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2020 (10) TMI 1346 - ITAT BANGALORETP Adjustment - comparable selection - HELD THAT:- Selection of comparables in a case of assessee rendering SWD services such as the assessee, must be functionally similar as that of assessee also if extraordinary events that occurred in the relevant previous year . Thus we direct exclusion of (1) Infosys Ltd. (2) Larsen & Toubro Infotech Ltd. (3) Persistent Systems Ltd. & (4) Thirdware Solutions Ltd. from the list of comparable companies and restore the question of deciding the comparability of Cigniti Technologies Ltd. to the AO for fresh consideration as directed by the Tribunal in the decision referred to above. Not treating the gain on account of foreign exchange fluctuation as operating income - HELD THAT:- This issue is no longer res integra and has been settled by the decision in the case of e4e Business Solutions P. Ltd.[2016 (3) TMI 356 - ITAT BANGALORE] held therein that the gains arising from fluctuation of foreign exchange having nexus with international transaction should be treated as operating income and taken into consideration while computing the operating profit of the assessee. Following the aforesaid decision, we direct the computation of PLI by treating the gains arising from fluctuation of foreign exchange having nexus with international transaction as part of operating income. TP adjustment in respect of delayed receivables on a notional manner - whether delayed realization of trade receivables from the AE constitutes an international transaction or not? - HELD THAT:- Non-charging or undercharging of interest on the excess period of credit allowed to the AE, for the realization of invoices amounts to an international transaction and the ALP of such an international transaction is required to be determined. Thus it is held that deferred trade receivable constitutes international transaction. Having concluded that deferred trade receivables constitute international transaction, we now proceed to deal with the argument of the Assessee that the credit period allowed to the AE is not unreasonable so as to warrant an inference of any benefit to the AE and consequent determination of ALP of such delayed receivables. From the annual report of the assessee, it is clear that the average credit period is about 66 days for realization of trade receivables from the AE. As to whether this period can be construed as reasonable or not has not been examined by the DRP despite submissions by the Assessee in this regard. If there has been no unreasonable delay in realizing the trade receivables from the AE, then the addition is not warranted. In our opinion, the issue requires to be decided afresh and hence the same is remanded to the AO/TPO to give a factual finding on the aspect what constitutes normal credit period and what is extended credit period that warrants conclusion that there has been a separate international transaction of providing deferred payment facility to the AE. Consequently, the issue is remanded to the AO/TPO for consideration afresh in the light of the above discussion after affording opportunity of being heard to the Assessee. Disallowance of finance lease purchase - In order to comply with the Accounting Standards AS-19 in its books of accounts, the Assessee had capitalised the payments made towards principal component of the rent and claimed depreciation on the same - HELD THAT:- It is clear from the facts that the assessee claimed depreciation in the financial statement on the assets taken on lease only because of requirement of AS-19 of Institute of Chartered Accountants of India (ICAI). In the income tax return, the assessee has not claimed any depreciation. Since it is a payment of lease rent, the claim for deduction has to be allowed. In this regard, the decision of the ITAT Delhi Bench in the case of Bharati Hexacom Ltd. [2016 (5) TMI 34 - ITAT DELHI] supports the plea of assessee that rental payments have to be allowed as a deduction. We therefore direct that deduction claimed by the assessee should be allowed.
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