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2024 (2) TMI 749 - ITAT VISAKHAPATNAMTransfer Pricing Adjustments - Validity of final assessment order u/s. 143(3) r.w.s 144C(13) passed not in conformity with the directions issued by the Ld. DRP - Request for change in the Transfer Pricing Method (TPM) from Transactional Net Margin Method (TNMM) to Comparable Uncontrolled Price (CUP) method - HELD THAT:- We find from the directions of the Ld. DRP wherein the objections raised by the assessee with respect to providing appropriate adjustment towards difference on account of working capital, the Ld. DRP has directed the Ld. AO to compute the mean of the working capital adjustment in respect of the comparables retained. AO in his order while considering the other directions of the Ld. DRP has erred in not considering the directions of the DRP with regard to working capital adjustment. We find that the Ld. AO has partly carried out the directions and partly ignored the directions with regard to working capital adjustment. We are therefore of the considered view that it would be deemed fit to direct the Ld. AO/ Ld.TPO to consider all the directions of the Ld. DRP while drafting the final assessment order. Accordingly, this legal ground raised by the assessee is partly allowed for statistical purposes. Selection of MAM [ Most appropriate method] - changing the method from TNMM to CUP which was rejected by the Ld. DRP - HELD THAT:- The principle of Res Judicata is not applicable to tax proceedings but at the same time, when there is no change in the facts, then it is the requirement of law that consistency should be maintained and the method will be adopted by the assessee for benchmarking its international transaction should not be disturbed. The assessee has adopted the TNMM during the earlier and subsequent assessment years as Most Appropriate Method. In the absence of any reasoning brought on record, there is no merit in deviating or taking a stand contrary to the accepted method in both the preceding and succeeding years. We therefore find merit in the arguments of the Ld. DR and in the present case, since there is no change in the facts and circumstances which merits deviating from the TNMM to CUP method to benchmark its international transactions.Thus the change in method from TNMM to CUP method cannot be entertained and thereby dismissed the grounds raised by the assessee. Comparable selection - AR submitted that the objections raised before the Ld. DRP were not considered and rejected by the Ld. DRP - HELD THAT:- DRP has observed and rejected the objections raised by the assessee with respect to multiple / prior year data and comparable companies while determining the ALP in relation to the assessee that the assessee has failed to establish that the use of data of earlier FYs could result in more reliable results. DRP also relied on various judicial pronouncements and Rule-10B(iv) of the IT Rules, 1962. The assessee also failed to produce any data to establish its objections raised before the Ld. DRP, even before us. DRP also rejected the objections of the assessee with regard to peculiar economic conditions faced by the assessee by observing that any such differences are taken care of while computing the mean margin - with regard to abnormal business loss and under-utilization of the capacity by the assessee company, the assessee has failed to demonstrate such factors which are unique to the assessee-company and does not exist in the case of comparable companies. We find that the assessee has also failed to produce or demonstrate such factors even before us. With regard to non-operating and extraordinary expenses, the Ld. DRP has observed that these cannot be considered as operating expenses as it is only a provision made in the books of account. We also find that the assessee has failed to establish that the above expenses are extraordinary in nature and these are not incurred by the comparable companies which necessitate appropriate adjustment. We are therefore inclined to uphold the directions of the Ld. DRP on the above issues thereby rejecting the grounds raised by the assessee.
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