Emptoris Technologies India Pvt Ltd., Pune V. Additional C.I.T, Pune

ITA 1550/PUN/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93891 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 18-12-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 13-07-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Transfer pricing; International transaction; Services rendered outside India; Wholly owned subsidiary; Corroborative evidences
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE , . . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM . / ITA NO.1500/PN/2012 / ASSESSMENT YEAR : 200 7 - 0 8 THE DY . COMMISSIONER OF INCOME TAX, CIRCLE 1(2), PUNE . / APPELLANT VS. EMPTORIS TECHNOLOGIES INDIA PVT. LTD., A 101, PUNE IT PARK, 34 AUNDH ROAD, BHAU PATIL MARG, PUNE 411020 . / RESPONDENT . / ITA NO.1550/PN/2012 / ASSESSMENT YEAR : 2007 - 08 EMPTORIS TECHNOLOGIES INDIA PVT. LTD., A 101, PUNE IT PARK, 34 AUNDH ROAD, BHAU PATIL MARG, PUNE 411020 . / APPELLANT PAN: AABCC3721G VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 1(2), PUNE . / RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK RE VENUE BY : SHRI B.C. MALAKAR / DATE OF HEARING : 24 .0 4 .2015 / DATE OF PRONOUNCEMENT: 08 .07.2015 / ORDER PER SUSHMA CHOWLA, JM: ITA NO . 1 500 /PN/201 2 ITA NO.1 550 /PN/201 2 EMPTORIS TECHNOLOGIES INDIA PVT. LTD. 2 THE CROSS APPEALS FILED BY THE REVENUE AND THE ASSESSEE ARE AGAINST THE ORDER OF CIT (A) - I, PUNE , DATED 15 . 12 .201 1 REL ATING TO ASSESSMENT YEAR 20 07 - 08 PASSED UNDER SECTION 143(3) OF T HE INCOME TAX ACT , 1961 . PASSED UNDER SECTION 143(3) OF T HE INCOME TAX ACT , 1961 . 2. THE CROSS APPEALS FILED BY REVENUE AND THE ASSESSEE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 3. THE REVENUE IN ITA NO. 1 500 /PN/201 2 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - APPEAL : - 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED IN ALLOWING WORKING CAPITAL ADJUSTMENT TO THE PROFIT OF THE ASSESSEE WITHOUT TAKING INTO CONSIDERATION THE FACT THAT THE ASSESSEE HAS CONVENIENTLY TAKEN THE CLOSIN G FIGURES AS ON 31 ST MARCH FOR THE CALCULATION OF THE WC ADJUSTMENTS WHEREAS THE CORRECT PRACTICE IS TO TAKE THE AVERAGE OF THE OPENING AND CLOSING BALANCES ASSUMING THAT THE AVERAGE VALUE PREVAILED DURING THE ENTIRE YEAR. 2 . ON THE FACTS AND IN THE CIRCUMST ANCES OF THE CASE THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE IS NOT ELIGIBLE FOR THE BENEFIT OF +/ - 5% AS STANDARD DEDUCTION IN VIEW OF PROVISIONS OF SECTION 92C(2) OF THE +/ - 5% AS STANDARD DEDUCTION IN VIEW OF PROVISIONS OF SECTION 92C(2) OF THE ACT, WHERE MORE THAN ONE PRICE IS DETERMINED BY THE MOST APPROPRIATE METHOD, THE ARMS LENGTH PRICE SHALL BE TAKEN TO BE THE ARITHMETICAL MEAN BY AN AMOUNT NOT EXCEEDING 5% OF SUCH ARITHMETICAL MEAN AND WHEN THE ALP OF THE INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE ASSESSEE FALLS BEYOND THE 5% MARGIN OF THE P RICE OF INTERNATIONAL TRANSACTION COMPUTED BY THE ASSESSEE. 