Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2016 (10) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (10) TMI 1202 - AT - Income TaxTreatment of foreign exchange fluctuations gain as operating in nature - computing the operating margin of the assessee for the purpose of determining the arm’s length price - Held that:- The issue of treatment of foreign exchange fluctuations (gain/loss), accrued on account of export sales has been consistently considered as part of the operating margin for the purpose of determining transfer pricing analysis in a series of decisions by this tribunal. In the case of SAP LABS India Pvt. Ltd., Vs. ACIT (2010 (8) TMI 676 - ITAT, BANGALORE), the tribunal held that if the foreign exchange (gain/loss) is accrued to the assessee on export sale, then the same will be considered as operating in nature. Similarly, the foreign exchange fluctuations on sales turnover of the comparables should also be considered as part of operating margins. Thus we direct the AO/TPO to recompute the operating margin of the assessee by considering the foreign exchange fluctuations (gain/loss) arising from export as operating in nature. Similarly, the foreign exchange fluctuations (gain/loss) on sales shall be considered as part of operating margins of comparables for the purpose of determining arm’s length price. Benefit of tolerance range as per the proviso to section 92C - Hed that:- TPO is directed to consider the benefit of tolerance range as per the proviso to section 92C if the price of the assessee is within the range of ± 5% of the comparable price. Accordingly this ground is disposed off. Working capital adjustment - directions of the CIT (A) to consider the risk adjustment - Held that:- It is pertinent to note that since the assessee is a captive service provider and therefore there is a difference in the financial risk involved in the transactions between two independent parties and between the related parties as in the case of the assessee. Accordingly, in the facts and circumstances of the case, we do not find any error or irregularity in the order of the CIT(A) on this issue. However we direct the TPO to reconsider this issue after verification and examination of the relevant details and materials Exclusion of telecommunication expenditure and other expenses incurred in foreign currency from export turnover as well as total turnover while computing deduction under section 10A - Held that:- This issue is covered by the Hon’ble jurisdictional High Court in the case of Tata Elxsi CIT Vs. Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] as held If the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded in computing the export turnover as a component of total turnover in the denominator.
|