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It is now a settled proposition of law that necessary adjustments are to be made to the margins of comparables to give effect to the differences in the working capital positions of the tested party and of the comparables. The TPO ought to have given the assessee the benefit of the same.

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Section 92C of the Income-tax Act, 1961—Transfer pricing— Company not selected as comparable as it was functionally incomparable with assessee company - TPO excluded the comparable company on the ground that the company is engaged in significant R&D activity- - BROCADE COMMUNICATIONS SYSTEMS (P.) LTD. V/s DEPUTY CIT - [2020] 26 ITCD Online 135 (ITAT-BANGALORE)
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