“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

Bravura Solutions India LLP, New Delhi vs. Deputy Commissioner of Income Tax, New Delhi

In the result, the appeal of the assessee is partly allowed

ITA 3944/DEL/2024[2020-21]Status: DisposedITAT Delhi22 Apr 2025AY 2020-21

Bench: Shri Mahavir Singh & Shri M. Balaganeshbravura Solutions India Llp, Vs. Assessment Unit, P-24, Green Park Extension, Income Tax New Delhi-110016 Department, (Appellant) (Respondent) Pan: Aaqfb3843C

For Appellant: Shri Ajay Jain, ARFor Respondent: Shri Dharm Veer Singh, CIT DR

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

ICAI. Hence, LIBOR plus 400 points should be applied in the instant case. 8. The ld AR before us prayed for grant of working capital adjustment to be applied on the comparable margin, which in either case, if granted, there would no need to separately impute interest on outstanding receivables ... Kusum Healthcare in ITA No. 765/2016 dated 25.04.2017. We find that the ld DRP had also directed the ld TPO / AO to grant working capital adjustment to the assessee which has not been followed by the ld TPO. Hence, the order passed by the TPO had to be considered

Shakti Hormann Private Limited, Hyderabad vs. DCIT Circle -3(1), Hyderabad

In the result, appeals filed by the assessee for both the assessment years 2017-18 and 2018-19 are partly allowed

ITA 452/HYD/2022[2018-19]Status: DisposedITAT Hyderabad21 Apr 2025AY 2018-19

Bench: Shri Vijay Pal Rao & Shri Manjunatha G.आ.अपी.सं /Ita-Tp No.451/Hyd/2022 & 452/Hyd/2022 (निर्धारण वर्ा/Assessment Year: 2017-18 & 2018-19) Shakti Hormann Private Vs. Asst.Commissioner Of Limited Income Tax Hyderabad Circle-3(1) [Pan : Aadcs4024Q] Hyderabad (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee By: Shri P.Murali Mohan Rao, Ar रधजस् व द्वधरध/Revenue By: Shri B.Bala Krishna, Cit-Dr सुिवधई की तधरीख/Date Of Hearing: 15/04/2025 घोर्णध की तधरीख/ 21/04/2025 Date Of Pronouncement: आदेश / Order Per Vijay Pal Rao: These Appeals Filed By The Assessee Are Directed Against The Assessment Orders Dated 21.07.2022 & 28.07.2022 Passed U/S 143(3) R.W.S. 144C(13) Of The Income Tax Act, 1961 (“The Act”) In Pursuant To The Directions Of The Dispute Resolution Panel (“The Drp”) U/S 144C(5) Of The Act For The Assessment Year 2017-18 & 2018-19 Respectively. 2. For The Assessment Year 2017-18, The Assessee Has Raised The Following Grounds Of Appeal :

For Appellant: Shri P.Murali Mohan Rao, ARFor Respondent: Shri B.Bala Krishna, CIT-DR

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

coined as a separate international transaction as envisaged u/s 92B of the Act. 4.8. The AO/TPO erred in not considering the fact that working capital adjustment itself takes the impact of interest on receivables & accordingly no separate adjustment can be made for the receivables. 4.9. The AO/TPO ought to have ... coined as a separate international transaction as envisaged u/s 92B of the Act. 4.8. The AO/TPO erred in not considering the fact that working capital adjustment itself takes the impact of interest on receivables & accordingly no separate adjustment can be made for the receivables. 4.9. The AO/TPO ought to have

Shakti Hormann Private Limited, Hyderabad vs. ACIT, Central Circle-3(1), Hyderabad

