Tax department wins appeal for transfer pricing adjustment, sends case back for working capital review.

The department appealed against the deletion of a transfer pricing adjustment of Rs. 79,67,93,400 made by the TPO/AO. The appeal was successful, and the matter was sent back to the TPO/AO for verification of working capital adjustment. The department's appeal was allowed for statistical purposes.

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Issues:
Transfer pricing adjustment of Rs. 79,67,93,400.

Analysis:
The appeal was filed by the department against the order of the ld. CIT(A)-XXIX, New Delhi, challenging the deletion of the addition of Rs. 79,67,93,400 made by the TPO/AO on account of transfer pricing adjustment. The assessee, a listed Indian Public Limited Company engaged in manufacturing/sale of consumer durables, reported 12 international transactions with its Associated Enterprises (AE) for benchmarking. The TPO recommended the addition based on the difference between the margin from ALP of these transactions. The AO added the amount after the assessee's submissions were considered, stating that the TPO's decision to club manufacturing and trading functions for margin computation was valid. The ld. CIT(A) rejected the claim for separate benchmarking but observed that adjusted margins of comparables showed higher profits than the assessee. The ld. CIT(A) deleted the addition, considering the working capital adjustment and comparables' profit margins. The department appealed, and during the hearing, both parties agreed to restore the matter to the TPO/AO for verification of working capital adjustment. The issue was set aside for reconsideration, and the appeal of the department was allowed for statistical purposes.

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