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2018 (1) TMI 325 - AT - Income TaxTPA - rejection/non-inclusion of certain companies as comparable which were otherwise functionally similar, on the ground that they follow accounting year other than financial year - Held that:- As decided in CIT-II Vs Mckinsey Knowledge Centre India Pvt. Ltd. [2015 (3) TMI 1226 - DELHI HIGH COURT] the revenue submits that comparable was correctly rejected by TPO because the company had different financial year ending on December, 2006, whereas Assessee’s financial year ended on March, 2006. There is nothing shown to the court that supports the revenue’s argument that the ITAT fell into error in holding that if a comparable is following different financial year then the same cannot be included in the list of comparables selected for benchmarking the international transaction. Therefore, the ITAT has held that if the comparable is functionally same as that of tested party then same cannot be rejected merely on the ground that data for entire financial year is not available. If from the available data on record, the results for financial year can reasonably be extrapolated then the comparable cannot be excluded solely on the ground that the comparables have different financial year endings.”. Thus resorted this issue back to the file of the TPO/AO with the direction to include the aforesaid comparable, if from the available data on record, the results for financial year can reasonably be extrapolated. Inclusion of amount pertaining to ESOPs twice in the operating cost base of the assessee - Held that:- . In the present case, it appears that the directions given by the ld. DRP has not been appreciated by the TPO in right perspective. It also appears that the TPO without appreciating the documentary evidences furnished by the assessee made this addition in the cost base taken by him. We, therefore, by considering the totality of the facts, set aside this issue back to the file of the TPO to be adjudicated afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee. Treatment of the foreign exchange fluctuation gain/loss as a non-operating item while computing the operating margin of the assessee and of the comparables companies - Held that:- Hon’ble Supreme Court in the case of CIT Vs Woodward Governor India P. Ltd. (2009 (4) TMI 4 - SUPREME COURT) held that Loss suffered by the assessee on account of fluctuation in the rate of foreign exchange as on the date of the balance-sheet is an item of expenditure under Section 37(1).
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