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2018 (10) TMI 1395 - AT - Income TaxTPA - determining the Arm’s Length Price (ALP) u/s. 92CA(3) in respect of international transactions entered by the assessee with its AE - foreign exchange gain earned by the assessee is generated from the services rendered to AE - Held that:- We find that the AO was not justified in not following the directions given by the ld. DRP. We, therefore, remit this matter back to the AO/TPO to consider the foreign exchange gain as operating income of the assessee while working out the operating profit margin of the assessee, as directed by the ld. DRP. We further direct that the AO/TPO should calculate operating profit margin as per Rule 10B(1)(e) of the Income Tax Rules, 1963, if the assessee satisfies the conditions as per rules. Needless to say, the assessee shall be given reasonable opportunity of being heard. Accordingly, these grounds are allowed for statistical purposes. Rejection of comparable companies on the basis of additional filter of export sales less than 75% of the total income - Held that:- No justification to discard the conclusion reached by the authorities below while considering this filter as appropriate filter for comparability analysis in the facts of the present case. The ld. AR of the assessee failed to rebut the finding of the ld. DRP that more than 86% of the operating revenue is earned by assessee out of export sales. Therefore, considering the quantum of export gross revenue of the assessee, the authorities below have rightly applied this filter as an appropriate filter for comparability analysis. Accordingly, this ground of assessee has no merit and is liable to fail. Companies functionally dissimilar with that of assessee as engaged in BPO/KPO services need to be deselected from final list. The company is not passing on the filter of related party transaction in excess of 25%, applied by the TPO to be rejected.- Any extraordinary events like amalgamation occurred during the year, the financial result is affected
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