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2020 (1) TMI 866 - AT - Income TaxTP Adjustment - Rate of interest for the purpose of calculating working capital adjustment - HELD THAT:- TPO vide his order giving effect to the directions of the DRP changed the rate of interest for the purpose of calculating working capital adjustment from the originally accepted 9.86% to 14.61%. - AO passed the draft order on 28.11.2016 by considering the adjusted margins of the comparables with the working capital adjustment on the basis of rate of interest at 9.86%. The assessee assailed the draft order before the DRP on certain issues other than the rate of interest for computing the working capital adjustment. The DRP gave certain directions but did not direct to alter such interest rate either suo motu or at the instance of the assessee. Once the position was so, the rate of interest at 9.86% attained finality as the draft order was passed with such a rate of interest. AO/TPO, while giving effect to the directions of the DRP, were bereft of any power to change any aspect of the draft order save and except the direction of the DRP including the rate of interest to 14.61%. Having themselves accepted such a rate of interest up to the stage of passing the draft order, the AO/TPO ceased to exercise any jurisdiction to re-examine the earlier view and enhance it at the time of giving effect to the direction of the DRP, when the same was not a part of the direction. We direct to consider the rate of interest at 9.86% for calculating the working capital adjustment for benchmarking the international transaction in question, as was originally accepted. Adjustment to account for differences in the depreciation cost of the Appellant vis-à-vis comparable companies selected by the Appellant - Additional ground raised - HELD THAT:- Dispute is not about granting any adjustment on account of difference in the quantum of depreciation as such or percentage of such depreciation to a common base but only towards difference in the rates of depreciation on similar asset(s). We agree with this proposition as has been approved in several decisions including a recent decision in M/s. Vishay Components India Private Limited vs. ACIT [2020 (1) TMI 618 - ITAT PUNE] . It is, therefore, held that no adjustment can be allowed if there is difference just on account of the quantum of depreciation or percentage of depreciation to a certain base. An adjustment should be allowed in the computation of profit of the comparables only if there is a difference in the rate of depreciation as charged by the assessee vis-a-vis the comparables on the same asset(s). We, therefore, set-aside the impugned order and remit the matter to the file of AO/TPO for a fresh determination of the ALP of the international transaction in accordance with our above directions.
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