TMI Blog2020 (1) TMI 866X X X X Extracts X X X X X X X X Extracts X X X X ..... aving 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- -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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... average PLI of 6 comparables at 8.96%. The TPO dropped three companies from the assessee s list and proceeded with the final set of remaining three companies, namely, Cenlub Industries Ltd. (14.13%), Continental Valve Ltd. (5.87%) and Oswal Industries Ltd. (18%). The TPO computed unadjusted average PLI of the above three companies at 12.66%. During the course of the transfer pricing proceedings, the assessee submitted the working capital adjusted margins of comparables at 16.18%, 8.34% and 18.10% respectively. The TPO accepted such adjusted working capital margins of the three comparables at an average of 14.20% as against the assessee s margin of 9.80%. This is how, the TPO recommended transfer pricing adjustment of ₹ 6,05,55,749/-, which was incorporated by the AO in the draft order. The assessee challenged certain aspects of the draft order before the Dispute Resolution Panel (DRP), which for the time being are not relevant for our purpose. The DRP directed the AO/TPO to treat net gain/loss on foreign currency fluctuations as non-operating income/expenses and recompute the PLI of the assessee and the comparables and thereafter consequential transfer pricing adjustment acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of transfer pricing proceedings was wrongly taken, which was rightly corrected in the order giving effect to the direction of the DRP. The moot question, which ergo arises is whether the TPO, having accepted the rate of interest for the purposes of calculating working capital adjustment at 9.86% at the time of passing order u/s 92CA(3) of the Act, was right in changing such rate to 14.61% for whatever reason, while giving effect to the DRP s direction when there was no such direction in this regard? 5. Section 144C of the Act has marginal note Reference to Dispute Resolution Panel . Sub-section (1) of section 144C provides that: The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee. Sub-section (2) of section 144C states that the assessee shall either file his acceptance to the AO on the variat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition to or subtraction from the draft order, whether the order is passed under sub-section (3) or sub-section (13) except in the latter sub-section, to the limited extent of giving effect to the direction given by the DRP. If the contrary is permitted, the assessee would lose the forum of the DRP for redressal of his grievance, which is statutorily impermissible. 6. Reverting to the factual panorama of the instant case, it is observed that the 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%. It is seen that the 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% atta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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