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TMI Blog2018 (1) TMI 289X X X X Extracts X X X X X X X X Extracts X X X X ..... e been raised in this appeal: "1. On the facts and in circumstances of the case, the order of Hon'ble DRP is wrong and against the provisions of law which is liable to be set aside. 2. Whether the observations of Hon'ble DRP is right in directing the TPO to give working capital adjustment [using OCED methodology given in Annexure to chapter - 3 and applying SBI Prime Lending Rate (as on 30th June of the relevant financial year) as the interest rate] against the TPO order dated 16.01.2014 passed u/s 92CA(3) for A.Y. 2010-11. 3. The appellant craves for the permission to add, alter and submit additional ground in the course of the appellant proceedings before the Hon'ble ITAT." 3. From the above grounds, it is gathered that only grie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder to assess the assessee at an income of Rs. 2,62,86,830/-. Against the draft assessment order, the assessee filed the objections before the ld. DRP who issued certain directions, the TPO thereafter passed the order u/s 92CA of the Act and worked out the adjustment on account of arm's length price at Rs. 2,40,44,219/-. 5. One of the issue agitated by the assessee before the ld. DRP was relating to the denial of adjustment on account of working capital while working out the average margins of the comparable. The gist of the submissions by the assessee before the ld. DRP was as under: * No adjustment have been undertaken by the ld. AO to the margins of the comparables selected by the TPO to account for differences in the working capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest cost is accounted for, the margin changes its luster Therefore, working capital requirements do affect the margins or prices, costs or profits because this is a implicit cost which is recovered/recoverable from the customers. Therefore, this DRP is of the opinion that in view of the Rule 10B(3) and in order, to improve the comparability, in the facts of the present case, while comparing the margins of tested party with that of the comparables, adjustment be made for working capital for which the reliable data is to be provided by the taxpayer. 8.2.2 The TPO has stated that the taxpayer has not demonstrated that there is a difference in the levels of working capital employed by it vis-a-vis the comparables which affect prices and con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 30th June of the relevant financial year) as the interest rate. It has boon a general matter of observation by this Panel that in many of the cases the taxpayers do not strictly follow the guidelines provided by OECD for the computation of working capital adjustment. For example in some of the cases it has been observed that instead of taking into account only trade creditors the taxpayers also take into account credits received from various group concerns or loans etc Similarly, creditors on account of capital items are also observed to be included in many cases. Since, this practice is not in accordance with the Guidelines, the TPO and the taxpayer are directed to take following into consideration while working out the working capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... page nos. 218 to 220 of the assessee's paper book. It was further submitted that the department has accepted the working capital adjustment in all other years except the year under consideration, therefore, the ld. DRP was justified in directing the TPO to give the working capital adjustment. Reliance was placed on the decision of the ITAT Pune Bench 'B', Pune in the case of Demag Cranes & Components (India) Pvt. Ltd. Vs DCIT, Circle-1(2), Pune. 9. We have considered the submissions of both the parties and perused the material available on the record. In the present case, it appears that the assessee furnished the calculation for adjustment on account of working capital before the ld. DRP who after considering the submissions of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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