ITA 451/HYD/2022[2017-18]Status: DisposedITAT Hyderabad21 Apr 2025AY 2017-18

Bench: Shri Vijay Pal Rao & Shri Manjunatha G.आ.अपी.सं /Ita-Tp No.451/Hyd/2022 & 452/Hyd/2022 (निर्धारण वर्ष/Assessment Year: 2017-18 & 2018-19) Shakti Hormann Private Limited Hyderabad [Pan : Aadcs4024Q] (Appellant) Vs. Asst.Commissioner Of Income Tax Circle-3(1) Hyderabad (Respondent) निर्धारिती द्वारा /Assessee By: Shri P.Murali Mohan Rao, Ar राजस्व द्वारा /Revenue By: Shri B.Bala Krishna, Cit-Dr सुनवाई की तारीख /Date Of Hearing: 15/04/2025 घोषणा की तारीख / Date Of Pronouncement: 21/04/2025 आदेश / Order Per Vijay Pal Rao: These Appeals Filed By The Assessee Are Directed Against The Assessment Orders Dated 21.07.2022 & 28.07.2022 Passed U/S 143(3) R.W.S.144C(13) Of The Income Tax Act, 1961 ("The Act") In Pursuant To The Directions Of The Dispute Resolution Panel (“The Drp”) U/S 144C(5) Of The Act For The

For Appellant: Shri P.Murali Mohan Rao, ARFor Respondent: Shri B.Bala Krishna, CIT-DR

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

separate international transaction as envisaged u/s 92B of the Act. 4. 8. The AO/TPO erred in not considering the fact that working capital adjustment itself takes the impact of interest on receivables & accordingly no separate adjustment can be made for the receivables. 4.9. The AO/TPO ought to have appreciated ... separate international transaction as envisaged u/s 92B of the Act. 4. 8. The AO/TPO erred in not considering the fact that working capital adjustment itself takes the impact of interest on receivables & accordingly no separate adjustment can be made for the receivables. 4.9. The AO/TPO ought to have appreciated

Tupperware India Private Limited, New Delhi vs. DCIT, Circle-25(1), New Delhi

In the result, the appeal of the assessee for AY 2018-19 is partly allowed for statistical purposes

ITA 462/DEL/2022[2017-18]Status: DisposedITAT Delhi17 Apr 2025AY 2017-18

Bench: Shri Mahavir Singh & Shri M. Balaganesh

For Appellant: Shri Rohit Tiwari, AdvFor Respondent: Shri S. K. Jadav, CIT DR

Section 143(3)Section 144BSection 144CSection 144C(3)Section 92CSection 92F

international transactions. As per the Transfer Pricing documentation, the assessee earned an operating margin of 15.65%. The comparables have earned a working capital adjusted margin of 4.15% (35th percentile) to 10.29% (65th percentile) with a median of 8.18%. Accordingly, the transactions of assessee was held ... upheld by the ld DRP and adjustment was proposed in final assessment order. The ld AR submitted if assessee is given working capital adjustment and if the same is applied on the margins of the comparable companies, then, margins earned by the assessee is more than that comparable companies

Tupperware India Private Limited, New Delhi vs. ACIT, Circle-25(1), New Delhi

In the result, the appeal of the assessee for AY 2018-19 is partly allowed for statistical purposes

ITA 2409/DEL/2022[2018-19]Status: DisposedITAT Delhi17 Apr 2025AY 2018-19

Bench: Shri Mahavir Singh & Shri M. Balaganesh

For Appellant: Shri Rohit Tiwari, AdvFor Respondent: Shri S. K. Jadav, CIT DR

Section 143(3)Section 144BSection 144CSection 144C(3)Section 92CSection 92F

Oakton Global Technology Services Centre (I) Private Limited, Hyderabad vs. Dy. Commissioner of Income Tax, Circle-16(2), Hyderabad

In the result, the appeal of the assessee in ITA No

ITA 32/HYD/2019[2014-15]Status: DisposedITAT Hyderabad16 Apr 2025AY 2014-15

Bench: Shri Vijay Pal Rao & Shri Madhusudan Sawdia

For Appellant: Shri Ravi Bharadawaj, C.AFor Respondent: Shri B. Bala Krishna, CIT-DR

Section 143(3)Section 92B

international transaction of the Appellant and the comparable companies in accordance with the provisions of Rule 10B(1) (e) of the Rules; Negative Working Capital Adjustment 9) Without prejudice to the above, making a negative working capital adjustment to the arm's length margin determined without appreciating the fact that ... been aggregated for determination of ALP under TNMM. (iv) Not appreciating the fact that under TNMM, the impact of outstanding receivables on the working capital adjustments have already been taken into account in determining the arm's length margin hence there is no need of imputing interest on outstanding receivables

