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2014 (2) TMI 229 - ITAT BANGALOREDeduction u/s 10A of the Act – Reduction of Communication expenses and foreign currency expenses from export turnover – Held that:- The decision in CIT v. Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] followed - while computing the deduction under section 10A, if the export turnover in the numerator is to be arrived at after excluding certain expenses, then the same should also be excluded from the total turnover in the denominator – thus, the Assessing Officer is directed to exclude the expenses on communication and travel incurred in foreign currency both from export turnover as well as from the total turnover while calculating the eligible deduction under section 10A of the Act. Transfer pricing Adjustment – Rejection of Transfer Pricing study - Computation of ALP - Selection of comparables – Held that:- The TPO has included the company in the final set of comparables only on the basis of information obtained under section 133(6) of the Act - it was the duty of the TPO to have necessarily furnished the information so gathered to the assessee and taken its submissions thereon into consideration before deciding to include this company in its final list of comparables - Non-furnishing the information obtained under section 133(6) of the Act to the assessee has vitiated the selection of this company as a comparable – the matter remitted back to the AO for fresh adjudication - The TPO is directed to make available to the assessee information obtained under section 133(6) of the Act. The TPO in his order has not given any reasoning for treating foreign exchange gain / loss as a non-operating item of income / expense - In the remand report submitted to the DRP, the TPO has merely stated that the exchange loss / gain could be on account of hedging / speculative activity owing to which it has been treated as non-operating in nature - In a rejoinder to the remand report, the assessee had submitted that the assessee receives remuneration from its AEs for rendering of services in foreign currency - The foreign exchange gain / loss relates entirely to the rendering of services and there is no speculative hedging activity. The foreign exchange gain should be considered as an operating income while computing the operating margins of the assessee and the comparable companies - the TPO has considered the foreign exchange income as non-operating income based on assumptions and surmises – the foreign exchange gain is to be treated as operating income in the view of the facts in the case on hand and the margins are to be computed accordingly. The TPO has not allowed any adjustment by observing that this has been considered and discussed in detail in the order for earlier years – The decision in We find that on similar facts, different co-ordinate benches of this Tribunal in the case of Intellinet Technologies India Ltd. v. ITO [2012 (6) TMI 237 - ITAT BANGALORE] followed - the TPO ought to have given risk adjustment to the margins of the comparables for bringing them on par with the assessee and remanded the issue back to the file of the TPO – the issue of market risk adjustment remitted back to the AO for fresh adjudication – Decided partly in favour of Assessee.
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