3 . FOR THESE AND SUCH OTHER REASONS AS MAY BE URGED AT THE TIME OF THE HEARING, THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE REST ORED. 4 . THE APPELLANT CRAVES TO ADD, AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUND OF APPEAL DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE HONBLE OF APPEAL DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE HONBLE TRIBUNAL. 4 . THE ASSESSEE IN ITA NO. 1 550 /PN/201 2 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW 1 . THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - I PUNE ERRED IN REJECTING SOME GROUNDS AS ACADEMIC AND NOT ADJUDICATING THE SAME. 2.1 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - I PUNE ERRED I N 2.1 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - I PUNE ERRED I N CONFIRMING THE REJECTION OF SOME OF THE COMPANIES CONSIDERED AS COMPARABLE BY THE APPELLANT COMPANY ON THE GROUND OF FUNCTIONAL DIFFERENCES (DIFFERENT BUSINESS ACTIVITIES) AS WELL AS IN SOME CASES ON THE GROUND OF BEING LOSS MAKING COMPANIES . ITA NO . 1 500 /PN/201 2 ITA NO.1 550 /PN/201 2 EMPTORIS TECHNOLOGIES INDIA PVT. LTD. 3 2 . 2 HE ERRED IN NOT FOLLOWING THE RATIO OF THE DECISION OF THE SPECIAL BENCH OF ITAT - CHANDIGARH BENCH IN THE CASE OF DCIT V QUARK SYSTEMS (P) LTD (2010) 38 SOT 307 (CHD)(SB) WHEREIN THE ITAT HAS HELD THAT MERELY BECAUSE A COMPARABLE IS MAKING LOSS, IT CANNOT BE EXCLUDED. BECAUSE A COMPARABLE IS MAKING LOSS, IT CANNOT BE EXCLUDED. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - I PUNE ERRED IN NOT ALLOWING ADJUSTMENT OF BASIC ADMINISTRATIVE EXPENSES WHICH WERE INCURRED BY THE APPELLANT COMPANY TO MAINTAIN CORPORATE IDENTITY OF THE COMPANY AND EXPENSES OF SUPPORT STAFF, EXPENSES INCURRED FOR TRAINING OF EMPLOYEES WHILE CALCULATING OPERATING PROFITS FROM AS WELL AS OPERATING COSTS RELATED TO THE INTERNATIONAL TRANSACTION OF EXPORT OF SERVICES. HE ERRED IN NOT APPRECIATING THAT SUCH EXPENSES DID NOT FORM PART OF THE 'SERVICE PROVIDER COSTS' AS PER THE TERMS OF THE INTER - COMPANY SERVICES AGREEMENT . 4.1 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - I PUNE ERRED IN NOT APPRECIATING THAT THE OPERATING MARGINS OF THE APPELLANT COMPANY AS PER THE INTER - COMPANY SERVIC ES AGREEMENT WAS 10 % AND NON - OPERATING EXPENSES SUCH AS LOSS ON SALE OF ASSETS, DONATION ETC WERE REQUIRED TO BE EXPENSES SUCH AS LOSS ON SALE OF ASSETS, DONATION ETC WERE REQUIRED TO BE ADDED BACK WHILE CALCULATING THE OPERATING MARGINS OF THE APPELLANT COMPANY . 4.2 HE ERRED IN NOT APPRECIATING THAT SUCH OPERATING MARGIN OF TH E APPELLANT COMPANY @ 10 % WAS WITHIN + / - 5% OF THE AVERAGE OF THE OPERATING MARGINS OF THE COMPARABLE COMPANIES @ 14.30 % AND THEREFORE NO ADJUSTMENT WAS CALLED FOR TO THE VALUE OF THE INTERNATIONAL TRANSACTION OF THE APPELLANT COMPANY. 