Try this...I have assumed that @PToDate and @PFromDate are parameters set within SSRS. If so then they cannot be set within the query text.

Workaround : create two additional TSQL variables called @PFromDateInside and @PToDateInside. Set these initially to the parameter values then increment these variables within the WHILE.

Create table #SampleData(Prodid nvarchar(35), model nvarchar(35), Trandate datetime)

Go

Insert into #SampleData

Select 'TRC003328042','DRDRZR2BLK','2013-08-31 04:30:33.000' union all---Saturday

Select 'TRC003327670','DRDRZR2BLK','2013-08-31 02:40:23.000'union all---Saturday

Select 'TRC003327822','DROIDRZR','2013-08-31 05:17:28.000'union all---Saturday

Select 'TRC003328342','DROIDRZR','2013-08-31 08:10:27.000'union all---Saturday

Select 'TRC003328387','DROIDRZR','2013-08-31 09:22:01.000'union all---Saturday

Select 'TRC003322836','DRDRZRHDBLK','2013-08-30 23:40:19.000'union all---Saturday

Select 'TRC003326586','DROIDBIO2','2013-08-31 05:50:47.000'union all---Saturday

Select 'TRC003325460','DROIDBIO2','2013-08-30 22:36:50.000'union all---Saturday

Select 'TRC003328994','DRDRZR2WHT','2013-09-02 04:33:44.000'union all-- Monday

Select 'TRC003328998','DRDRZR2WHT','2013-09-02 06:37:13.000'-- Monday

--Created SSRS Parameter

Declare @FromDate datetime, @ToDate datetime, @rowcount int,

@Fromtime nvarchar(6), @Totime nvarchar(6) ,@timezoneOffset int

set @FromDate='9/2/2013' --Monday

set @ToDate='9/3/2013'

Set @Fromtime='6:00 AM'

Set @Totime='6:00 AM'

set @timezoneOffset=8

set @rowcount=0

/***** Assume this is being performed in SSRS

@PFromDate=Parameters!FromDate.Value &" "&Parameters!FromTime.Value

@PToDate=Parameters!ToDate.Value &" "&Parameters!ToTime.Value

*****/

DECLARE @PFromDateInside datetime

DECLARE @PToDateInside datetime

SET @PFromDateInside = @PFromDate

SET @PToDateInside = @PToDate

--Text Query expression

IF OBJECT_ID('tempdb..#Temp') IS NOT NULL

DROP TABLE [dbo].[#Temp]

Create table #Temp (Prodid nvarchar(35), model nvarchar(35), Trandate datetime)

While (1=1)

BEGIN

Insert into #Temp(Prodid,model,Trandate)

select Prodid, model, Trandate from #SampleData

Where

DATEADD(HOUR,convert(int,@timezoneOffset), Trandate)

BETWEEN DATEADD(DAY,0,@PFromDateInside) AND DATEADD(DAY,0,@PToDateInside)

IF @ROWCOUNT < 0

BEGIN

--got an error from this portion

SET @PFromDateInside=@PFromDateInside -1

SET @PToDateInside=@PToDateInside-1

END

ELSE

BREAK

END

--Query validation to get the final result set

With CTE AS

(

select * from #Temp

)

SELECT * from CTE