Oakton Global Technology Services Centre (India) Private Limited, Hyderabad vs. Deputy Commissioner of Income Tax, Circle-16(2), Hyderabad

In the result, the appeal of the assessee in ITA No

ITA 2130/HYD/2017[2013-14]Status: DisposedITAT Hyderabad16 Apr 2025AY 2013-14

Bench: Shri Vijay Pal Rao & Shri Madhusudan Sawdia

For Appellant: Shri Ravi Bharadawaj, C.AFor Respondent: Shri B. Bala Krishna, CIT-DR

Section 143(3)Section 92B

Schneider Electric India Pvt. Ltd., Gurgaon vs. ACIT, New Delhi

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

ITA 1076/DEL/2016[2007-08]Status: DisposedITAT Delhi09 Apr 2025AY 2007-08

Bench: Shri Vikas Awasthy & Shri Pradip Kumar Kedia[Assessment Year : 2007-08] Schneider Electric India Vs Acit Pvt.Ltd., 9Th Floor, Tower C Circle-22(2) Building No.10, Dlf Cyber Room No. 226 City, Phase-Ii, Gurgaon C.R. Building Hartyana-122002 New Delhi-110002 Pan-Aabcs1642G Appellant Respondent Appellant By Shri Rohit Tiwari, Adv. & Tanya, Adv. Respondent By Shri Rajesh Kumar Dhanesta, Sr.Dr Date Of Hearing 17.01.2025 Date Of Pronouncement 09.04.2025

Section 10ASection 143(3)Section 144CSection 92C(2)Section 92D

verifying the computational errors in the margins of comparable companies while arriving at the ALP; 2.7. not providing the benefit of a working capital adjustment while computing the ALP and thereby disregarding the law, international guidance and judicial precedents in this regard; 2.8. ignoring the fact that the Appellant ... verifying the computational errors in the margins of comparable companies while arriving at the ALP; 2.12. not providing the benefit of a working capital adjustment while computing the ALP and thereby disregarding the law, international guidance and judicial precedents in this regard; 3. denying the benefit of (+/-) 5 percent range

Ayatna Realty Pvt. Ltd., New Delhi vs. ACIT, Circle-3(2), New Delhi

In the result, the appeal of the Assesse in ITA No

ITA 1295/DEL/2024[2012-13]Status: DisposedITAT Delhi07 Apr 2025AY 2012-13

Bench: Shri Vikas Awasthy & Shri Manish Agarwalm/S Wrigley India Private Dcit, Limited Circle-27(2), 206, Okhla Industrial Vs. New Delhi. Estate, Phase Iii, New Delhi-110020 Pan-Aaacw1789P (Appellant) (Respondent) Joint Cit (Osd), M/S Wrigley India Private Circle-27(2), Limited, New Delhi Vs. 206, Okhla Industrial Estate, Phase Iii, New Delhi-110020 Pan-Aaacw1789P (Appellant) (Respondent)

Section 250(6)Section 92CSection 92C(3)Section 92D

disregarding the fresh search conducted by the Appellant in line with the quantitative and qualitative filters proposed by the Ld. TΡΟ; 3.8. denying working capital adjustment to the operating profit margins of the comparables, and in doing so have grossly erred in: 3.8.1. concluding that the Appellant has not been

Ayatna Realty Pvt. Ltd., New Delhi vs. ACIT, Circle-3(2), New Delhi

In the result, the appeal of the Assesse in ITA No

ITA 1294/DEL/2024[2011-12]Status: DisposedITAT Delhi07 Apr 2025AY 2011-12

Section 250(6)Section 92CSection 92C(3)Section 92D

Rajasthan Prime Steel Processing Center Pvt. Ltd., Alwar vs. DCIT, Circle- 15(1), New Delhi

Accordingly, the grounds relevant to this issue raised by the Revenue stand dismissed in both years