5.1 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - I PUNE ERRED IN NOT GRANTING ANY ADJUSTMENT TOWARDS LOWER RISK BORNE BY THE APPELLANT COMPANY AS COMPARED TO THE COMPANIES CONSIDERED AS COMPARABL E BY THE LEARNED TRANSFER PRICING OFFICER . 5.2 HE ERRED IN NOT APP RECIATING THAT THE APPELLANT COMPANY HAD SUBMITTED ALL THE RELEVANT INFORMATION , ON ITS RISK PROFILE. 6. THE COMMISSIONER OF INCOME TAX (APPEALS) - I PUNE ERR E D IN NOT APPRECIATING THAT FOR THE PURPOSES OF BENCH - MARKING, PROFIT AFTER TAX SHOULD HAVE BE EN CONSIDERED AND TAX COST SHOULD HAVE BE E N CONSIDERED AS A PART OF OPERATING COSTS AS THE APPELLANT COMPAN Y WAS ELIGIBLE TO CLAIM BENEFIT OF DEDUCTION U/S. 10A AND THE BASIC NATURE OF SUCH BENEFITS / INCENTIVES IS TO HELP THE SOFT W ARE COMPANIES COMPET E GLOBALL Y . 7 . 1 THE COMMISSIONER OF INCOME TAX (APPEALS) - I PUNE ERRED IN NOT APPRECIATING THAT THE APPELLANT COMPAN Y WAS ELIGIBLE TO CLAIM TAX HOLIDA Y U/S.10A AND HAD NO REASON TO MANIPULATE THE VALUE OF ITS HOLIDA Y U/S.10A AND HAD NO REASON TO MANIPULATE THE VALUE OF ITS INTERNATIONAL TRANSACTIONS AS THERE WAS NO BENEFIT IN SHIFTING PROFITS OUTSIDE INDIA . 7.2 FURTHER HE ERRED IN NOT APPRECIATING THAT THE EFFECTIVE TAX RATE IN USA WAS HIGHER THAN THE APPLICABLE TAX RATE IN INDIA AND THE ORGANIZATION OF T HE ASSOCIATED ENTERPRISE OF THE APPELLANT COMPAN Y WAS SIGNI FICANTL Y STRONGER AND SUBSTANTIALLY LARGER AS COMPARED TO THE APPELLANT COMPANY. FURTHER THE ASSOCIATED ENTERPRISE HAD INCURRED OPERATING LOSSES DURING THE YEAR UNDER CONSIDERATION . 8. THE APPELLANT COMPANY CRAVES LEAVE TO ADD TO, ALTER, AMEND, MODIFY AND / OR DELETE ANY OR ALL OF THE GROUNDS OF APPEAL. 5. IN THE CROSS APPEALS FILED BY THE REVENUE AND THE ASSESSEE, THE ISSUE RAISED I S AGAINST THE TRANSFER PRICING ADJUSTMENT PROP OSED BY THE TRANSFER PRICING ITA NO . 1 500 /PN/201 2 ITA NO.1 550 /PN/201 2 EMPTORIS TECHNOLOGIES INDIA PVT. LTD. 4 OFFICER ( TPO ) AND THE RELIEF GRANTED BY THE CIT( A) IN RESPECT OF WORKING CAPITAL ADJUSTMENT. 6. BOTH THE REVENUE AND THE ASSESSEE HA VE R AISED SEVERAL GROUNDS OF APPEAL, BUT THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT IN CASE THE WORKING CAPITAL ADJUSTMENT IS ALLOWED TO THE A SSESSEE BY THE ASSESSING OFFICER / TPO, THEN THE MARGINS SHOWN BY THE ASSESSEE WOULD BE WITHIN BENEFIT OF +/ - 5% OF THE AVERAGE MARGINS OF THE COMPARABLES AND NO ADJUSTMENT IS TO BE MADE IN THE ARM'S LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS OF THE AS SESSEE WITH ITS ASSOCIATE ENTERPRISES . IT WAS FAIRLY POINTED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE DIRECTIONS HAVE BEEN GIVEN BY THE CIT(A) TO A LLOW WORKING CAPITAL ADJUSTMENT, BUT CERTAIN ERRORS HAVE CREPT IN THE ORDER GI VING EFFECT TO THE ORDER OF CIT(A) BY THE ASSESSING OFFICER , AGAINST WHICH THE ASSESSEE IS AGGRIEVED AND IN CASE THOSE ERRORS ARE RECTIFI E D , THE APPEAL FILED BY THE ASSESSEE BECOMES INFRUCTUOUS. