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2018 (1) TMI 671 - ITAT MUMBAITPA - comparable selection criteria - Held that:- All the five comparables- i.e. AL, CLL, GITL, Rites and WL, selected by the TPO for benchmarking the IT's of the assessee are not providing MSS, that there functionally dissimilar, that they have to be excluded from the final list of the valid comparables .There is nothing on record to prove that support services provided by the above five comparables were also associated with marketing function. There is no doubt that the support services provided by the assessee were directly associated with marketing. We find that if these five comparables are excluded from the list the valid comparables, the assessee will be in the safe zone of +/- 5% -the OP to OC of the assessee is 5.18% whereas OP to OC of the remaining comparables is 3.01%. In the circumstances, we hold that the IT's entered into by the assessee with its AE was at arm’s length Foreign exchange loss disallowed - Held that:- As decided in assessee's own case we find that the AO on one hand would tax gain on FE earnings but would not allow loss arising on FE loss. In our opinion, the stand taken by the AO is not justified in any manner .If the gains of FE fluctuation had to be taxed then the loss arising out of such fluctuation has to be allowed .We find that the honorable Supreme Court, in the case of Oil and Natural Gas Corporation (supra)has held that the loss claimed by the appellant on account of fluctuation in the rate of FE as on the date of the balance-sheet was allowable as expenditure under section 37(1) of the Act . Income from the AE on account of incentive - Held that:- As decided in assessee'e own case incentive scheme was introduced by the assesee and the AE makes part payment for the expenditure incurred by the assessee for the scheme. Advertisement expenditure cannot be compared with introduction of an incentive schemes that would increase the revenue of the AE. Here it is not a case of incidental benefit to AE-it is a case of major benefit to the AE and fringe benefit to the assessee. TP provisions were introduced to take care of such eventualities i.e. determine the market value of transactions had they been entered in by two independent entities. Therefore, in our opinion, the order of the DRP does not require any interference from our side. Main argument of the assessee stands dismissed. As far as disallowing the expenditure of ₹ 2 crores, while computing the taxable income of the assessee, is concerned, we would like to hold that the DRP was not justified in disallowing the same. There is no doubt about incurring of expenditure by the assessee, as stated earlier .The assessee had introduced an incentive scheme and had incurred the expenses of ₹ 34 .61 crores . Whether the money received from AE was at arm’s length or not is a separate issue. But, incurring of expenditure was never in doubt. So, in our opinion, the alternate argument raised by the assessee has to allowed
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