In the present case the Ld. TPO while making the working capital adjustment observed that that working capital adjustment cannot exceed the average working capital component of the comparables. Ld. TPO further observed that while computing working capital adjustment, advances received from the sister company included in the debtors should be excluded because such advances received towards services to be rendered usually does not have any cost.

The Appellate Tribunal however deleted the addition by holding that when the working capital adjustment is positive, the same is to be allowed on actual without putting a cap on the working capital adjustment i.e., without restricting the working capital adjustment to the average working capital component of the comparables. The Appellate Tribunal further held that when the working capital adjustment is negative then there should be no adjustment on account of working capital and advances received from AE should also be considered as part of payables in computing working capital of the Assessee. (AY. 2010-11)