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2017 (12) TMI 1793 - ITAT DELHIRectification of mistake - TP Adjustment - comparable selection - margin computational error in respect of two comparables - HELD THAT:- Contentions are raised regarding margin computational error in respect of two comparables i.e. Accentia Technologies Ltd. and e4e Healthcare Business Services Pvt. Ltd. and for the remaining four comparables, the only contention raised was regarding turnover filter and there is no contention raised regarding the functionality aspect. Hence on this aspect, we find no apparent mistake in the impugned Tribunal order because it appears that no argument was made in respect of this aspect. ALP Computation - Foreign Exchange fluctuation gain / loss - HELD THAT:- In respect of computation of ALP, profit margin percentage is worked out by dividing the operating profit of the tested party by the turnover of the tested party and therefore, if the foreign exchange gain/loss is not in respect of turnover of the present year, then such gain/loss cannot be considered for computing the profit percentage even after holding the same as operating profit/loss because if the corresponding turnover is not a part of the denominator, the profit in respect of such turnover cannot be included in the numerator because if this is done, it will give an absurd result. Hence we feel it proper to restore back this matter to the file of AO / TPO for fresh decision after examining this aspect and we hold that if the foreign exchange gain / loss is in respect of the present year turnover then the same should be considered as profit/loss of the current year for working out the profit percentage of the tested party but if such foreign exchange gain / loss is not in respect of current year turnover then the same should not be considered in the case of tested party. In the case of comparable companies also, if there is any foreign exchange gain / loss and this information is available in the annual report of the concerned company as to whether the fluctuation gain / loss is in respect of current year turnover or earlier year turnover then the same treatment should be given to foreign exchange gain / loss in case of comparable company also but if such information is not available in the annual report of such company then it should be taken as foreign exchange gain / loss in respect of earlier year’s turnover because in most of the cases, such foreign exchange gain / loss is in respect of turnover of the earlier year because any gain / loss on account of foreign exchange difference for current year turnover is generally included in sale proceeds and is not shown separately in the final accounts. AO / TPO should decide this issue afresh as per above discussion after providing reasonable opportunity of being heard to assessee
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