Appeal partly allowed, ALP adjustment deleted, services remanded for verification, carry forward loss to be verified.

The appeal was partly allowed. The addition of Rs. 74,70,102/- on account of ALP adjustment for purchase/sale of raw materials/finished goods was deleted as it fell within the permissible arm's length range. The adjustment for intra-group services was remanded back to the TPO for verification of tangible benefits. The disallowance of carry forward loss and depreciation was directed to be verified and allowed as per law. Interest under Sections 234B and 234C was deemed consequential.

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Issues Involved:
1. Adjustment on Arm's Length Price (ALP) for intra-group services and purchase/sale of raw materials/finished goods.
2. Disallowance of adjustment on brought forward business loss and unabsorbed depreciation.
3. Interest charged under Sections 234B and 234C.

Issue-wise Detailed Analysis:

1. Adjustment on Arm's Length Price (ALP) for Intra-group Services and Purchase/Sale of Raw Materials/Finished Goods:
The assessee challenged an addition of Rs. 84,86,175/- made on account of ALP adjustments, which included Rs. 10,16,073/- for intra-group services and Rs. 74,70,102/- for purchase and sale of raw materials/finished goods. The assessee applied the Transactional Net Margin Method (TNMM) using operating profit/operating income as the Profit Level Indicator (PLI). The TPO initially made an adjustment of Rs. 2,19,93,409/-, which was reduced to Rs. 84,86,175/- after the Dispute Resolution Panel (DRP) directions.

The TPO rejected two comparables selected by the assessee and introduced one new comparable, resulting in a final operating margin of 5.64% for the comparables, while the assessee's margin was 1.44%. The difference of 4.20% fell within the permissible +/-5% range, leading to the deletion of the addition of Rs. 74,70,102/- as it fell within the arm's length range.

2. Intra-group Services Adjustment:
The TPO determined the ALP for intra-group services at 'Nil' using the Comparable Uncontrolled Price (CUP) method, arguing that the assessee failed to substantiate the actual rendering and benefit of the services. The assessee contended that the services were indeed rendered and provided a cost-benefit analysis demonstrating tangible benefits such as cost savings and enhanced commercial position.

The Tribunal found that the TPO's application of the benefit test without comparable uncontrolled transactions was incorrect. The Tribunal directed the TPO to verify the working of tangible benefits derived from the services and examine the overall benefit to the assessee. If the benefits were demonstrated, no adjustment should be made.

3. Disallowance of Adjustment on Brought Forward Business Loss and Unabsorbed Depreciation:
The Assessing Officer was directed to verify the disallowance of carry forward loss and depreciation from the records and allow the same in accordance with the law.

4. Interest Charged under Sections 234B and 234C:
The interest charged under Sections 234B and 234C was noted as consequential in nature and dependent on the final assessed income.

Conclusion:
The appeal was partly allowed. The addition of Rs. 74,70,102/- on account of ALP adjustment for purchase/sale of raw materials/finished goods was deleted as it fell within the permissible arm's length range. The adjustment for intra-group services was remanded back to the TPO for verification of tangible benefits. The disallowance of carry forward loss and depreciation was directed to be verified and allowed as per law. Interest under Sections 234B and 234C was deemed consequential.

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