TMI Blog2021 (3) TMI 1262X X X X Extracts X X X X X X X X Extracts X X X X ..... ed enterprises. ITAT, Chennai in the case of Prodapt Solutions Pvt. Ltd. [ 2019 (3) TMI 1919 - ITAT CHENNAI] has considered an identical issue and held that transfer pricing adjustment has to be made only in respect of transactions of the assessee being a tested party, with associated enterprises after comparing the transactions made by similarly placed company in uncontrolled transactions with non associated enterprises. Thus adjustment can be made only in respect of transactions of the assessee with its associated enterprises, but not to a third party transactions at entity level - TPO as well as DRP has erred in making TP adjustment at entity level - we direct the Ld. TPO to restrict TP adjustment in respect of international trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia. The company also renders engineering services to its associated enterprises. During the previous year relevant to the assessment year under consideration, the assessee has entered into international transactions with its associated enterprises to the tune of ₹ 1701,01,35,249/-. The case was taken up for scrutiny and during the course of assessment proceedings a reference was made to Transfer Pricing Officer (TPO) to determine the Arm s Length Price of international transactions with its associated enterprises. The TPO vide his order dated 31.10.2017 has suggested upward adjustment of ₹ 3,34,57,602/- towards engineering services segment, and downward adjustment of ₹ 84,41,75,545/- towards project segment. Similarly, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roposed by the Ld.TPO in respect of project segment and engineering segment and has also upheld the proposed adjustment towards royalty payment. The Ld. TPO has also upheld additions proposed by the AO towards disallowance of employees contribution to PF and ESI by following the decision of Hon'ble Gujarat High Court in the case of CIT vs. Gujarat State Road Transport Corporation (supra) and further by relied upon Circular No.22/15 dated 17.12.2015 issued by the CBDT. 6. Pursuant to directions of DRP, the AO has passed final assessment order u/s. 143(3) r/w s. 144C(3) of the Act on 16.10.2018 and made additions towards TP adjustment in respect of project segment and engineering segment and has also royalty payment. In addition, he h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the decision of ITAT, Chennai in assessee s own case, the Ld. TPO as well as DRP has erred in not providing working capital adjustments. Therefore, a suitable direction may be given to the Ld. TPO to re-compute working capital adjustments in accordance with the rules provided therein by following the decision of assessee s own case for earlier year. 8. On the other hand, the Ld. DR strongly supporting the order of Ld. TPO as well as Ld. DRP submitted that the Ld. TPO brought out clear facts in light of decision of Hon'ble ITAT, Chennai in the case of Caterpillar India Pvt. Ltd. that entity level adjustment can be made even though the issue is settled by the Hon'ble Bombay High Court in favour of the assessee in the case of M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay High Court in yet another case of CIT vs. Tara Jewels Exports Pvt. Ltd. (supra) had also considered identical issue and held that TP adjustments cannot be made at entity level. The ITAT, Chennai in the case of Prodapt Solutions Pvt. Ltd. vs. DCIT in ITA No.566/Chny/2017 has considered an identical issue and held that transfer pricing adjustment has to be made only in respect of transactions of the assessee being a tested party, with associated enterprises after comparing the transactions made by similarly placed company in uncontrolled transactions with non associated enterprises. The sum and substance of the ratios laid down by Hon'ble Supreme Court and Hon'ble High Courts are that TP adjustment can be made only in respect of tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng profit level indicator after analyzing the margins of comparables. Therefore, we are of the considered view that the Ld. TPO needs to compute working capital adjustment having regard to the margins of the comparables after considering the working capital levels. But, fact remains that the details with regard to working capital adjustment of comparables is not placed before us. Therefore, we are of the considered view that the matter needs to go back to the file of Ld. TPO to re-consider the working capital adjustment in light of the findings of the Tribunal in assessee s own case for AY 2011-12. Hence, this issue is set aside to the file of the Ld. TPO. 11 The other grounds taken by the assessee towards TP adjustment on account of pay ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
