TMI Blog2016 (10) TMI 1202X X X X Extracts X X X X X X X X Extracts X X X X ..... uations (gain/loss) on sales shall be considered as part of operating margins of comparables for the purpose of determining arm’s length price. Benefit of tolerance range as per the proviso to section 92C - Hed that:- TPO is directed to consider the benefit of tolerance range as per the proviso to section 92C if the price of the assessee is within the range of ± 5% of the comparable price. Accordingly this ground is disposed off. Working capital adjustment - directions of the CIT (A) to consider the risk adjustment - Held that:- It is pertinent to note that since the assessee is a captive service provider and therefore there is a difference in the financial risk involved in the transactions between two independent parties and between the related parties as in the case of the assessee. Accordingly, in the facts and circumstances of the case, we do not find any error or irregularity in the order of the CIT(A) on this issue. However we direct the TPO to reconsider this issue after verification and examination of the relevant details and materials Exclusion of telecommunication expenditure and other expenses incurred in foreign currency from export turnover as well as total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis LLC, USA. The assessee is registered as Software Technology Park (STP) unit under STP scheme of Govt. of India. The assessee has carried out international transactions for providing medical transcription services to Acusis LLC for ₹ 25,92,00,211/-, the only international transaction which falls under ITES segment. The assessee furnished T.P. study and claimed its international transaction at arm s length by considering a set of 8 comparables having average profit margin @ 18.56% on cost in comparison to the assessee s operating margin at 22.69% on cost. The TPO did not accept the TP analysis as well as the comparables selected by the assessee and carried out fresh search. The TPO has finally selected 8 comparables having average Profit Level Indicator (PLI) at 25.04%. There is no dispute regarding the most appropriate method adopted by the parties as Transaction Net Margin Method (TNMM). The TPO has worked out a negative working capital adjustment of 3.18% and accordingly arrived at the adjusted mean margin of 28.22%. Accordingly the TPO proposed an upward adjustment under section 92CA of ₹ 2,66,09,306/- . The assessee challenged the action of the TPO before the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are concerned, the TPO has accepted that the same would be part of operating expenses provided the same is incurred every year for at least three years and the manner in which provision is made is consistent. The Assessee in reply to the query of the TPO on the above aspect has not furnished any details. We are of the view that the Assessee should be afforded opportunity to explain its position on the above and the AO is directed to consider the same in accordance with law. As far as fringe Benefit Tax (FBT) is concerned, the same was not considered by the TPO as part of operating cost in the case of comparables and therefore the same should also not be considered as part of operating cost of the Assessee. We hold accordingly and direct the AO to compute the operating cost of the Assessee . 5. In view of the above discussion as well as by following the orders of this tribunal, we direct the AO/TPO to recompute the operating margin of the assessee by considering the foreign exchange fluctuations (gain/loss) arising from export as operating in nature. Similarly, the foreign exchange fluctuations (gain/loss) on sales shall be considered as part of operating margins of comparabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR(Trib) 464 without appreciating that in transfer pricing every case is unique and requires to be decided i.ndependently and that the directions issued are beyond the mandate of the provisions of Section 251(1)(a) of the I.T. Act which does not empower the CIT(A) to set aside the issue. 6. The CIT(A) erred in directing the AO to follow the ratio laid down by the Hon ble High Court in the case of Tata Elxsi Limited 349 ITR 98 while computing the deduction u/s 10A by excluding the value of the telecommunication expenditure and expenses incurred in foreign currency from the total turnover also, without appreciating the fact that there is no provision in Section 10A that such expenses should be reduced from the total turnover also, as. clause (iv) of the explanation to Section 10A provides that such expenses are to be reduced only from the export turnover. 7. The CIT(A) erred in not appreciating the fact that the jurisdictional High Court's decision in the case of Tata Elxsi Limited 349 ITR 98 has not been accepted by the' department and an appeal has been filed before the Hon'ble Supreme Court. 8. For these and such other grounds that may be urged at the t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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