court in the case of Kusum Healthcare Pvt.Ltd. in ITA No.6814/Del/2014 dated 26.03.2015, directed the Assessing Officer to allow working capital adjustment to the appellant by calculating its profit margin in accordance with formula stipulated by DRP for Assessment Year 2009-10 and give relief to the appellant ... company under normal trade practices was unjustly charged, having heard both the counsel, we are of the considered opinion that if working capital adjustment is granted, then no separate adjustment or interest receivables is required.We are fortified in our decision by the decision of the Hon’ble Delhi High Court

JCIT, Special Range-1, New Delhi vs. American Express (India) Pvt. Ltd., New Delhi

In the result, the Cross-objection filed by the assessee is dismissed

ITA 2834/DEL/2018[2012-13]Status: DisposedITAT Delhi16 Sept 2021AY 2012-13

Bench: Shri R.K.Panda & Shri Kul Bharatassessment Year : 2012-13 American Express (India) Pvt.Ltd., Vs Jcit, Metropolitan Saket, 7Th Floor, Office Special Range-I, Block, District Centre, Saket, New Delhi-110002. New Delhi-110017. Pan-Aaaca8163F Appellant Respondent

Section 143(3)Section 253Section 40

Delhi High Court in the case of Kusum Healthcare Pvt.Ltd. in ITA No.6814/Del/2014 dated 26.03.2015, directed the Assessing Officer to allow working capital adjustment to the appellant by calculating its profit margin in accordance with formula stipulated by DRP for Assessment Year 2009-10 and give relief to the appellant ... company under normal trade practices was unjustly charged, having heard both the counsel, we are of the considered opinion that if working capital adjustment is granted, then no separate adjustment or interest receivables is required.We are fortified in our decision by the decision of the Hon’ble Delhi High Court

American Express (India) Pvt. Ltd., New Delhi vs. JCIT, Special Range-1, New Delhi

In the result, the Cross-objection filed by the assessee is dismissed

ITA 2714/DEL/2018[2012-13]Status: DisposedITAT Delhi16 Sept 2021AY 2012-13

Bench: Shri R.K.Panda & Shri Kul Bharatassessment Year : 2012-13 American Express (India) Pvt.Ltd., Vs Jcit, Metropolitan Saket, 7Th Floor, Office Special Range-I, Block, District Centre, Saket, New Delhi-110002. New Delhi-110017. Pan-Aaaca8163F Appellant Respondent

Section 143(3)Section 253Section 40

Delhi High Court in the case of Kusum Healthcare Pvt.Ltd. in ITA No.6814/Del/2014 dated 26.03.2015, directed the Assessing Officer to allow working capital adjustment to the appellant by calculating its profit margin in accordance with formula stipulated by DRP for Assessment Year 2009-10 and give relief to the appellant ... company under normal trade practices was unjustly charged, having heard both the counsel, we are of the considered opinion that if working capital adjustment is granted, then no separate adjustment or interest receivables is required.We are fortified in our decision by the decision of the Hon’ble Delhi High Court

Outotec India Pvt. Ltd., New Delhi vs. Addl. CIT, Special Range -7, New Delhi

In the result, appeal of the assessee is allowed for 7

ITA 6753/DEL/2017[2013-14]Status: DisposedITAT Delhi15 Sept 2021AY 2013-14

Bench: Sh. Anil Chaturvedi & Shri Kuldip Singh(Through Video Conferencing) Outotec India Pvt. Ltd., Vs. Acit S-557, 3Rd Floor, Special Range – 7, School Block, Shakarpur, New Delhi New Delhi – 110 092 Pan : Aaaco 9433 A (Appellant) (Respondent) Assessee By Shri Rishabh Malhotra, Adv. Revenue By Shri M. Baranwal, Sr. D.R. Date Of Hearing: 15.09.2021 Date Of Pronouncement: 15.09.2021 Order Per Anil Chaturvedi, Am : This Appeal Filed By The Assessee Is Directed Against The Order Of The Commissioner Of Income Tax (Appeals)-38, Delhi Dated 08.08.2017 For Assessment Years 2013-14. 2. The Relevant Facts As Culled From The Material On Records Are As Under :

Section 143(2)Section 143(3)Section 92C(3)

risk assumed in an uncontrolled transaction; 3.4 making computational errors in the operating profit mark-ups of the comparable companies; 3.5 not granting working capital adjustment to account for the difference between the level of working capital invested by the Appellant and the comparable companies. The above grounds are without

