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TMI Blog2021 (3) TMI 1262X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Dispute Resolution Panel (DRP)-2, Bengaluru u/s.144C(5) of the Act dated 25.09.2018 and pertains to assessment year 2014-15. 2. The brief facts of the case are that the assessee-company is engaged in providing engineering, procurement and construction services to thermal power generating companies in India. 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 Rs. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the decision of Hon'ble Madras High Court in the case of CIT vs. M/s. Industrial Security & Intelligence India Pvt. Ltd. in Tax Appeal Nos. 585 & 586 of 2015. 5. The Ld. DRP vide its direction dated 25.09.2018 rejected objections filed by the assessee and confirmed TP adjustment proposed 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 iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... margins of the assessee when compare to margins at comparables selected by the AO, he rest his arguments to the extent of adjustment made at entity level. He further submitted that as regards working capital adjustment although the issue is squarely covered in favour of the assessee 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court has dismissed the SLP filed by the Department and affirmed to the findings of Hon'ble Bombay High Court, where the Hon'ble High Court held that TP adjustments cannot be made beyond the transactions of the assessee with its associated enterprises. The Hon'ble Bombay 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at this level. 10. As regards working capital adjustment, it was the claim of the Ld. AR for the assessee that the ITAT, Chennai Bench in assessee's own case for the AY 2011-12 has considered an identical issue and held that working capital adjustment is necessary while computing 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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