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TMI Blog2014 (1) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... th its original and core business of design, manufacture, supply, erection and servicing of Cooling Systems, Heat Exchangers and Air Pollution Control systems. The assessee-company is engaged in the business of manufacturing, designing, engineering and supply of cooling towers, spares and providing engineering services. The assessee filed its return declaring total income of Rs. 11,42,254. The assessee entered into six types of international transactions with its Associated Enterprises (AEs). Because of such international transactions, the Assessing Officer made reference u/s 92CA(1) to the Transfer Pricing Officer (TPO) for determination of Arm's Length Price (ALP). First transaction which is disputed in the present appeal is the payment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proposed by the TPO was added by the A.O. in the draft order passed u/s 143(3) read with section 144C(1) on 15.11.2010. The assessee agitated the TP adjustments made through the draft order before the Dispute Resolution Panel (DRP). The DRP noticed that the payments by the assessee to its parent AE in respect of Management fees, Tender cost reimbursed and R&D expenses were in the nature of intra group transactions. It was opined that no payment in respect of intra group services could be justified unless it was shown that some tangible and direct benefit was derived as a result of such payment or that the payment made was commensurate with the benefit derived or expected to be derived. As such a letter dated 27.07.2011 was sent by the DRP t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion which looms large before us is as to whether the DRP is empowered to modify the TPO's order to the prejudice of the assessee when the objections have been taken against the draft order in terms of section 144C(2) of the Act. The stand of the assessee is that when it approaches the DRP for seeking some relief against the proposed TP adjustments, the authority can only grant some relief, if permissible, but has no power to make enhancement. 4. In order to find answer to this question, we need to refer to the provisions of section 144C, which deal with the reference to the DRP. Sub-section (1) of this section provides that the Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5) of section 144C to issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to complete the assessment. What can be the ambit of the directions of the DRP has been more elaborately enshrined in sub-section (8), which provides that : 'The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order'. A close scrutiny of the mandate of this provision indicates that the DRP has been empowered not only to confirm or reduce the variation proposed in the draft order to the benefit of the assessee but also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noticed that the TPO proposed adjustment in respect of Management fee, Tender cost reimbursed and R&D expenses totaling Rs. 63.69 lakh and the DRP enhanced this variation of Rs. 63.69 lakh to Rs. 1.17 crore. As the subject matter of enhancement in the present case continues to remain the same, being the adjustment flowing from the TPO's order, we find no force in the contention that the DRP ought not to have ventured to increase the variation to the prejudice of the assessee in a reference made by the assessee for reduction of the amount of adjustment made in the draft assessment order. 7. The ld. DR pressed into service Explanation to sub-section (8) of section 144C for bolstering his submission in support of the enhancement. At this junc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld also be applicable to the A.Y. 2008-09 or earlier years is left open to be decided on a suitable occasion. 9. Be that as it may the facts prevailing in the extant case are fully covered by the mandate of sub-section (8) of section 144C de hors the Explanation inserted retrospectively inasmuch as the enhancement has been directed by the DRP in respect of the variations proposed in the draft order. We, therefore, hold that the DRP was right in principle to embark upon the question of enhancement of the TP adjustments made by the A.O. in the draft order. 10. The learned Counsel for the assessee contended through ground no.1 that the DRP did not give reasonable opportunity of being heard to the assessee. Here it is relevant to note that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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