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2019 (8) TMI 1775 - AT - Income TaxTP Adjustment - allowing foreign exchange gain/loss as operating revenue for computing margins of comparables under both segments - HELD THAT:- It is undisputed fact that, income earned by assessee/comparable is from international transaction with its AE’s, and is received in foreign exchange currency. Further gain or loss due to foreign exchange fluctuation can be computed only on accrual of income by assessee/comparable. We cannot accept contention of Ld.CIT DR that fluctuation must relate to income earned from international transaction under consideration earned during the year. The moment there is no dispute regarding nexes with income earned and foreign exchange fluctuation, it has to be considered as operating revenue. Thus respectfully following decisions of this Tribunal in case of SAP Labs India Pvt. Ltd. [2010 (8) TMI 676 - ITAT, BANGALORE] and Triology Ebusiness software India Pvt Ltd. [2011 (6) TMI 392 - ITAT BANGALORE] we direct Ld.AO/TPO to consider gain/loss earned by comparable due to foreign exchange fluctuation as operating revenue for computing its margin.We therefore do not find any infirmity in the view taken by Ld. CIT (A) and the same is upheld. Computation of deduction under section 10 A - HELD THAT:- As relying on HCL TECHNOLOGIES LTD. [2018 (5) TMI 357 - SUPREME COURT] deduction of right, telecommunication and insurance attributable to the delivery of computer software under section 10 A of the act are allowed only into export turnover but not from the total turnover then, it would give rise to an inadvertent, unlawful, meaningless and illogical result which would cause grave injustice to the respondent which could have never been the intention of the legislature. Even in common parlance, when the object of the formalised to arrive at the profit from export business, expenses excluded from export turnover have to be excluded from total turnover also. Otherwise, any other interpretation makes the formula unworkable and apps erred. Hence, we are satisfied that such deduction shall be allowed from the total turnover in same proportion as well. Comparable selection - functional dissimilarity - HELD THAT:- Companies functionally dissimilar with that of assessee as contract service provider for software development service need to be deselected from final list.
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