Exlservices.Com (India) Pvt. Ltd., New Delhi vs. DCIT, Ltu, Circle- 1, New Delhi

In the result, appeal of the assessee is partly allowed

ITA 7392/DEL/2018[2014-15]Status: DisposedITAT Delhi06 Sept 2021AY 2014-15

Bench: Sh. Anil Chaturvedi & Sh. Kul Bharat(Through Video Conferencing) Exlservices.Com (India) Vs. Acit Pvt. Ltd., Large Taxpayer Unit, 414, 4Th Floor, Plot No.10 Circle – 1, Nbcc Plaza & 11, Dlp Jasola Tower-B, Pushp Vihar, Dda District Centre, Saket, New Delhi New Delhi - 110025 Pan No. Aaace 5174 C (Appellant) (Respondent) Assessee By Shri Ajay Vohra, Sr. Adv. Shri Neeraj Jain, Adv. Shri Saksham Singhal, Adv. Revenue By Ms. Rinku Singh, Sr. D.R. Date Of Hearing: 31.08.2021 Date Of Pronouncement: 06.09.2021 Order Per Anil Chaturvedi, Am: This Appeal Filed By The Assessee Is Directed Against The Order Dated 31.08.2018 Passed By The Commissioner Of Income Tax (Appeals)-22, New Delhi Relating To Assessment Year 2014-15. 2. The Relevant Facts As Culled From The Material On Records Are As Under :

Section 143(3)Section 14ASection 155JSection 271(1)(c)

aforesaid purchase consideration was allocated to identifiable assets and liabilities based on their book value and the difference between the purchase price (after working capital adjustments) and net value of acquired assets was recognized as ‘goodwill’, amounting to Rs. 76,97,89,365/- in the books of the assessee

Dhr Holding India Pvt. Ltd., New Delhi vs. JCIT, New Delhi

In the result, the appeal filed by the assessee in ITA No

ITA 953/DEL/2017[2012-13]Status: DisposedITAT Delhi27 Aug 2021AY 2012-13

Bench: Shri N.K. Billaiya & Ms. Suchitra Kamble[A.Y 2012-13]

For Appellant: Shri Ajit Jain, CAFor Respondent: Shri Surender Pal, CIT-DR
Section 143(3)Section 92C

Appellant has not paid any interest to its AEs 7.4 That the issue of outstanding receivables, if any, is subsumed in the working capital adjustment granted to the assessee and no separate adjustment on account of outstanding receivables is called for. 8. On the facts

Addl.CIT, Special Range-2, New Delhi vs. Barco Electronic Systems Pvt. Ltd., New Delhi

In the result, the appeal of the assessee in ITA

ITA 2667/DEL/2018[2012-13]Status: DisposedITAT Delhi18 Aug 2021AY 2012-13

Bench: Ms. Suchitra Kambledr. B. R. R. Kumarita No. 2148/Del/2018 : Asstt. Year: 2012-13 Barco Electronics Systems Pvt. Vs Dcit, Ltd., E-20, 1St & 2Nd Floor, Hauz Central Circle-4(1), Khas, New Delhi-110016 New Delhi (Appellantt (Respondent) Pan No. Aaacb5865F

For Appellant: Sh. Mukesh Gupta, CAFor Respondent: Sh. F. R. Meena, Sr. DR

assessee company has a margin of 23.3% on Software Development segment as compared to the margin of 11.42% of the comparable companies. The working capital adjusted margin of the assessee have already factored into account the delay in the receivables and therefore no separate adjustment on this account is required ... Appliances Ltd (supra), we are of the opinion that impact of the delayed receivables has already been factored in the working capital adjustment and, therefore, any further adjustment on the outstanding receivables is not required separately in the instant case. Accordingly, we direct the Assessing Officer to delete the adjustment

Barco Electronic Systems Pvt. Ltd., New Delhi vs. DCIT, Central Circle- 4(1), New Delhi

In the result, the appeal of the assessee in ITA

ITA 2148/DEL/2018[2012-13]Status: DisposedITAT Delhi18 Aug 2021AY 2012-13

Bench: Ms. Suchitra Kambledr. B. R. R. Kumarita No. 2148/Del/2018 : Asstt. Year: 2012-13 Barco Electronics Systems Pvt. Vs Dcit, Ltd., E-20, 1St & 2Nd Floor, Hauz Central Circle-4(1), Khas, New Delhi-110016 New Delhi (Appellantt (Respondent) Pan No. Aaacb5865F

For Appellant: Sh. Mukesh Gupta, CAFor Respondent: Sh. F. R. Meena, Sr. DR

assessee company has a margin of 23.3% on Software Development segment as compared to the margin of 11.42% of the comparable companies. The working capital adjusted margin of the assessee have already factored into account the delay in the receivables and therefore no separate adjustment on this account is required ... Appliances Ltd (supra), we are of the opinion that impact of the delayed receivables has already been factored in the working capital adjustment and, therefore, any further adjustment on the outstanding receivables is not required separately in the instant case. Accordingly, we direct the Assessing Officer to delete the adjustment

