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2023 (4) TMI 558 - AT - Income TaxTP Adjustment - Arm’s Length Price (ALP) of the trading and manufacturing segments - HELD THAT:- Facts on record further reveal that between January, 2008, wherein, the assessee entered into an agreement with MSIL for sale of ignition coils and the financial year relevant to assessment year under dispute, there has been substantial appreciation in the price of Yen. Thus, the assessee was put to foreign exchange fluctuation risk as the value of Rupee depreciated compared to Yen. Assessee had to pay more to the AE due to variation in foreign exchange rate. Whereas, it was unable to fully recover the increased amount paid form MSIL. Assessee had to absorb loss on account of foreign exchange fluctuation. In its benchmarking under TNMM the assessee has claimed adjustment towards foreign exchange fluctuation. Both the TPO and Commissioner (A) have disallowed such adjustment. It is observed, while considering identical nature of dispute in assessee’s own case in assessment years 2009-10, learned DRP has directed the TPO to determine ALP after considering the margin computed by the assessee after making foreign exchange fluctuation adjustment. The decisions cited before us by learned counsel also express similar view. We direct the AO to allow adjustment for foreign exchange fluctuation rate while computing margin of the assessee and the comparables. Adjustment on account of difference in rates of depreciation as per Income-tax Act followed by the assessee and Companies Act in case of comparables - HELD THAT:- As identical issue in assessee’s case in assessment year 2012-13 [2022 (2) TMI 1361 - ITAT DELHI] we direct the Assessing Officer to allow depreciation adjustment while determining the ALP. Adjustment relating to manufacturing segment - On careful perusal of the orders of the Transfer Pricing Officer (TPO) and learned Commissioner (Appeals), we find, though, detailed submissions were made by the assessee in support of its claim, however, they have not at all been considered on merits and have been rejected on flimsy grounds. Even, the ratio laid down in various judicial precedents have not been taken note of. Considering that this is the first year of commencement of manufacturing activity in case of assessee, the submissions made by assessee require deeper examination. Restore this issue to the AO for fresh adjudication after considering the submissions of the assessee on merits through a well reasoned and speaking order. Further, the Assessing Officer is directed to examine the decisions relied upon by the assessee and must consider applicability of the ratio laid down in the decisions to assessee’s case - assessee must be provided reasonable opportunity of being heard before deciding the issue.
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