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2017 (11) TMI 324 - AT - Income TaxTransfer pricing adjustment - exclusion of Exchange loss from total expenses - TPO treated such amount as of non-operating nature and, hence, excluded it from the ambit of total expenses for working out operating costs - Held that:- As the assessee could not link exchange loss of ₹ 112.40 million with the borrowings effected by the assessee from its holding company. It is patent that foreign exchange loss on account of trade receivables and payables has to be taken as an item of operating expenditure and exchange loss on account of financing transactions will be considered as non-operating. Since the AR could not link the amount of foreign exchange loss of ₹ 112.40 million with the transaction of borrowing from the assessee’s AE, we cannot uphold the argument put forth before us without verification. We set aside the impugned order and remit the matter to the file of Assessing Officer/TPO for ascertaining if exchange loss of ₹ 112.40 million pertains to loan transactions from the assessee’s AE or trading transactions as well. A part of such exchange loss which pertains to borrowing made by the assessee from Teva Pharmaceuticals Finance Netherlands B.V., should be considered as non-operating and the remaining amount, if any, pertaining to trading transactions should be taken as operating expense. Needless to say, the assessee will be allowed a reasonable opportunity of hearing before taking any decision for the purposes of computing the assessee’s ‘Operating costs’ to find out its OP/OC. Selection of comparable - Held that:- The assessee’s aggregated international transaction under consideration is manufacturing and contract R&D, and companies functionally dissimilar with that of assessee need to be deselected from final list.
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