Appeal allowed, issues remitted for reconsideration.

The Tribunal set aside the lower authorities' orders and remitted the issues of comparables selection and working capital adjustment back to the Assessing Officer for reconsideration. The TPO was instructed to re-examine the matter considering the appellant's objections. The DRP was directed to provide a speaking order addressing all aspects raised by the appellant. The decision allowed the appeal for statistical purposes, with the matter remitted back to the Assessing Officer.

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Issues:
Transfer pricing adjustment for working capital difference
Selection of comparables by Transfer Pricing Officer and Dispute Resolution Panel

Analysis:
The appeal concerns the order of the Assessing Officer dated 26.12.2015 following directions from the Dispute Resolution Panel. The appellant pressed grounds No.5, 6 & 7, specifically addressing working capital adjustment and selection of comparables. The appellant argued that the Dispute Resolution Panel did not make adjustments for working capital differences between the appellant and comparable companies, emphasizing the need for proper adjustments. The appellant highlighted that the DRP acknowledged the detailed arguments and supporting documents provided by the appellant but did not consider them due to lack of verifiable supporting material. The appellant stressed that working capital comparison is crucial in determining arm's length price.

Regarding the selection of comparables, the appellant contended that the TPO included companies not functionally comparable to the appellant and urged for a reconsideration. The DRP's dismissal without proper discussion was challenged by the appellant. The Departmental Representative countered by stating that the appellant failed to provide verifiable source material for working capital verification, justifying the DRP's decision. The DRP's confirmation was supported by the fact that the TPO considered the materials filed by the appellant.

The Tribunal acknowledged both sides' arguments and reviewed the records. It recognized the significance of working capital in determining profit and the necessity of comparing capital employed by the appellant and comparable companies. The Tribunal emphasized that without comparing working capital, transfer pricing adjustments cannot be made. Additionally, the Tribunal noted the appellant's objections to the selection of comparables and the TPO's actions. It highlighted the DRP's responsibility as a fact-finding authority to address all aspects related to determining arm's length price, emphasizing the need for detailed discussions. Consequently, the Tribunal set aside the lower authorities' orders and remitted the issues of comparables selection, working capital adjustment, and objections back to the Assessing Officer for reconsideration. The TPO was instructed to re-examine the matter considering the appellant's objections and decide accordingly. The DRP was directed to provide a speaking order addressing all aspects raised by the appellant. The decision allowed the appeal for statistical purposes, with the matter remitted back to the Assessing Officer.

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