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TMI Blog2019 (6) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Electric India Pvt. Ltd. [ 2019 (4) TMI 1427 - ITAT KOLKATA] has laid down certain parameters for working capital adjustment. It is the contention of AR, that a working of margins of the comparables after providing for working capital adjustment following the parameters laid down in case of Dong Fang Electric India Pvt. Ltd. (supra) has been placed on record vide paper book Page no. 81. In view of the aforesaid, we direct the Assessing Officer/Transfer Pricing Officer to verify the computation of working capital adjustment made by the assessee and compute the margin of the comparables and determine the arm s length price of the international transaction. Accordingly, this ground is allowed. Inclusion of unutilized MODVAT credit to the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jection relating to claim of working capital adjustment. 3. Brief facts are, the assessee, an Indian company, is engaged in the business of manufacturing and sale of clutches. The manufactured products are supplied to the local vehicle manufacturers and also to aftermarket customers. In the previous year relevant to the assessment year under dispute, the assessee had entered into various international transactions with its Associated Enterprise (AE). In the transfer pricing study report, the assessee had bench marked the international transaction relating to purchase of raw materials and component, sale of finished goods, etc., by applying Transactional Net Margin Method (TNMM) as the most appropriate method with Profit Before Depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that have a material impact on net profit margin. In this context, he also drew our attention to the computation of working capital adjustment of comparables. He submitted, as against the credit period of 85 days of the comparables, the assessee has given credit period of 1,118 days. Therefore, suitable adjustment for working capital has to be provided. He submitted, though, detailed submissions were made before the Transfer Pricing Officer, however, while rejecting the claim of working capital adjustment, he has not assigned any reason. He submitted, learned Commissioner (Appeals) simply relying upon his decision in the assessment year 2011-12, has disallowed claim of working capital adjustment. The learned Authorised Representative subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Transfer Pricing Officer and learned Commissioner (Appeals). 8. We have considered rival submissions and perused the material on record. Undisputedly, in the transfer pricing study report, the assessee has made adjustment on account of working capital investment. However, neither the Transfer Pricing Officer nor learned Commissioner (Appeals) have allowed assessee's claim. On a perusal of the orders passed by the Departmental Authorities, we are of the view that disallowance of assessee's claim of working capital adjustment was not on valid reasoning but by way of general observations. Now, it is fairly well settled that adjustment on account of working capital investment has to be allowed, as it is a crucial factor impacting the pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner (Appeals) excluding three comparables selected by the Transfer Pricing Officer. 12. In view of the submissions of learned Authorised Representative that on the instructions of the assessee he would not be contesting the grounds raised by the Revenue, we do not find it necessary to delve much into the issues raised in these grounds. Accordingly, grounds no.1, 2 and 3 are allowed. 13. In ground no.4, the Revenue has challenged the decision of the learned Commissioner (Appeals) in directing the Assessing Officer to include the unutilized MODVAT credit to the value of the closing stock and allow the consequential effect to the opening stock in terms of section 145A of the Act. 14. At the time of hearing, learned Counsels appearing for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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