Addl. CIT, Special Range-8, New Delhi vs. St Microelectronics Pvt. Ltd., New Delhi

In the result, the appeal of the Revenue and the cross-objection of

ITA 4774/DEL/2017[2005-06]Status: DisposedITAT Delhi18 Aug 2021AY 2005-06

Bench: Shri R.K.Panda & Shri Kul Bharatassessment Year : 2005-06 Addl. Cit, Vs St Micro Electronics Pvt.Ltd., Special Range-8, 202-206,Tolstoy House, 15, New Delhi. Tolstoy Marg, New Delhi-110001. Pan-Aaacs3406M Appellant Respondent

Section 143(3)Section 92C

impugned order. However, Ld.CIT(A ruled against assessee in respect of exclusion of Bodhtree Consulting Ltd., Working Capital Adjustment and adoption of multiple year data analysis. Further, Ld.CIT(A) in respect of depreciation 3 | P a g e ITA No. 4774/Del/2017 & C.O-54/Del/2018 allowed the claim of the assessee and regarding ... comparable companies. 3. That the Ld. Assessing Officer/ Ld. Transfer Pricing Officer have erred in law and on facts, in not providing working capital adjustment to the Respondent though the same was directed by the CIT(A). 4. That the Ld. CIT(A) and the Ld. Assessing Officer have erred

Jas Forwarding Worldwide Pvt. Ltd., Gurgaon vs. DCIT, New Delhi

In the result appeal of the assessee for assessment year 2011 – 12 is allowed for statistical purposes

ITA 1687/DEL/2016[2011-12]Status: DisposedITAT Delhi26 Jul 2021AY 2011-12

Bench: Shri Amit Shukla & Shri Prashant Maharishi(Through Video Conferencing)

For Appellant: Shri Salil Kapoor advocateFor Respondent: Shri M. Barnwal, Sr. DR
Section 143Section 143(3)Section 144CSection 144C(1)Section 144C(5)Section 40Section 92CSection 92C(2)

shipping and logistics private limited 3.17 6 Sindhu cargo services Ltd 8.13 7 Arithmetic mean 13.83 The learned transfer pricing officer denied the working capital adjustment is no justification was given by the assessee. He recast Margins of the assessee by disallowing management fees and computed the same

Jas Forwarding Worldwide Pvt. Ltd., New Delhi vs. DCIT, New Delhi

In the result appeal of the assessee for assessment year 2011 – 12 is allowed for statistical purposes

ITA 2484/DEL/2014[2009-10]Status: DisposedITAT Delhi26 Jul 2021AY 2009-10

Bench: Shri Amit Shukla & Shri Prashant Maharishi(Through Video Conferencing)

For Appellant: Shri Salil Kapoor advocateFor Respondent: Shri Surendra Pal [CIT] – DR
Section 143Section 143(3)Section 144CSection 144C(1)Section 144C(5)Section 40Section 92CSection 92C(2)

shipping and logistics private limited 3.17 6 Sindhu cargo services Ltd 8.13 7 Arithmetic mean 13.83 The learned transfer pricing officer denied the working capital adjustment is no justification was given by the assessee. He recast Margins of the assessee by disallowing management fees and computed the same

M/S. Saic India Private Limited, Noida vs. DCIT, New Delhi

In the result, appeal of the assessee is partly allowed

ITA 6842/DEL/2014[2010-11]Status: DisposedITAT Delhi07 Jun 2021AY 2010-11

Bench: Shri Amit Shukla & Shri Prashant Maharishi(Through Video Conferencing) Saic India Private Limited, Vs. Dcit, C/O. Wipro Energy It Services India Circle-7(1), Pvt. Ltd, New Delhi A-67, Sector-57, Noida Pan: Aaaci6192A (Appellant) (Respondent)

For Appellant: Manoneet Dalal, AdvFor Respondent: Shri Surendra Pal, CIT DR
Section 143(3)Section 144CSection 145Section 234BSection 92Section 92C

modified the comparable sets except 5 comparables of the assessee and further populated with the final comparables of 15 companies, after allowing the working capital adjustment, computed the margins of the comparables at 24.26% and thus an adjustment of Rs. 7,08,12,972/- was made

