Tribunal quashes orders on arm's length price adjustment, advises separate pursuit of depreciation allowance grievance.

The Tribunal partly allowed the appeal by quashing the Dispute Resolution Panel's directions dated 22nd April 2021, the Transfer Pricing Officer's order based on these directions, and the Assessing Officer's rectification order. The Tribunal found the rectification application by the TPO to be not maintainable and held that all related grievances regarding the arm's length price adjustment were academic. The Tribunal advised the assessee to pursue the depreciation allowance grievance separately.

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Issues Involved
1. Justification of the Dispute Resolution Panel (DRP) in passing the order dated 22nd April 2021.
2. Justification of the Transfer Pricing Officer (TPO) in giving effect to the DRP's directions.
3. Justification of the Assessing Officer in making an addition of Rs 6,68,10,000 as an arm's length price (ALP) adjustment based on the DRP and TPO orders.

Issue-wise Detailed Analysis

1. Justification of the Dispute Resolution Panel (DRP) in Passing the Order Dated 22nd April 2021
The appellant challenged the legitimacy of the DRP's order dated 22nd April 2021. The DRP had initially concluded that the transaction between the assessee and its associated enterprise (AE) was at arm's length and did not require any upward adjustment. However, the TPO filed a miscellaneous application (MA) on 16th February 2021, seeking rectification of various mistakes in the DRP's order. The DRP, after considering the submissions from both parties, found that the MA was based on incorrect facts and circumstances and rejected it as not maintainable. The DRP noted that the TPO's application was ultra vires since there was no provision under the Act or DRP Rules, 2009, for filing such an application. Despite this, the DRP proceeded to rectify the directions on certain points. The Tribunal found that the scheme of rule 13 of the DRP Rules does not permit a rectification application from the TPO, and the rectification should only address "mistakes apparent on record," which were not established in this case. Thus, the Tribunal quashed the DRP's directions dated 22nd April 2021 as unsustainable in law.

2. Justification of the Transfer Pricing Officer (TPO) in Giving Effect to the DRP's Directions
The TPO had recommended an ALP adjustment of Rs 131,40,70,214, which was initially proposed by the Assessing Officer in the draft assessment order. After the DRP's initial order, no ALP adjustment was made. However, following the TPO's MA and the subsequent directions by the DRP on 22nd April 2021, the TPO gave effect to these directions in his order dated 31st May 2021. The Tribunal found that the TPO's application for rectification was not maintainable under rule 13 of the DRP Rules, and the directions issued by the DRP were quashed. Consequently, the TPO's order based on these directions was also quashed.

3. Justification of the Assessing Officer in Making an Addition of Rs 6,68,10,000 as an Arm's Length Price Adjustment
The Assessing Officer, based on the rectification order passed by the DRP and the resultant order by the TPO, made an addition of Rs 6,68,10,000 as an ALP adjustment in the impugned order dated 2nd June 2021. The Tribunal noted that since the DRP's directions dated 22nd April 2021 were quashed, the TPO's order giving effect to these directions and the Assessing Officer's impugned rectification order must also be quashed. The Tribunal held that all other related grievances with respect to the ALP adjustment were rendered infructuous and academic, and did not require specific adjudication.

Additional Grievance
The assessee also raised a grievance against the depreciation allowance on Gas Turbine Generators (GTGs) of Rs 25,29,89,877 at 15% instead of 80%. However, this addition was made in the original assessment order dated 30th March 2021, and the present appeal was against the rectification order dated 2nd June 2021. The Tribunal advised the assessee to pursue this grievance in appeals against the original assessment order.

Conclusion
The appeal was partly allowed, with the Tribunal quashing the DRP's directions dated 22nd April 2021, the TPO's order giving effect to these directions, and the Assessing Officer's rectification order based on the TPO's order. The Tribunal left open the possibility for the DRP to pass a new order within the permissible framework of the law.

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