The Income Tax Appellate Tribunal (ITAT), Bangalore Bench ruled that Zynga India is no risk company, so risk adjustment should be provided to comparables.
The Assessee, Zynga India is a company registered under the Companies Act 1956. It is a subsidiary of Zynga Luxembourg U.S Assessee is stated to be a software development service provider in the nature of the development of modules for online games for testing and maintenance of online games, developed by Zynga Inc.
The assessee has filed the appeal for not considering provision of bad and doubtful debts as operating in nature while computing operating margin of assessee and the comparable companies.
The TPO has considered provision for doubtful debts and provision for doubtful advances are non-operating in nature and the action was upheld by the DRP.
In this regard it was submitted that provision for doubtful debts is a provision which is to be made as a part of the operating activities of business governed by the principles of prudence, and therefore it is not correct to contend that the same is non-operating in nature.
The coram of B.R.Baskaran and Beena Pillai noted that assessee is a no risk company and therefore risk adjustment should be provided to comparables if any.
The ITAT directed the assessee to file all necessary details in respect of the same. In respect of the companies for which details could not be filed, the AO or TPO shall call for necessary information under section 133(6) in order to compute necessary adjustment.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan AdFree. We welcome your comments at info@taxscan.in
