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2018 (10) TMI 1814 - AT - Income TaxTP Adjustment - Comparable selection - HELD THAT:- Assessee is engaged in the business of manufacturing brake lining to automobile industry, more particularly, 4-wheeler. The assessee claims that the brake lining manufactured by the assessee was supplied to Hyundai Motor India Ltd. thus companies functionally dissimilar with that of assessee need to be deselected from final list. Loss on foreign exchange fluctuation - This Tribunal after referring to safe Harbour Rules, found that the loss incurred by the assessee in foreign exchange fluctuation due to international transaction does not give any extra benefit to the Associated Enterprise who supplies the material. The loss arose due to exchange difference between the foreign currency and Indian currency. Therefore, foreign exchange loss or gain has to be excluded from operating income. Profit or loss due to foreign exchange fluctuation has to be excluded from the operating income for the purpose of PLI. Accordingly, the orders of the authorities below are set aside and the Assessing Officer is directed to exclude the loss or gain in foreign exchange fluctuation from the operating income for computing PLI. Working capital adjustment for determination of arm's length price - Working capital adjustment has to be made. However, the AO shall find out the working capital of the comparable companies and that of the assessee by issuing notice u/s 133(6) of the Act if necessary, and thereafter shall make necessary adjustment while computing PLI. Transaction of the assessee with Associated Enterprise outside the country only and compare the same with the transaction made by the similarly placed company in uncontrolled transaction with non Associated Enterprise.
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