Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2017 (5) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (5) TMI 1733 - AT - Income TaxComputation of ALP - Foreign Exchange Gain as operating income - HELD THAT:- We find force in the submissions of the learned DR of the revenue that even after holding that the Foreign Exchange Gain is operating income, it has to be seen that such gain is in respect of the turnover of the present year or an earlier year and then only, it can be considered for computing ALP of the present year if the said gain is in respect of the turnover of the present year. Since, there is no finding of any of the lower authorities on this aspect, we feel it proper that this matter should go to the A.O. for a fresh decision with amended direction that the assessee should establish that the foreign exchange gain earned by the assessee in the present year which the assessee wants to include in the operating income of the present year is arising in respect of the turnover of the present year because in T. P. study, operating profit is worked out to arrive at the Profit percentage on turnover of the present year and therefore, only that gain which is relatable to the turnover of the present year has to be taken into account - assessee should establish that the foreign exchange gain earned by the assessee in the present year which the assessee wants to include in the operating income of the present year is arising in respect of the turnover of the present year because in T. P. study, operating profit is worked out to arrive at the Profit percentage on turnover of the present year and therefore, only that gain which is relatable to the turnover of the present year has to be taken into account. A. O./TPO should decide this issue afresh - Appeal of the revenue is allowed for statistical purposes. Disallowance u/s 14A - HELD THAT:- We find force in the submissions of the learned AR of the assessee that this issue should go back to the A.O. for a fresh decision because the figure of opening investment has to be taken being the investment on 01.04.2008 and not on 31.03.2008 and since the company M/s Raman Boards Limited got merged with the assessee company w.e.f. 01.04.2008, the investment in that company has become nil on that date and there is no other investment on that date and as a result, for computing disallowance u/s 14A, the average investment amount has to be worked out by adopting the opening investment at NIL and closing investment at ₹ 73.29 Lacs. Hence, we set aside the order of CIT (A) on this issue and restore this matter back to the A.O. Comparable selection - HELD THAT:- Since the assessee is rendering only software development services to its AE, who may be doing Product Development, it has to be accepted that the assessee is engaged in rendering software development services to AE and Product Development by AE is of no relevance because the assessee is not the owner of those products. Companies functionally dissimilar with that of assessee need to deselected from final list . Companies with more than 15% RPT % need to be excluded. Working Capital Adjustment - HELD THAT:- We restore the matter to AO/TPO for a fresh decision by following the tribunal order rendered in the case of NOVELL SOFTWARE DEVELOPMENT (INDIA) P. LTD [2016 (3) TMI 1256 - ITAT BANGALORE] because it was held by the tribunal in this case that AO/TPO should recomputed the working capital adjustment by taking the actual data without putting any upper limit. In the present case also, the AO/TPO should recompute the working capital adjustment by taking the actual data without putting any upper limit.
|