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2016 (6) TMI 790 - AT - Income TaxTransfer pricing adjustment - selection of comparable - determination whether the assessee has to be categorized as a Knowledge Process Outsourcing Services Provider (KPO) or BPO service provider - Held that:- As observed earlier, agreement with the AE for providing service was executed on 1.10.2004. It was valid upto 30.12.2012. In the year for which an order under section 10TE(6) was passed by the TPO, this agreement was relevant for the period 1.4.2012 to 30.12.2012 i.e. nine months. If an agreement for a period of nine months indicates that the assessee’s services were of low-end services, and those services can be categorized as BPO, then, how for the earlier period, the nature of services would be different ? In other words, same agreement cannot be give rise two types of services, merely on the basis of providing at different times. The TPO in the proceedings for the purpose of Safe Harbour Rules paid a visit in the office of the assessee, and himself collected information regarding nature of services. Thus, there is a conflict in the stand of the Revenue in different assessment years on one agreement. Considering this aspect, we are of the view that impugned orders are not sustainable on this issue, therefore, we set aside the assessment order including that of DRP and restore this issue to the file of the AO for fresh adjudication. The ld.AO shall take into account, the TPO’s order passed in subsequent period i.e. dated 26.2.2014 though passed for the subsequent period but deals with same agreement. If the assessee is being accepted as a BPO, then, all the comparable selected by the TPO would not be relevant, and a fresh inquiry has to be conducted. Considering all these aspects, we allow the appeal of the assessee for statistical purpose. Deduction under section 10A - whether Foreign exchange fluctuation gain is directly linked with export business carried on by the undertaking, and hence, deemed to be derived from undertaking’s business eligible for deduction u/s.10A? - Held that:- DRP has recorded a finding that foreign exchange fluctuation gain was directly linked with the export business carried out by the assessee, hence, it is to be treated as income derived by an undertaking. The ld.DR was unable to point out any significant error in the proposition canvassed by the ld.DRP for granting the deduction under section 10A of the Income Tax Act.
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