TMI Blog2015 (10) TMI 461X X X X Extracts X X X X X X X X Extracts X X X X ..... V Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT ], wherein the Hon'ble Court has held that telecommunication expenses reduced from export turnover should also be reduced from export turnover while computing deduction under Section 10A of the Act. Respectfully following the aforesaid decision of the Hon'ble Karnataka High Court in the case of Tata Elxsi Ltd. (supra) the deduction under Section 10A of the Act by excluding the telecommunication expenses from both export turnover as well as from total turnover.- Decided against revenue. - I.T.(T.P.) A. No.1376/Bang/2014 - - - Dated:- 17-4-2015 - SHRI VIJAYPAL RAO, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER Appellant By : Dr. P.K. Srihari, Addl. CIT(D.R) Respondent By : Shri Rohit Nair, C.A. ORDER Per Shri Jason P. Boaz, A.M. : This appeal by Revenue is directed against the order of the Commissioner of Income Tax (Appeals)-IV, Bangalore dt.4.9.2014 for Assessment Year 2009-10. 2. The facts of the case, briefly, are as under :- 2.1 The assessee company, a subsidiary of Amba Holdings Inc., is engaged in the business of providing Information Technology Enabled Services ( ITE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g that forex gain / loss are to be treated as operating in nature without appreciating that though they may be incidental to the operating activity, they cannot be deemed as operating in nature since, they are not critical to operational activities of the business conducted by the taxpayer. 4. The CIT (Appeals) erred in law as well as on facts by directing the TPO to decide the case of the assessee, by applying the principles emerging from the orders of the Delhi Bench of the Hon'ble Tribunal in Haworth (India) Pvt. Ltd. V DCIT 11 ITR (Trib) 757 and the Bangalore Bench of the Hon'ble Tribunal in Trilogy E Business Software V DCIT 23 ITR (Trib.) 464 without appreciating that in transfer pricing every case is unique and requires to be decided independently and that the directions issued are beyond the mandate of the provisions of section 251(1)(a) of the IT Act which do not empower the CIT (Appeals) to set aside the issue. 5. The CIT (Appeals) erred in directing the Assessing Officer to follow the ratio laid down by the Hon'ble Court in the case of Tata Elxsi Ltd. 349 ITR 98 and exclude the telecommunication expenses and other foreign currency expenses from the tota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormed Technologies India Ltd. 7. R. Systems International Ltd. 8. Vishal InformationTechnologies Ltd. As the average profit margin of the comparable companies, worked out @ 14.01 % on cost, was lower than the profit margin of the assessee @ 14.64%, the assessee held its international transactions to be at arm s length. TPO s Approach 5.3 The TPO after examining the assessee's T.P. Study, rejected it. After conducting a search for fresh comparables and considering the assessee's objections in this regard, the TPO arrived at the final list of 8 comparable companies and their profit margins, the details of which are extracted hereunder :- S.No. Name of the Company Margin % 1. Infosys BPO Ltd. 24.41 2. Aditya Birla Minacs Worldwide Ltd. 23.86 3. Microland Ltd. (both segments) 1.53 4. Allsec Technologies Ltd. - 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Tribunal in the case of Triology E-Business Software India Pvt. Ltd. (supra) and Sap Labs India (P) Ltd. (2011) 44 SOT 156 (Bang). 5.7 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial decisions cited and placed reliance upon. We observe that it has not been disputed that the foreign exchange gain has arisen as a consequence of the realization of the consideration for rendering ITES services and therefore there is no reason for its exclusion from the operating revenues for the purpose of calculating the operating margin of the assessee. We find that this proposition has been upheld by a co-ordinate bench of this Tribunal in the case of Mindteck (India) Ltd. in IT(TP)A No.70/Bang/2014 dt.21.8.2014 wherein at para 11 thereof it has been held as under :- 11. We have considered the rival submissions. It is not disputed by the Revenue that the foreign exchange fluctuation has arisen as a result of the realization of the consideration for rendering software development services. It is therefore incurred in the normal course of business and therefore there is no reason why it should be excluded from determinin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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