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2017 (1) TMI 1491 - AT - Income TaxTPA - comparable selection criteria - Held that:- Assessee is a captive service provider engaged in the business of rendering software development services to its Associated Enterprise ("AE") at cost plus 15% mark-up., thus companies functionally dissimilar with that of assessee need to be deselected from final list. Foreign exchange fluctuations considered as non-operating in nature - Its foreign exchange gain should be considered as operating in nature - CIT (A) has, inter alia, directed the TPO to accept the assessee’s claim, on which, the Revenue is on appeal - Held that:- We have considered the rival contentions. This issue is remitted back to the TPO to examine whether the foreign exchange loss/gain is out of current years’s transactions or not. If that gain/loss arises out of current year’s transactions, then, it should be treated as operating in nature. To that extent Revenue’s claim is allowed. Restricted the working Capital adjustment to 1.98% - Held that:- As this Tribunal in Moong Controls India P Ltd [2015 (11) TMI 1719 - ITAT BANGALORE] wherein this Tribunal directed the TPO to allow actual adjustment towards the differences in the of working capital position between the assessee and the entrepreneurial companies selected as comparable. We direct the TPO to follow this decision. To this extent, the assessee’s appeal ground is allowed. Computation of deductions u/s 10A & 10AA - data communication, voice communication and cell phone expenses incurred in foreign currency should be excluded from the export turn over as well from total turnover on the basis of the Jurisdictional High Court decision in CIT v Tata Elxsi [2011 (8) TMI 782 - KARNATAKA HIGH COURT]. Thus the Revenue’s appeal grounds are dismissed.
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