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2017 (3) TMI 1734 - AT - Income TaxTPA - Loss on Derivatives disallowed - DRP upholding, the provision for mark-to-market loss on derivatives created by your appellant during the year "based on the principles articulated in .Accounting Standard-1 and pursuant to the pronouncement of Institute of Chartered Accountants of India dated 29/03/2008 - Held that:- It is seen from the DRP order that it has not considered the assessee's submissions independently but held that that the view taken by the A O do not call for any interference. This issue is remitted back to the DRP for passing a reasoned order after giving due opportunity to the assessee. Customs Duty disallowance - sum added to the cost of such equipments/ items and disallowed the revenue expenditure and the DRP upholding the same - Held that:- The Panel after taking into consideration of the facts deems it appropriate to direct the AO to revisit this issue and examine the claim that the impugned customs duty on imports pertaining to equipments/items procured for clients projects and the same was subsequently billed to the client. This ground is disposed off with the directions as above Disallowance of rent equalization - assessee provided this sum towards rent equalization in accordance with AS 19-Leases, as notified by the Ministry of Corporate affairs under the Companies (Accounting Standards) Rules 2006 - AO held that since no such known liability exists, the claim is not allowable - Held that:- As pointed out by the DR, we find that the assessee has not raised any objection on this issue before the DRP. Since, this issue has attained finality, we don't entertain this ground. TPA - ALP determination - MAM - assessee had adopted Transactional Net Margin Method (TNMM) to arrive at the Arm's Length Price with 14 comparables - Held that:- Assessee is into providing software development services to its AEs thus companies functionally dissimilar with that of assessee need to be deselected from final list. Idle costs incurred by the assessee on account of excess capacity considered by the TPO as operating costs for arriving the ALP - Held that:- Adjustments have been made for the expenses on idle infrastructure and manpower incurred by the assessee which was not the case with the companies adopted as comparables by the assessee. Hence, margins of transactions with AEs excluding idle costs have been considered. The margin on cost calculated by the TPO after apportionment of idle cost was - 8.95% as against the margin of 27.11% computed by the appellant. In view of that the assessee sought suitable adjustment for idle costs for excess capacity - this issue is a purely factual one and minute details are required to be verified and examined. Therefore, this issue requires proper verification and examination. Accordingly, we set aside this issue to the record of the TPO/AO to verify all the facts and then decide this issue as per law.
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