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2017 (5) TMI 1093 - AT - Income TaxTPA - exclusion of one M/s. Mahindra Consulting Engineers Limited from the list of comparables considered by the ld. TPO for fixing the ALP - Held that:- No doubt this company appeared in the list of comparables selected by the assessee itself. Assessee had taken no grounds before TPO or ld. DRP for its exclusion. However, by virtue of decision of Special Bench in the case of Quark Systems (P) Ltd (2009 (10) TMI 591 - ITAT, CHANDIGARH) we are of the opinion that an assessee could not be estopped from seeking an exclusion of a comparable even before the appellate authority, if it could show that the selected comparable was not really a good comparable. As per assessee M/s. Mahindra Consulting Engineers Limited was having a turnover of F102.43 Crores whereas its own turnover was only F8.48 Crores. We are of the opinion, the question whether the turnover filter could be applied for exclusion of M/s. Mahindra Consulting Engineers Limited from the list of comparables, has to be considered by the ld. Assessing Officer /TPO. We remit this issue back to ld. Assessing Officer/TPO. Excluding foreign exchange loss on cancellation of forward contracts while working out operating margin of the assessee - whether forex loss suffered by the assessee on account of cancellation of its forward forex contracts could be considered as operative or non operative in nature? - Held that:- There is a clear observation that entering into forward contract for covering the risks of exchange rate fall, was a normal business transaction. Of course there indeed is an observation that extraordinary fluctuations could warrant an adjustment if it could be demonstrated that such a phenomena was absent for comparable cases. Nothing of this sort was demonstrated by the assessee here. In such circumstances we are of the opinion that ld. DRP fell in error in directing the ld. TPO to exclude foreign exchange loss/gain, considering it to be non operating in nature, while computing operating margin of the assessee as well as that of comparables. Directions given by the ld. DRP in this regard are set aside.
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