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TMI Blog2016 (5) TMI 1300X X X X Extracts X X X X X X X X Extracts X X X X ..... ee submitted that the first issue arises for consideration is upward adjustment of Rs. 4,81,47,719/- to the value of international transaction. According to the ld. Counsel, the assessee-company is engaged in the business of manufacturing automobile air conditioner and cooling systems, automotive ancillaries, components and other automotive parts. The assessee-company is a subsidiary company of M/s Doowon Climate Control Ltd., Korea. M/s Doowon Climate Control Ltd., Korea, holds the assessee-company by majority shares through its subsidiary companies. During the year under consideration, the assessee imported raw material, capital machineries and share capital from the parent company. The assessee applied Transactional Net Margin Method as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e DRP proceeded to reject the capacity utilization and customs duty adjustment without issuing any enhancement notice. Therefore, the assessee has no occasion to put forward its objection before the DRP. According to the ld. Counsel, capacity utilization and customs duty adjustment without issuing any notice to the assessee cannot be made by the DRP. Therefore, according to the ld. Counsel, the matter may be remitted back to the file of the DRP for reconsideration. 3. On the contrary, Shri Jasdeep Singh, the ld. Departmental Representative submitted that the DRP by order dated 20.12.2013 directed the Assessing Officer to apply TNMM with adjustment on account of working capital and to exclude loss or gain on account of foreign exchange fluc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee and the comparables needs to be adjusted. However we also notice that the' assessee is actually buying from the AE and therefore working capital adjustment be allowed if it is demonstrated that the AE is allowing extra ordinary credit period to the assessee. We direct the TPO to compute the adjustment keeping this aspect in mind. 19. Customs Duty adjustment: we agree with the TPO that the adjustment is not required in the facts of the case. Apart from the reasoning given by the TPO, in this regard we shall also refer to the decision of the Delhi ITAT in the case of Sony India, consolidated order for Asst years 2001-02 to 2.003-04 dated 23.09.2008 wherein (para 136 on page 67.) the Tribunal held as: under: "136. As regards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustment to the profit margins of the comparables on this count." The adjustment on account of custom duty payment is not allowed. 20. The assessee wants that loss on account of forex fluctuations be excluded from operating income. The TPO has accepted that forex fluctuation loss is due to treasury management functions of the assesee, but still. the TPO appears to be against exclusion of the same from operating profit for the purpose of comparability. We agree with the assessee in this regard and direct the TPO to exclude the loss on account of forex fluctuations. Our reason for the same is that the functions of treasury management *are* not being compared in this case. The comparables might have managed their forex better or worse. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TPO has passed another order dated 22.1.2014. The Assessing Officer giving effect to the order of the TPO has passed the impugned assessment order dated 24.1.2014. 6. We have carefully gone through the provisions of sec. 144C of the Act. Sec. 144C(5) says that the DRP shall issue such directions as it thinks fit for the guidance of the Assessing Officer to enable him to complete the assessment. Sec. 144C(13) of the Act says that once a direction was given by the DRP under sub-section(5) of sec. 144C, the Assessing Officer shall in conformity with the direction, complete the assessment without providing any further opportunity of being heard to the assessee. Therefore, the scheme of the international transaction under the Income-tax Act, en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olation of the procedure prescribed u/s 144C of the Act. Moreover, as rightly submitted by the ld. Counsel for the assessee, the DRP made adjustment with regard to capacity utilization and customs duty adjustment without issuing any notice. This Tribunal is of the considered opinion that there was a clear violation of the principles of natural justice. Therefore, the matter needs to be reconsidered by the DRP. The direction of the DRP shall be specific and clear so that the Assessing Officer can implement the same without any intervention either by the TPO or any authority. If the DRP directs the TPO to consider any of the things, that would amounts to violation of the procedure laid down in sec. 144C of the Act. If the DRP finds that any f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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