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2013 (2) TMI 726 - ITAT DELHITransfer Pricing Adjustments - Computation of risk adjustment under Rule 10B(4) - Selection of comparables - Determination of Operating Margin - Assessee is working on cost plus basis as a captive service provider to its AE, therefore, it is a risk-free entity. As per the him, the basic economic formula is, take more risk, more profit would be there. Thus, an adjustment on assuming risk should be given. - HELD THAT:- the main section uses the expression "shall" which make it mandatory to first use the current year data. If certain other circumstances reveals an influence on the determination of transfer pricing in relation to the transaction being compared than other datas for period not more than two years prior to such financial year may be used. The assessee has already assumed critical risk and it is a not a risk free entity. He failed to disclose nature of risks which are to be adjusted. Also, the quantification of the risk adjustment has not been made. Thus, no risk adjustment is to be given to the assessee. - we do not find any error in the appreciation of the facts and circumstances made by the learned DRP on the inclusion of ICRA Online in the comparable list.
Exchange fluctuation gain - Capital Receipt or Revenue Receipt? - Assessee had raised external borrowings i.e. ECB loan. On account of fluctuation gain, it received a some amount. The assessee contended that it is a capital receipt, whereas according to the learned AO it is a revenue receipt. - HELD THAT:- Loan was utilized not for the purpose of purchasing capital assets but for other purposes also. If a loss suffered on account of foreign exchange fluctuation is allowable as a revenue expenditure, as per the decision of the Hon'ble Supreme Court in the case of CIT VERSUS M/S WOODWARD GOVERNOR INDIA P. LTD. & M/S HONDA SIEL POWER PRODUCTS LTD. [2009 (4) TMI 4 - SUPREME COURT], then the gain on such fluctuation would also be revenue receipt. Thus treated as revenue receipt. Decision against assesee.
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