Net profit margins needs to be worked out for working capital adjustment

Arm Embedded Technologies Pvt. Ltd Vs DCIT (ITAT Bangalore)

ITAT Bangalore held that if for reasons given by CIT(A) working capital adjustment cannot be allowed to the profit margins, then the comparable uncontrolled transactions chosen for the purpose of comparison will have to be treated as not comparable in terms of Rule 10B(3) of the Rules. Matter remanded to re-compute the working capital adjustment.

Facts-

The assessee mainly contend that AO has erred in upholding the learned TPO’s approach of determining the arm’s length price for the provision of software development MOW (‘SWD’) services and provision of marketing and sales support services (MSS’) segments of the Appellant by rejecting the value of international transaction of provision of SWD and provision of MSS, as recorded in the books of account. as the arm’s length price.

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