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2023 (1) TMI 1076 - AT - Income TaxTP Adjustment - functions performed by the assessee and the comparables selected - whether the assessee is in distribution support services or is doing marketing support services as held by the TPO - HELD THAT:- As perused the Reseller agreement between the assessee and its AE and in this agreement the very term the assessee is referred to as “Reseller”. In the recital part clause (B), it states “Company wishes to appoint reseller to market and sell the products in the territory (as defined herein) and reseller desires to accept such appointment. Here, the reseller is MSC Software Corporation India Pvt. Ltd. i.e. the assessee and this clearly signifies that the assessee has to do the marketing activities and sell the products. Assessee being the reseller is doing only marketing support services. That MSC India is actually performing routine marketing activities in India attracting customers of software products in the Indian market. The marketing material is provided by company to the assessee at no cost and even when assessee prepares localized products, the copyrights are always with the company. The routine marketing activity primarily includes attending conferences, exhibitions, seminars to showcase the product to the targeted customers. When an order is received from the customer by MSC India that would be submitted to AE with specific type quantity of the product name and e-mail address of the customer and the requisite delivery date. However, the AE has the discretion either to accept or reject that order. If accepted, the delivery of the product is the responsibility of AE. The company will deliver the product directly to the customer and company will provide the assessee just a notification of such delivery. The customer makes payment to the assessee, the assessee retains 3.5% of revenue from the receipts from customers and the remaining amount is passed on to the company i.e. AE. The copy of agreement with customer is done in a format which also to be approved by the AE. AE has right to call for periodic report regarding the activities of the assessee and verify the books of account of assessee as evident from clauses 3.8 and 3.9 of the agreement. Assessee's main activity is nothing but marketing activity, whereas all the ownership of the product, the power to determine whether to accept / reject the order and the pricing is with the AE. The assessee is only getting 3.5% of the revenue from the receipts of the customers for the marketing function that it is doing. We, therefore, set aside the findings of ld. CIT(A) and restore the order of ld. TPO - grounds of appeal of Revenue are allowed. Treat foreign exchange gain as non-operating in nature for the purpose of computation of the PLI of the appellant as well as that of the comparable companies - We find that Pune Bench of Tribunal in several decisions have held that forex gain is operating in nature. See TRANSPERFECT SOLUTIONS INDIA PVT. LTD. VERSUS ACIT, CIRCLE-7 PUNE [2022 (8) TMI 521 - ITAT PUNE] - Thus we hold that forex gain is operating in nature and accordingly, ground of objection No.2 is allowed.
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