JCIT, New Delhi vs. M/S Dunnhumby It Services India Pvt. Ltd., New Delhi

Appeal is partly allowed for statistical purpose

ITA 2815/DEL/2017[2010-11]Status: DisposedITAT Delhi26 Apr 2021AY 2010-11

Bench: Shri N. K. Billaiya & Ms Suchitra Kamble

Section 92C

Tribunal in case of Cheil Communication India Pvt. Ltd. vs. DCIT (ITA No. 712/Del/2010). As regards to Ground No. 8 relating to working capital adjustment, the Ld. AR submitted that the same is jettisons a separate overlapping adjustment on account of outstanding receivables. The Ld. AR relied upon the decision ... held that the same is not admissible as per discussions recorded at P/23 of his order. However, the CIT(A) has allowed working capital adjustment. As regards the issue of considering 3rd party cost recoveries from AE for applying mark-up, the discussions of the TPO are recorded in para

Dunnhumby It Services India Pvt. Ltd., Gurgaon vs. DCIT, New Delhi

Appeal is partly allowed for statistical purpose

ITA 2423/DEL/2017[2010-11]Status: DisposedITAT Delhi26 Apr 2021AY 2010-11

Bench: Shri N. K. Billaiya & Ms Suchitra Kamble

Section 92C

Tribunal in case of Cheil Communication India Pvt. Ltd. vs. DCIT (ITA No. 712/Del/2010). As regards to Ground No. 8 relating to working capital adjustment, the Ld. AR submitted that the same is jettisons a separate overlapping adjustment on account of outstanding receivables. The Ld. AR relied upon the decision ... held that the same is not admissible as per discussions recorded at P/23 of his order. However, the CIT(A) has allowed working capital adjustment. As regards the issue of considering 3rd party cost recoveries from AE for applying mark-up, the discussions of the TPO are recorded in para

DCIT, New Delhi vs. M/S. Accretive Health Services Pvt. Ltd., Delhi

In the result, appeal of the Revenue as well as CO of the assessee are dismissed

ITA 2129/DEL/2017[2010-11]Status: DisposedITAT Delhi01 Apr 2021AY 2010-11

Bench: Sh. Anil Chaturvedi & Sh. Kuldip Singh(Through Video Conferencing) Assessment Year : 2010-11 Dcit Vs. Accretive Health Services Circle-20(2), Pvt. Ltd., New Delhi (Now Known As R1 Rcm Global Pvt. Ltd.) 17, Subhash Marg, Pan : Aahca 5178 K Daryaganj, Delhi-110002 (Appellant) (Respondent) Co No.131/Del/2017 Assessment Year : 2010-11 Accretive Health Services Vs. Dcit Pvt. Ltd., Circle-20(2), (Now Known As R1 Rcm New Delhi Global Pvt. Ltd.) 17, Subhash Marg, Daryaganj, Delhi-110002 Pan : Aahca 5178 K (Appellant) (Respondent)

Section 10ASection 142(1)Section 143(3)Section 92C

doubtful debts as non- operating in nature; 2. Directing the TPO/AO to consider unadjusted NCPM of comparable companies in-spite of allowing working capital adjustment to the Respondent. The above grounds are without prejudice and notwithstanding to each other. The Respondent craves leave to add, alter, omit or substitute

Honda R & D (India) Pvt. Ltd., Gurgaon vs. DCIT, Circle-11(1), New Delhi

The appeal of the assessee is partly allowed for statistical purposes

ITA 7419/DEL/2017[2013-14]Status: DisposedITAT Delhi15 Mar 2021AY 2013-14

Bench: Shri N. K. Billaiyaa N D Ms. Suchitra Kamble

For Appellant: Shri Nageshwar Rao, AdvFor Respondent: Shri Surendra Pal, Sr. D. R
Section 92C

extremely high profits / losses. The ld. DR relied upon the order of the TPO and DRP. The ld. DR further submitted that the working capital adjustment has not been properly calculated and, therefore, the issue may be remanded back to the file of the TPO / DRP. The ld. DR relied ... three comparables as the functional profile of those comparables was not in consonance with the assessee company’s profile. As regards the working capital adjustment is concerned, the ld. DR submitted that if the re-computation is required, then it is necessary to remand back the issue to the file

Exlservice.Com(India) Private Limited, New Delhi vs. ACIT, Ltu, Circle-1, New Delhi

In the result, all the appeals of the assessee in ITA Nos

ITA 8452/DEL/2019[2015-16]Status: DisposedITAT Delhi08 Mar 2021AY 2015-16

Bench: Shri N.K. Billaiya & Ms. Suchitra Kamble

For Appellant: Shri Ajay Vohra, Sr. AdvFor Respondent: Shri Surender Pal, CIT-DR
Section 143(3)

considered the rival contention and perused the orders of the lower authorities. As in the present case the assessee has been granted the working capital adjustment while computing the arm’s-length price of the international transaction of the sale of services, according to us no separate benchmarking should