TMI Blog2016 (8) TMI 1423X X X X Extracts X X X X X X X X Extracts X X X X ..... the ALP, as it is affecting the operating profits. The plea of the assessee is to be accepted, more so, following case of Transwitch India Pvt. Ltd. V. DCIT [2012 (5) TMI 314 - ITAT DELHI] wherein the adjustments towards abnormal expenses incurred by the assessee to be considered while determining the ALP. Accordingly, we direct the TPO to consider the same while determining the ALP. Variation in exchange rate adjustment while determining the ALP - assessee entered into contract in adverse prices fixed on the prevailing exchange rate and due to fluctuation in exchange rate, there is loss and that exchange fluctuation to be considered while determining the ALP - HELD THAT:- It is normal that exchange rate is subject to fluctuation due to economic conditions. While determining the ALP, one has to consider these factors, more so, our view is fortified by cases of Honda Trading Corp. India Pvt. Ltd. V. ACIT [2013 (6) TMI 184 - ITAT DELHI] for the assessment year 2007-08 and DHL Express (India) Pvt. [2011 (4) TMI 856 - ITAT MUMBAI] for the assessment year 2006-07. Accordingly, we direct the TPO to provide considerable exchange fluctuation adjustment while determining the ALP - issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... monstrated that the assessee has concealed the particulars of income in his order. 7. The learned TPO/Hon ble DRP has erred in law on not adjudicated on working capital adjustment performed by appellant to eliminate the differences in receivables, inventory and payables which is due to the difference in the working capital cycle of the appellant and the comparable companies. 8. The learned TPO, AO and DRP have erred, in law and in facts, by determining the arm s length margin/price using only FY 2008-09 data which was not available to the Assessee at the time of complying with the transfer pricing documentation requirements. 9. The learned TPO has erred in not allowing the benefit under the proviso to section 92C(2) of the Act. 3. At the time of hearing, the ld. AR submitted that the assessee did not press these grounds. However, it has the right to pursue these grounds, if the situation warrants after considering giving effect to the present Tribunal s order by the lower authorities. Therefore, we dismiss these grounds of appeal as not pressed by observing that the assessee is at liberty to file an appeal after considering giving effect to the present Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rable ALP. Considering the bona fide explanation given by the assessee, we are of the opinion that there exists a reasonable cause in not filing the grounds originally before the Tribunal. Accordingly, these grounds are admitted for adjudication. 6. The ld. AR submitted that in respect of custom duty component suitable adjustment to be made while determining the ALP. In our opinion, the plea of the assessee is justified. The TPO has not considered the custom duty adjustment on the reason that it is equivalent to central excise in commercial market. This is not correct. The Tribunal consistently holding that while determining ALP, there should be suitable adjustment in respect of custom duty, which was considered in the following cases : i) Skoda Auto India (P) Ltd. v. ACIT, Aurangabad (30 SOT 319)[Pune] ii) Toyota Kirloskar Motors Pvt. Ltd. v. ACIT, Bangalore ITA No. 828/Bang/2010 iii) Putzmeister Concrete Machines Pvt. Ltd. v. DCIT, Panaji ITA No. 107/PNJ/2012 iv) Demag Cranes Components (India) Pvt. Ltd. v. DCIT, Pune in ITA No.120/PN/2011 6.1 At this stage, it is pertinent to mention the finding of the Pune Bench in the case of Demag Cranes Components ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the comparables that the TPO has adopted in this case. The adjustments then are required to be made for functionally differences. The other way of looking at the present situation is to accept that business model of the assessee company and the comparable companies are the same and it is on account of initial stages of business that the unusually high costs are incurred. The adjustments are thus required either way. It is, therefore, permissible in principle to make adjustments in the costs and profits in fit cases. We also do not agree with the authorities below that the onus is on the assessee to get all such details of the comparable concerns so as to make this comparison possible. The assessee cannot be expected to get the details and particulars which are not in public domain. In such a situation, i.e. when information available in public domain is not sufficient to make these comparisons possible, it is inevitable that some approximations are to be made and reasonable assumptions are to be made. The argument before us was that it was first year of assessee s operations and complete facilities ensuring a reasonable indigenous raw material content was not in place. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to manufacture its final products. In the course, it incurred air freight charges, which is abnormal expenses and adjustments to be made while determining the ALP, as it is affecting the operating profits. The plea of the assessee is to be accepted, more so, there is a binding decision of the co-ordinate Bench of the Tribunal in the case of Transwitch India Pvt. Ltd. V. DCIT in ITA No.6083/Del/2010 for the assessment year 2006-07, wherein the adjustments towards abnormal expenses incurred by the assessee to be considered while determining the ALP. Accordingly, we direct the TPO to consider the same while determining the ALP. 8. The next ground is with regard to variation in exchange rate adjustment while determining the ALP. According to the ld. AR, the assessee entered into contract in adverse prices fixed on the prevailing exchange rate and due to fluctuation in exchange rate, there is loss and that exchange fluctuation to be considered while determining the ALP. 9. We find force in the argument of the ld. AR. It is normal that exchange rate is subject to fluctuation due to economic conditions. While determining the ALP, one has to consider these factors, more so, our v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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