2019 (4) TMI 1427

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....43(3) read with section 144C(5) of the Income Tax Act, 1961. 2. The assessee in the present case is a Company, which is engaged in the business of Supervision of Erection & Commission, Repairs & Maintenance and Supply of Spare Parts for various Power Plants and also in Consulting Engineering and Business Auxiliaries. The return of income for the year under consideration was filed by it on 29.11.2013 declaring total income of Rs. 6,73,46,720/-. As noted by the Assessing Officer, the assessee-company during the year under consideration had entered into the following international transactions with its Associated Enterprise:- (i) Import of Spare Parts valued Rs. 19,42,22,986/-; (ii) Royalty and fees for Technical Services-....

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....on account of Transfer Pricing Adjustment as worked out by the TPO. Against the draft assessment order of the Assessing Officer, the assessee-company filed its objections before the Dispute Resolution Panel (DRP) and as per the directions given by the DRP vide its order dated 25.07.2017 passed under section 144C(5) of the Act, the Transfer Pricing Adjustment to be made in the case of the assessee was recomputed by the TPO at Rs. 80,17,341/- (Technical Service Segment Rs. 5,31,750/- and Trading Segment Rs. 74,85,591/-). Accordingly in the order passed by the Assessing Officer under section 143(3) read with section 144C(5) of the Act on 18.09.2017, addition on account of Transfer Pricing Adjustment of Rs. 80,17,341/- was made to the total inc....

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.... technical services and royalty segment to the international transactions entered by the company with its Associated Enterprises. 5. That, on the facts and in the circumstances of the case, the Hon'ble DRP have erred in upholding the action of the Ld. TPO in not providing the detailed search process for selecting the companies considered comparable by him w.r.t. spares segment and service and royalty segment. 6. That, on the facts and in the circumstances of the case, the Hon'ble DRP has erred in upholding the action of the Ld. TPO in rejecting use of multiple year data for analysis and determining the arm's length margin. 7. That, on the facts and circumstances of the case, whether the Hon'ble DRP....

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....stur & Co. Pvt. Ud) for determination of arm's length price w.r.t. technical services and royalty segment. 10. That, on the facts and in the circumstances of the case, Ld. AO! Ld. TPO has erred in not following the directions of the Hon'ble DRP in providing adjustment to the margins of the final comparable companies on account of differences in working capital w.r.t. both the segments (spares segment and technical services and royalty segment) of the Appellant. 11. That, on the facts and in the circumstances of the case, the Ld. AO in the impugned order has erred in not giving effect to the demand of AY 2013-14 raised vide intimation under section 143(1) of the Act of Rs. 7,380,270 (including interest under section....

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.... adjustment should be made provided reliable data is furnished by the assessee to the TPO. The claim for working capital adjustment has consistently been accepted in several decisions of the ITAT. Considering the facts, the TPO is directed to give working capital adjustment using the methodology given in Annexure to Chapter III of OECD guidelines and apply SBI Prime Lending rate (as on 30th June of the relevant financial year) as the interest rate. The assessee is directed to provide the necessary data/details with computation of the working capital of the tested party and the comparables. The TPO is directed to take the following consideration while working out the working capital adjustment: (a) Compute the average of op....

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....-computing the quantum of Transfer Pricing Adjustment and this position clearly evident from the order of the TPO dated 20.08.2017 passed under section 92CA(3) read with section 144C(5) [pages 468 to 470 of the paper book] is not disputed even by the ld. D.R. We, therefore, direct the Assessing Officer/TPO to allow the working capital adjustment while determining the Arm's Length Price of the relevant international transactions of the assessee with its AE by following these specific directions given by the DRP. Ground No. 10 of the assesese's appeal is accordingly allowed. 7. As regards the other grounds raised by the assessee in this appeal while challenging the addition made on account of Transfer Pricing Adjustment, the ld. Counsel fo....