ITA 3293/DEL/2018[2010-11]Status: DisposedITAT Delhi27 Mar 2025AY 2010-11

Bench: Shri Vikas Awasthy & Shri Avdhesh Kumar Mishra

Section 271(1)(c)

margin (Ground No.1 of both years). ii. To treat foreign exchange gain/loss as operating profit/loss (Ground No.2 of both years) iii. Allowance of working capital adjustment (Ground No.3 of ITA No. 3538) ITA No.3537 & 3538/Del/2018 4. The brief facts giving rise to these appeals are that the assessee ... duty from operating margin and (ii) Inclusion of foreign exchange gain/loss as operating profit/loss in both years. Further, the Ld. CIT(A) allowed working capital adjustment in the AY 2009-10. The Revenue Challenged these issues before us. The assessee challenged the creation of two segments for benchmarking, comparables taken

Cvent India Pvt. Ltd., Gurgaon vs. ACIT, New Delhi

In the result, the appeals of the assessee in both the A

ITA 187/DEL/2016[2011-12]Status: DisposedITAT Delhi26 Mar 2025AY 2011-12

Bench: Shri Mahavir Singh & Shri Naveen Chandra

For Appellant: Shri Himanshu Sinha, AdvFor Respondent: ShriDheeraj Kumar Jaiswal, Sr. DR

Section 92CSection 92D

operating item, even though the same had been considered as operating in prior assessment years.6. The Ld. TPO erred in computing working capital adjusted margins of comparable companies.7. The Ld. AO/ Ld. TPO/ Ld. CIT(A) erred in arbitrarily rejecting the risk adjustment conducted by the Assessee in its transfer ... companies with arithmetic mean of 34.91% and thereby made an adjustment of INR 4,46,25,506/-. The TPO also did not provide working capital adjustment and risk adjustment to the assessee. The TPO re- computed the PLI of the 10.01% instead of 14.43% by considering foreign exchange gain

Standard and Poors South Asia Services Private Limited, New Delhi vs. ACIT, New Delhi

In the result, appeal filed by the assessee is allowed

ITA 3792/DEL/2024[2020-21]Status: DisposedITAT Delhi21 Mar 2025AY 2020-21

Bench: SHRI S.RIFAUR RAHMAN (Accountant Member), SHRI VIMAL KUMAR (Judicial Member)

For Appellant: Ms. Ananya Kapoor, AdvocateFor Respondent: Shri S.K. Jhadav, CIT DR

Section 143(3)Section 144Section 144C(13)Section 234BSection 928Section 92C

basis points on an arbitrary basis without any cogent reasons. 2. While the Hon'ble DRP principally concurred with the view to allow working capital adjustment, it erred in law and on facts and circumstances of the case, by giving erroneous finding that the appellant has not given the reliable ... data for the computation of working capital adjustment and consequently rejected the claim for working capital adjustment whereas all data has been duly submitted and as such, once the working capital adjustment is allowable, no further adjustment on account of receivables is required/mandated in law. 3. The learned

Knauf India Pvt Ltd (Earlier Know As Usg Boral Building Products (India) Pvt Ltd), Gurgaon vs. ITO, Ward-14(3), New Delhi

In the result, the appeal filed by the assessee being ITA

ITA 2061/DEL/2022[2018-19]Status: DisposedITAT Delhi21 Mar 2025AY 2018-19

Bench: Shri S.Rifaur Rahman & Shri Vimal Kumar

For Appellant: Shri Ajit Kumar Jain, CAFor Respondent: Shri S.K. Jhadav, CIT DR

Section 144Section 37Section 92CSection 92C(3)Section 92D

keeping in view the FAR profile of the assessee. Further assessee has raised objection on the issue of denying working capital adjustment under Rule 10B(1)(c) of the Rules for determination of ALP to account for differences in working capital employed by the assessee vis-à-vis comparable companies

Knauf India Pvt Ltd (Earlier Know As Usg Boral Building Products (India) Pvt Ltd), Haryana vs. ITO, Ward 14 (3), New Delhi