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE W AS GRANTED AN OPPORTUNITY TIME AND AGAIN DURING THE COURSE OF HEARING TO RECTIFY THE ABOVE SAID DEFICIENCIES POINTED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE , WHICH AS PER HIM , WERE IN LINE WITH THE GUIDELINES ISSUED BY THE OECD . B UT THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE TILL THE CLOSE OF HEARING WAS UNABLE TO GET THE AFORESAID RECTIFICATIONS CARRIED OUT BY THE ASSESSING OFFICER / TPO . ACCORDINGLY, WE PROCEED TO DECIDE THE CROSS APPEALS FILED BY THE REVENUE AND THE A SSESSEE. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS A SUBSIDIARY OF EMPTORIS INC, USA, WHICH WAS A PROVIDER OF SUPPLY AND CONTRACT , MANAGEMENT, SOFTWARE APPLICATION AND SERVICES , I N ORDER TO ENABLE THE ENTERPRISES OF VARIETY OF SIZES TO ENHANCE THEIR FINANCIAL PERFORMANCE BY IMPROVING COST MANAGEMENT, INCREASING REVENUE AND ITA NO . 1 500 /PN/201 2 ITA NO.1 550 /PN/201 2 EMPTORIS TECHNOLOGIES INDIA PVT. LTD. 5 REDUCING BUSINESS RISKS . T HUS, EMPTORIS INC, USA WAS A PRODUCT COMPANY. THE ASSESSEE WAS ENGAGED IN RENDERIN G SOFTWARE RELATED DEVELOPMENT, TESTING, DOCUMENTATION AND MAINTENANCE SERVICES AS WELL AS SOFTWARE SUPPORT AND DEVELOPMENT SERVICES AND ALSO UNDERTOOK OTHER ACTIVITIES SUCH AS DOCUMENTATION, CUSTOMIZATION OF REPAIRS AND WORKING ON ADD - ON MODULES FOR EXIST ING SOFTWARE PRODUCTS OF EMPTORIS INC, USA . THE ASSESSEE WAS THUS, A SERVICE COMPANY ENGAGED IN RENDERING SOFTWARE DEVELOPMENT AND SUPPORT AS WELL AS TESTING AND DOCUMENTATION SERVICES TO ITS ASSOCIATE ENTERPRISES. THE ASSESSEE BENCHMARKED ITS INTERNATIO NAL TRANSACTION S WITH THE COMPANIES ENGAGED IN SOFTWARE DEVELOPMENT SERVICES BEING COMPARABLE TO IT. AS PER THE AGREEMENT BETWEEN THE ASSESSEE AND ITS ASSOCIATE ENTERPRISES , THE CONSIDERATION FOR SERVICES WAS FIXED AT SERVICE PROVIDERS COST PLUS 10% MARGI N. THE CLAIM OF THE ASSESSEE BEFORE THE AUTHORITIES BELOW IN ADDITION TO THE ALLOWABILITY OF CERTAIN ADMINISTRATIVE EXPENSES AND RISK ADJUSTMENT WAS THAT WORKING CAPITAL ADJUSTMENT SHOULD BE ALLOWED TO THE ASSESSEE , AS WORKING CAPITAL POSITION OF THE ASSE SSEE SHOULD BE ALLOWED TO THE ASSESSEE , AS WORKING CAPITAL POSITION OF THE ASSE SSEE WAS BETTER AS COMPARED TO THE WORKING CAPITAL POSITION OF THE COMPANIES CONSIDERED AS COMPARABLE. THE ASSESSEE SOUGHT ADJUSTMENT ON ACCOUNT OF THE ABOVE SAID FACTORS INCLUDING WORKING CAPITAL ADJUSTMENT. THE ASSESSEE HAD PICKED UP CERTAIN COMPARABLE S WHICH WERE NOT ACCEPTED BY THE TPO AND ANOTHER SET OF COMPARABLES WAS PROPOSED TO BE ADOPTED FOR