Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2017 (1) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (1) TMI 1705 - AT - Income TaxTP Adjustment - Selection of comparables - forex gain/loss form part of the operating margin of the assessee - HELD THAT:- The undisputed facts are that TNMM method has been used to benchmark the TP transactions by using data of impugned assessment year. After applying the various filters, TPO arrived at two comparables, the average PLI of which stood at 36.02% which resulted into impugned additions. Rule 10B(1)(e) deals with TNMM method which calls for suitable adjustment to net profit margins to make the two data comparable. We are unable to accept the contention of the Ld. DR that suitable adjustments could be made only in the margins of comparables and not in the margins of the Tested Party. Without making suitable adjustments in the margin, proper comparison could not be drawn. We find that the in case law relied upon by Ld. DR, the Tribunal had many alternative reason not to tinker with the PLI of the tested party. Issue of treatment of forex gain / loss is now well settled by various judicial pronouncements and more specifically in judgments relied upon by assessee, wherein it has been held that forex gain/loss form part of the operating margin of the assessee as well as comparables. Further, we find that the assessee suffered net forex loss in AY 2010-11 and reflected the same as part of operating expenses under Schedule-12 which gives strengths to the arguments of Ld. AR. Since TPO has excluded forex gain / loss from operating margin, the same is not in line with these judicial pronouncements. Therefore, we find that matter is pure legal issue and do not raise any fresh issue and do not require investigation of additional facts and hence admit the same for adjudication by following apex court judgment in ‘National Thermal Power Co. Ltd.’ [1996 (12) TMI 7 - SUPREME COURT] Sole comparable left out was selected by the TPO himself and not by the assessee and this comparable was never disputed before DRP and DRP also did not find the same as non-comparable. Hence, at this stage it would be very difficult to accept this plea of Ld. DR to undo the comparable selected by the revenue and never challenged at any stage. However, we are of the considered opinion that proper benchmarking of the margin is not possible with this single comparable and therefore, on the peculiar facts and circumstances, we are inclined to restore the matter back to the file of AO/TPO to undertake TP study afresh by taking robust comparables after providing adequate opportunity of being heard to the assessee. As already held by us in preceding paragraphs, forex gain/loss shall for part of operating operations and suitable adjustments, as statutorily admissible, shall be made in TP study. We restore the matter back to the file of AO/TPO to undertake TP study afresh after providing adequate opportunity of being heard to the assessee. It is again reiterated that forex gain/loss shall for part of operating operations and suitable adjustments, as statutorily admissible, shall be made in TP study. The appeal is allowed for statistical purposes
|