In the result, the appeal filed by the assessee being ITA

ITA 2060/DEL/2022[2017-18]Status: DisposedITAT Delhi21 Mar 2025AY 2017-18

Bench: Shri S.Rifaur Rahman & Shri Vimal Kumar

For Appellant: Shri Ajit Kumar Jain, CAFor Respondent: Shri S.K. Jhadav, CIT DR

Section 144Section 37Section 92CSection 92C(3)Section 92D

M/S Bt E-Serv (India) Pvt. Ltd., New Delhi vs. ITO, New Delhi

In the result, appeal of the assessee is partly allowed as

ITA 99/DEL/2016[2011-12]Status: DisposedITAT Delhi21 Mar 2025AY 2011-12

Bench: Shri Challa Nagendra Prasad & Shri Naveen Chandraआ.अ.सं/.I.T.A No.99/Del/2016 िनधा"रणवष"/Assessment Year:2011-12 बनाम Bt E-Serve (India) Pvt. Ltd., Ito, 11Th Floor, Eros Corporate Tower, Vs. Ward 5(2), Nehru Place, New Delhi. New Delhi. Pan No.Aadcb2533M अपीलाथ" Appellant ""यथ"/Respondent

comparables (Infosys BPO Ltd.) which was inadvertently overlooked while passing the order. The Tribunal also recalled its order to adjudicate on working capital adjustment which was omitted to consider while disposing of the appeal. Therefore, in this appeal only the following two issues have to be decided ... No.279/Del/2018 dated 03/12/2021: i) Infosys BPO Limited whether to be included or excluded from the final set of comparables; ii) for granting working capital adjustment. 2. In so far as the Infosys BPO Limited is concerned the Ld. Counsel submits that, Infosys BPO Limited is functionally dissimilar, it has significantly

Hanning Motors India Private Limited, Vadodara vs. The Dy.CIT, Circle-1(1)(1), Vadodara

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

ITA 1931/AHD/2024[2017-18]Status: DisposedITAT Ahmedabad13 Mar 2025AY 2017-18

For Appellant: Revenue by

Section 143(3)Section 92C

against comparables, which assume these risks and therefore have to be credited with a risk premium on this account; and c. Not providing working capital adjustment while computing the Arm's length. price. 6. The TPO has erred in not restricting the TP adjustment to the AE transactions

Ariba Technologies India Pvt Ltd, Bengaluru vs. Deputy Commissioner of Income Tax, Circle-1(1)(1), Bengaluru

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

ITA 1587/BANG/2024[AY 2020-21]Status: DisposedITAT Bangalore07 Mar 2025

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Mr. Aliasgar Rampurawala, C.AFor Respondent: Ms. Nandini Das, CIT (DR)

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

contended by the learned AR that there should not be any adjustment towards the outstanding receivables as it has already subsumed in the working capital adjustment. Without prejudice to the above, the learned AR submitted that if at all any adjustment needs to be made it should be netted ... profit of the tested party is equal or above the profit of comparables, even after taking into account the effect of working capital adjustment and the ALP is less that the price charged by the tested party, it cannot be said that the extra credit allowed is not an independent

Varian Medical Systems International (India) Private Limited, Mumbai vs. Assistant Commissioner /Dy. Commissioner of Income Tax Circle 3(3)(1), Mumbai

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

ITA 5086/MUM/2024[2020-21]Status: DisposedITAT Mumbai28 Feb 2025AY 2020-21

Bench: Smt. Beena Pillai () & Shri Omkareshwar Chidara ()

Section 143(3)Section 144BSection 144CSection 144C(13)Section 92D

years 300 basis points More than five years 500 sis points 8.1 The Ld.AR submitted that the assessee has not undertaken any working capital adjustment. In this context, we also refer to the decision of Hon'ble Delhi Tribunal in case of Orange Business 21 ITA No. 5060&5086/Mum/2024

Varian Medical Systems International (India) Private Limited, Mumbai vs. Assistant, Deputy Commissioner of Income Tax, Mumbai

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

ITA 5060/MUM/2024[2020-21]Status: DisposedITAT Mumbai28 Feb 2025AY 2020-21

Bench: Smt. Beena Pillai () & Shri Omkareshwar Chidara ()

Section 143(3)Section 144BSection 144CSection 144C(13)Section 92D