WORKING OUT THE ARM'S LENGTH PRICE OF THE ASSESSEE. AFTER CONSIDERING THE SUBMISSIONS AND OBJECTIONS OF THE ASSESSEE, THE TPO OBSERVED THAT THE BUSINESS OF THE COMPANIES WHICH WERE EARLIER REJECTED , WERE NOT COMPARABLE TO THE BUSINESS OF THE ASSESSEE AND THE COMPANIES WHICH WERE RETAINED BY THE TPO AS COMPARABLE S WERE HELD TO BE ENGAGED IN THE SIMILAR TYPE OF ACTIVITIES AS THAT OF THE ASSESSEE. FURTHER, THE PLEA OF THE ASSESSEE REGARDING ADOPTING OF REVISED OPERATING MARGINS OF 20.13% TO BE ADOPTED FOR THE PLI, WAS NOT ACCEPTED AS THE ENTIRE COST OF THE ASSESSEE IN CONNECTION WITH THE DESIGNATED PROJECT ASSIGNED TO IT WERE REIMBURSED WITH MARK - UP. FURTHER, T HE RISK ADJUSTMENT CLAIMED BY THE ASSESSEE WAS ALSO NOT ALLOWED ITA NO . 1 500 /PN/201 2 ITA NO.1 550 /PN/201 2 EMPTORIS TECHNOLOGIES INDIA PVT. LTD. 6 BY THE TPO AS THE SAME WAS WITHOUT ANY SUPPORTING EVIDENCE. FURTHER, WORKING CAPITAL ADJUSTMENT WAS ALSO NOT ALLOWED TO THE ASSESSEE AND THE TPO DETERMINED THE ADJUSTMENT AT RS. 1,01,98,528/ - . 9. BEFORE THE CIT(A), VARIOUS GROUNDS OF APPEAL WERE RAISED IN RELATION TO THE ADJUSTMENTS TO BE MADE IN RESPECT OF THE COMPARABLES WHICH HAVE BEEN PICKED UP BY THE TPO AND ALSO OBJECTIONS WERE RAISED AGAINST THE REJECTION OF THE COMPARABLES, WHICH WERE PICKED UP BY THE ASSESSEE. THE ASSESSEE ALSO RAISED VARIOUS GROUNDS OF APPEAL AGAINST DIFFERENT ASPECTS OF THE ADJUSTMENT S TO BE MADE AND ONE SUCH GROUND OF APPEAL RAISED WAS AGAINST THE DENIAL OF WORKING CAPITAL ADJUSTMENT. THOUGH THE ASSESSEE HAS RAISE D VARIOUS GROUNDS OF APPEAL, BUT IN VIEW OF THE ARGUMENTS MADE BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN RELATION TO THE APPEAL FILED BY THE REVENUE, WE PROCEED TO ADJUDICATE THE ISSUE IN RELATION TO THE WORKING CAPITAL ADJUSTMENT ALLOWE D BY THE CIT(A). THE CIT(A) VIDE PARA 3.3.3 AT PAGES 28 TO 30 OF THE APPELLATE ORDER NOTED THAT THE ASSESSEE WAS A WHOLLY OWNED SUBSIDIARY OF THE PARENT AE COMPANY AND WORK S ONLY FOR THE SAID COMPANY AT COST PLUS 10% MARGIN, AS PER THE AGREEMENT APPROVED BY THE RBI. THEREFORE, THE COMPANY DOES NOT HAVE TO TAKE RISK FOR MARKET, RECOVERY OF DUES, ETC. AND EVEN THE WORKING CAPITAL REQUIREMENT WAS VERY NOMINAL COMPARED TO OTHER COMPARABLES. THE ASSESSEE CLAIMED THAT COMPARATIVE ANALYSIS WAS MADE BY BRINGING THE FIGURES OF COMPARABLES FOR THE WORKING CAPITAL REQUIREMENT TO THE SAME LEVEL AND THE ASSESSING OFFICER HAD NOT GRANTED THE SAID ADJUSTMENT. AS PER THE ASSESSEE, THE WORKING CAPITAL ADJUSTMENT WAS REQUIRED TO BE MADE FOR THE COMPARABLES ADOPTED BY THE ASSESSING OFFICER AND IF THE SAID ADJUSTMENT IS MADE, THEN THE NET MARGINS OF THE COMPARABLES WOULD BE WITHIN ACCEPTABLE RANGE OF +/ - 5% OF THE MARGINS OF THE ASSESSEE. IT WAS ALSO POINTED OUT TO THE CIT(A) THAT THE ASSESSING OFFICER / TPO IN ASSESSMENT Y EAR 2006 - 07 AND IN OTHER CASES AS WELL AS DRP IN ASSESSMENT YEAR 2007 - 08 , HAD ACCEPTED AND ALLOWED THE WORKING ITA NO . 