Sun Life India Service Centre Pvt Ltd - ITAT Delhi
Rejecting the arguments of the TPO/DRP, the Delhi Tribunal has held that working capital adjustment should be allowedin the case of sevice industry. The Tribunal opined that where a company carries high trade receivables, it will lead to higher interest cost and lower net profit. Similary would be the case where the company has high trade payables, where it will benefit from lower interest cost and higher net profits. In order to neutralise the difference on account of such high trade receivables and/or inventory, it is important to allow working capital adjustment so as to bring the company at par with its comparables.
Posted on: 04-11-2015