TMI Blog2018 (3) TMI 296X X X X Extracts X X X X X X X X Extracts X X X X ..... order of TPO and direct that the foreign exchange gains to be considered as operational income for the purpose of computation of PLI. - Decided in favour of assessee - ITA No.475/PUN/2017 - - - Dated:- 28-2-2018 - SHRI ANIL CHATURVEDI, AM AND SHRI VIKAS AWASTHY, JM For The Assessee : Shri Kishor Phadke. For The Revenue : Shri Rajeev Kumar, CIT ORDER PER ANIL CHATURVEDI, AM : 1. This appeal filed by the assessee for A.Y. 2012-13 is emanating out of the order dt.25.01.2017 passed u/s 143(3) r.w.s. 144C(13) of the Act. 2. The relevant facts as culled out from the material on record are as under :- 2.1 Assessee is a company stated to be engaged in the business of Offshore Development of Software. Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ieved by the order of TPO, assessee is now in appeal before us and has raised the following grounds : 1. General Grounds The Learned DRP-3 Mumbai (hereinafter DRP) erred in law and facts in directing and the learned DCIT Circle 1 (2) Pune (hereinafter' AO') erred in law and on facts in making the additions of ₹ 3,22,90,259/- to the taxable income of the appellant company. 2. Transfer pricing related Grounds (Total addition ₹ 3,18,90,259) 2.1 The Learned DRP has erred in law and on facts in confirming and the learned AO/TPO erred in making a reference u/s.92CA(1) to the TPO for deciding Arm's Length Price of the international transactions of the appellant, without reaching any opinion a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional differences and for other reasons- - Datamatics Global Services Ltd. - Firstobject Technologies Ltd. - Objectone Information Systems Ltd. - R Systems International Ltd. - Technosoft Engineering Projects Ltd. 2.7 The Learned DRP and learned AO/TPO erred in law and on facts in not granting adjustment of around ₹ 3.50 Crores in respect of excessive benching cost incurred by the appellant. 2.8 The Learned DRP and learned AO/TPO erred in law and on facts in not accepting alternative benchmarking done by changing the tested party. 2.9 The learned DRP erred in law and on facts in sustaining and the learned AO/TPO erred in proposing enhancement of ALP of international transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the year and it was directly related to the main business operation of the assessee and the same should therefore be included while computing the operating margin of the assessee. The submission of the assessee was not found acceptable to the TPO. TPO was of the view that considering the definition given in Rule 10TA of the Income Tax Rules, the foreign exchange gains cannot be considered to be operational income. He accordingly considered the foreign exchange gains as non-operational income and worked out the PLI of Operating Profit to Operating Cost (OP/OC) at 10.20% and enhanced the income. Aggrieved by the order of TPO, assessee carried the matter before DRP, who upheld the order of AO by holding as under : 6.2 In this regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the foreign exchange gains are not operating profits. He submitted that Rule 10TA to 10TG which pertains to Safe Harbour Rules for International Transactions were inserted by IT (Sixteenth Amendment) Rules 2013 w.e.f. 18.09.2013 and thus the Safe Harbour Rules came into force in 2013 and therefore not applicable to the year under consideration being A.Y. 2012-13. In support of his contention that Rule 10TA are not applicable to A.Y. 2012-13, he relied on the aforesaid decision rendered by the Hon ble Delhi High Court in the case of BC Management Services Pvt. Ltd., (supra). He therefore submitted that the TPO and DRP erred in not considering the foreign exchange gain as operational income. Ld.D.R. on the other hand, supported the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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