1 500 /PN/201 2 ITA NO.1 550 /PN/201 2 EMPTORIS TECHNOLOGIES INDIA PVT. LTD. 7 CAPITAL ADJUSTMENT. THE CIT(A) OBSERVED THAT THE WORKING CAPITAL ADJUSTMENT HAS TO BE GRANTED TO THE ASSESSEE VIS - - VIS THE RESULTS OF THE COMPA RABLES ADOPTED BY THE ASSESSING OFFICER. IT WAS FURTHER HELD BY THE CIT(A) THAT THE DENIAL OF ADJUSTMENT BY THE TPO WAS NOT CORRECT AND WAS BASED ON FACTS WHICH WERE NOT PROPERLY APPRECIATED. REFERRING TO THE COMPUTATION FILED BY THE ASSESSEE, THE CIT(A) OBSERVED THAT SINCE THE COMPUTATION WAS NOT ANALYZED AND DISCUSSED BY THE TPO, EVEN THOUGH THE SAME WAS MADE AVAILABLE TO HIM, THE CIT(A) DIRECTED THE ASSESSING OFFICER TO VERIFY THE CALCULATION AND COMPUTE AS PER THE RECORDS AND IN CASE IT IS FOUND THAT AFTER WORKING CAPITAL ADJUSTMENT, THE MARGINS COMES WITHIN +/ - 5% OF THE MARGINS OF THE ASSESSEE COMPANY , THEN NO ADJUSTMENT WOULD BE REQUIRED. THE REVENUE IS AGGRIEVED BY THE AFORESAID DIRECTIONS OF THE CIT(A). 10. IT WAS POINTED OUT BY THE LEARNED AUTH ORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE ASSESSING OFFICER CONSEQUENT UPON PASSING OF THE ORDER OF CIT(A), HAD GRANTED CERTAIN ADJUSTMENTS, AGAINST WHICH THE ASSESSEE FILED A RECTIFICATION APPLICATION ON 16.07.2012 POINTING OUT THE ERRORS IN THE WOR KING CAPITAL ADJUSTMENT. ANOTHER RECTIFICATION APPLICATION WAS FILED BEFORE THE ASSESSING OFFICER ON 10.09.2013 . THE ASSESSEE HAS ENCLOSED THE ABOVE SAID COMMUNICATION AT PAGES 2 TO 5 OF THE PAPER BOOK 2 ALONG WITH COPY OF ORDER OF ASSESSING OFFICER GI VING EFFECT TO THE ORDER OF CIT(A) PLACED AT PAGE 1 OF PAPER BOOK 2. THE ASSESSEE ALSO FURNISHED COMPUTATION OF WORKING CAPITAL ADJUSTMENT AS PER OECD GUIDELINES WHICH IS PLACED IN THE APPEAL FOLDER. THE CLAIM OF THE ASSESSEE BEFORE US IS THAT IN CASE THE SAID WORKING CAPITAL ADJUSTMENT IS ALLOWED TO THE ASSESSEE, THEN NO ADJUSTMENT IS REQUIRED TO BE MADE ON ACCOUNT OF ITS INTERNATIONAL TRANSACTIONS. DURING THE COURSE OF HEARING, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURNISHED CORRECTE D WORKING OF WORKING CAPITAL ADJUSTMENT POINTING OUT THE DETAILED REASONS AND ALSO REFERRED TO THE RELEVANT PAGES OF THE ANNUAL REPORT OF THE DIFFERENT COMPANIES ITA NO . 1 500 /PN/201 2 ITA NO.1 550 /PN/201 2 EMPTORIS TECHNOLOGIES INDIA PVT. LTD. 8 WHICH WERE PICKED UP AS COMPARABLES TO WHOSE RESULTS WORKING CAPITAL ADJUSTMENT IS TO BE MADE. 11. ON PERUSAL OF THE RECORD AND IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, ON ACCOUNT OF PECULIAR CIRCUMSTANCES UNDER WHICH THE ASSESSEE IS CARRYING ON ITS BUSINESS I.E. PROVIDING SERVICES TO ITS ASSOCIATE ENTERPRISES ONLY WITH MARK - UP OF 10% ON THE COST AND WHERE THERE IS NO ADVERSITY ON ACCOUNT OF WORKING CAPITAL, THEN