Separate adjustment on outstanding receivables unjustified when working capital adjustment is factored in pricing

ITAT Visakhapatnam has held that if working capital adjustment on ALP has been already factored in pricing/ profitability vis-à-vis that of its comparables, then, no separate upward adjustment on outstanding receivables is required.

Facts- The assessee is engaged in the provision of processing services in relation to manufacture of garments to the Brandix Group of companies. The case of the assessee was selected for scrutiny and the matter was referred to TPO as the assessee had entered into an international transactions with its Associated Enterprises.

TPO rejected the TP analysis and documentation of the assessee. TPO made upward adjustments. AO giving effect to the directions of the DRP passed the final assessment order on 29/10/2018 making the addition towards TP Adjustment of Rs. 28,14,06,365/-. Aggrieved by the final assessment order of the Ld. AO, the assessee has preferred the present appeal.

Conclusion- Direct the Ld. AO / TPO to examine and consider the appropriate adjustments arising out of the working capital differences in the computation of the ALP. The assessee is also directed to submit the working relating to working capital adjustments of the assessee company. Following the principle of consistency if the working capital adjustments on the ALP has been already factored in its pricing / profitability vis-à-vis that of its comparables further adjustment to the margin of the assessee on the outstanding receivables cannot be justified and no separate upward adjustment on outstanding receivables is required.