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2015 (9) TMI 644 - AT - Income TaxTransfer pricing adjustment - calculation of OP/TC of EIL - CIT(A) deleted the addition - Held that:- We find that the major item of ‘Other income’ is Interest income which rightly deserves exclusion from the operating profit. When we compare other figures from the Profit & Loss account of EIL and the Annexure-I, it comes to light that the figures of all the expenses tally. To put it simply, the assessee took all the expenses, including the non-operating expenses, in the calculation of operating profit of EIL. It is but natural that if the items of non-operating income are to be excluded from the computation of operating profit, then the items of non-operating expense should also be excluded. One-sided exercise has been done with the obvious reason to bring down the OP/TC of EIL at 6.98%. The net effect of the exercise carried out by the assessee in calculating OP/TC of EIL at 6.98% by taking the figure of operating income on one hand and total expenses (both operating and non-operating) on the other is patently misleading, inasmuch as the figure of profit so computed is neither operating profit nor net profit. It lies somewhere between the two as it has become excess of operating income over total expenses (both operating and non-operating). In our considered opinion, the view canvassed by the ld. CIT(A) in accepting the correctness of the assessee’s calculation of OP/TC of EIL at 6.98% at its face value, cannot be sustained because of the apparent flaws as discussed above. Under these circumstances, we set aside the impugned order on this issue and remit the matter to the file of the AO/TPO for a correct de novo determination of the OP/TC of EIL. After doing this exercise, the TPO will compute ALP of the international transaction as per law. - Decided in favour of assessee for statistical purposes.
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