SUCH WORKING CAPITAL ADJUSTMENT IS TO BE MADE IN THE HANDS OF THE COMPANIES, WHICH ARE PICKED UP AS COMPARABLES TO BRING THE SAME TO THE LEVEL OF THE ASSESSEE, WHILE BEN CHMARKING THE INTERNATIONAL TRANSACTION S ENTERED INTO BY THE ASSESSEE . THUS, AN ENDEAVOUR IS TO BE MADE TO BRING THE RESULTS OF COMPARABLES AT PAR WITH THE RESULTS OF THE TESTED PARTY AS IF THE SAME ARE WORKING IN THE SAME ENVIRONMENT. IN THE CASE OF THE ASSESSEE, WHERE IT IS BENEFITED ON ACCOUNT OF ITS TRANSACTIONS ENTIRELY WITH ITS ASSOCIATE ENTERPRISES ON THE BASIS OF AN AGREEMENT, UNDER WHICH IT IS ENTITLED TO A MARK - UP OF 10% ON COST, WORKING CAPITAL ADJUSTMENT ON SUCH ACCOUNT MERITS TO BE ALLOWED TO THE ASSESSEE. THE OECD HAS PROVIDED GUIDELINES FOR SUCH WORKING CAPITAL ADJUSTMENT AND THE SAID GUIDELINES ARE ONE OF THE ACCEPTED MODE S OF COMPUTING WORKING CAPITAL ADJUSTMENT. IN VIEW THEREOF, WE HOLD THAT THE ASSESSEE IS ENTITLED TO THE WORKING CAPIT AL ADJUSTMENT, WHICH IN TURN IS TO BE COMPUTED AS PER THE OECD GUIDELINES. THE ASSESSEE HAS FILED THE COMPUTATION OF WORKING CAPITAL ADJUSTMENT TO THE RESULTS OF THE COMPARABLES BEFORE US AND THE SAME WERE ALSO FILED BEFORE THE ASSESSING OFFICER AND SOME ADJUSTMENT HAS BEEN ALLOWED ON ACCOUNT OF WORKING CAPITAL ADJUSTMENT BY THE ASSESSING OFFICER , WHILE GIVING EFFECT TO THE ORDER OF CIT(A). HOWEVER, THE ERRORS POINTED OUT BY THE ASSESSEE VIDE DIFFERENT COMMUNICATIONS TO THE ASSESSING OFFICER / TPO AND THE CONCERNED COMMISSIONER , HAVE NOT BEEN C ARRIED OUT TILL DATE. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO COMPLETE THE EXERCISE OF WORKING CAPITAL ADJUSTMENT TO BE ALLOWED TO THE ASSESSEE WITHIN A PERIOD OF 45 DAYS FROM THE DATE OF THIS ORDER, ITA NO . 1 500 /PN/201 2 ITA NO.1 550 /PN/201 2 EMPTORIS TECHNOLOGIES INDIA PVT. LTD. 9 AFTER A FFORDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. UPHOLDING THE ORDER OF CIT(A) WITH REGARD TO THE ALLOWABILITY OF WORKING CAPITAL ADJUSTMENT, WE DISMISS THE GROUNDS OF APPEAL RAISED BY THE REVENUE. IN VIEW OF THE CONCESSION OF THE LEARNED AUTH ORIZED REPRESENTATIVE FOR THE ASSESSEE THAT IN CASE THE WORKING CAPITAL ADJUSTMENT IS ALLOWED TO IT, THEN THE MARGINS SHOWN BY THE ASSESSEE IN RESPECT OF INTERNATIONAL TRANSACTION S WITH ITS ASSOCIATE ENTERPRISES WAS WITHIN +/ - 5% OF THE MARGINS SHOWN BY TH E LIST OF COMPARABLES, WE DO NOT ADJUDICATE THE ISSUE S RAISED IN THE APPEAL FILED BY THE ASSESSEE. 1 2 . IN THE RESULT, BOTH THE APPEAL S OF THE REVENUE AND THE ASSESSEE ARE DISMISSED. ORDER P RONOUNCED ON THIS 8 TH DAY OF JULY , 201 5 . SD/ - SD/ - ( R.K. PANDA ) ( SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 8 TH JU LY , 2015 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - I , PUNE ; 4. / THE CIT I, PUNE ; 5. , , / DR B , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE