TMI Blog2021 (6) TMI 1134X X X X Extracts X X X X X X X X Extracts X X X X ..... in ground No.6. We, however, remand the issue to the AO/TPO to call upon the assessee to given the correct figures based on certificate from the auditor and thereafter make adjustment in respect of ALP only in respect of transactions with AE. Thus, the ground of appeal is treated as allowed for statistical purposes. Computing the arm's length price of the international transactions - TPO treating the Exchange fluctuation gain as non-operating in nature and excluded the same from computation of Operating margins of the eligible Assessee while computing the arm's length price of the international transactions - HELD THAT:- Foreign exchange has been treated as the part of the operating profits, if they are integral to the process of the export of the software or if they arise out of operating income of the assessee. In view of the aforesaid decision SAP LABS INDIA (P.) LTD. [ 2010 (8) TMI 676 - ITAT, BANGALORE] , ELECTRONICS FOR IMAGING INDIA PVT. LTD. [ 2016 (2) TMI 1123 - ITAT BANGALORE] AND M/S. KHF COMPONENTS PVT. LTD. [ 2016 (7) TMI 811 - ITAT BANGALORE] we are of the view that the foreign exchange gain has to be treated as part of the operating profit of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Turnover 9,922,419 31,806,686 94,118 41,823,222 Administration cost apportioned based on the Turnover 9,519,086 30,513,788 90,292 40,123,166 Total Operating Cost 116,403,686 486,488,984 1,037,409 603,930,080 Operating Profit 52,758,335 55,766,242 567,151 109,091,728 Operating Profit % 31.19% 10_28% 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Variation between the ALP and price received (in Rs.) 4,20,60,956 5% of price received (in Rs.) 3,55,70,862 Adjustment (in Rs.) 4,20,60,956 ` Since the variation is exceeding 5% of the International Transaction, adjustment is made The above shortfall of Rs. 4,20,60,956/- is treated as transfer pricing adjustment u/s 92CA in respect of software development segment of the taxpayer's international transactions. 13. In view of the above order the assessing officer shall enhance the income of the assessee by Rs. 4,20,60,956/- on the issue u/s 92CA. 5. The AO passed the draft assessment order incorporating the additions suggested by the TPO. The assessee filed objections before the Disputes Resolution Panel (DRP). The DRP confirmed the order of the TPO. The AO passed the final Order of Assessment as per the directions of the DRP. Against the final Order of Assessment, the assessee has preferred the present appeal before the Tribunal. 6. The assessee has raised many grounds of appeal challenging the comparable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be compared within the company transactions. 9. Along with the letter, following breakup of transaction with unrelated parties and related parties was given by the assessee. Operating profit Unrelated party Particular Amount in Rs. Software development Manpower Supply Training Revenue 169,162,021 542,255,226 1,604,560 Less: Direct Cost as per the Cost center 96,962,182 424,168,510 853,000 Management Salary apportioned based on the Turnover 9,922,419 31,806,686 94,118 Administration cost apportioned based on the Turnover 9,519,086 10,561,,007.21 90,291.81 Total Operating Cost 116,403,686 174,209, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Salary apportioned based on the Turnover - 16,115,701 - Administration cost apportioned based on the Turnover - 15,460,621 - Total Operating Cost - 248,627,242 - Operating Profit - 26,120,758 - Operating Profit % - 9.51% - 10. The TPO s order is also dated 04.01.2016 and he has not taken cognizance of this letter which was filed only on 4.10.2016 by the Assessee. 11. In the objections filed by the assessee before the DRP, the assessee had taken specific objections that the Transfer Pricing Officer has erred or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of the ITAT in assessee s own case for Assessment Year 2009-10 in IT(TP)A No.158/Bang/2014 order dated 30.09.2014. The relevant portion of the observations of the Tribunal were as follows: As far as this ground is concerned, the value of the international transaction between the assessee and its AE- PTI is a sum of Rs.20,07,38,607/-. The TPO however applied the AM of the comparables on the total turnover of the assessee which includes transactions with non-AE also. The adjustment have been clone by taking transactions at the entity of transaction with the AE. The adjustment done by the TPO are as follows : Particulars ( in Lakhs ) Amount on which Adjustment Made ie Total Operating Cost 4,083.00 Margin worked out by Learned TPO 24.32% Shortfall as Computed by TPO on Total OC 452.00 Amount Paid for Services received from Pinnacle Talent Inc Margin worked out by Learned TPO Transfer Price Actual Price Received Actual Adjustment ought to have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in respect of ALP only in respect of transactions with AE. Thus, the ground of appeal is treated as allowed for statistical purposes. 16. The next ground that requires adjudication is ground No.12. The issue raised in Gr.No.12 is that the TPO has erred in treating the Exchange fluctuation gain amounting to Rs.1,34,61,664 as non-operating in nature and excluded the same from computation of Operating margins of the eligible Assessee while computing the arm's length price of the international transactions. As far as ground No.12 is concerned, the plea of the assessee was raised in the form of additional ground before the DRP and the DRP dealt with the same in the following manner. 12.3 Additional Ground of Objection The learned TPO has erred in treating the Exchange fluctuation gain amounting to Rs.1,34,61,664 as non-operating in nature and excluded the same.from computation of Operating margins of the eligible assessee while computing the arm's length price of the international transactions. The assessee has raised an additional ground of Objection for admission by the DRP during the course of hearing. This being more of a question of Law, the same i ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
