TMI Blog2022 (11) TMI 1104X X X X Extracts X X X X X X X X Extracts X X X X ..... at, in case, foreign exchange fluctuation gain is treated as operating income, assessee s margin would be 7.88%, which will come within the range of + 3% of average operating profit margin of comparables worked out at 9.91%. AO is directed to verify the working and delete the addition. TP adjustment on account of delayed receivables from AE - assessee received remittances after expiry of credit period - re-characterizing the delay in receipt of receivables as unsecured loan, the AO computed interest by applying rate of 4.33% on the basis of 6 months LIBOR with a mark-up of 400 basis points - HELD THAT:- We agree with CIT (DR) that there may be instances where the AE is benefited due to delay in remitting the outstanding receivables, ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for consideration is, whether foreign exchange fluctuation gain can be treated as operating income while computing the operating profit margin. 3. Briefly the facts are, the assessee is a resident corporate entity engaged in the activity of business process outsourcing (BPO)/debt Processing. It is a wholly owned subsidiary of M/s. Omniglobe International LLC, USA, the Associated Enterprises (AE) of the Assessee. In the year under consideration, the assessee provided BPO services to its AE. The assessee benchmarked the transaction by applying Transactional Net Margin Method (TNMM) and reported the transaction with AE to be at arm s length. Transfer Pricing Officer (TPO), in course of proceeding before him, modified/re-computed the profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2018. In any case of the matter, when learned DRP has directed the TPO to compute the operating margin of the assessee by considering foreign exchange fluctuation gain as operating income, AO/TPO could not have disregarded the direction of the DRP. 5. Be that as it may, in our view, the issue is squarely covered in favour of the assessee by the decisions of the Tribunal in assessee s own case in assessment years 2012-13 and 2013-14, as discussed above. For the sake of completeness, we must observe at the time of hearing, learned CIT(DR) has drawn our attention to certain observations of the Tribunal in the appellate order passed for assessment year 2012-13 and had submitted, as per the Safe Harbour Rules introduced to the Statute w.e.f. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d DRP upheld the adjustments made by the TPO. 8. Before us, learned counsel appearing for the assessee submitted that the receivables on which the Assessing Officer has imputed interest on account of delay are in relation to provision of BPO services to the AE. He submitted, since the receipts of remittances against invoices raised are closely linking with the provision of BPO services, it cannot be segregated and treated as a separate international transaction. In this contest, he relied upon the following decisions: 1. Pr. CIT Vs. Kusum Healthcare Pvt. Ltd., ITA No.765/2016 (Delhi High Court) 2. Avenue Asia Advisors Pvt. Ltd. Vs. DCIT, 398 ITR 120 9. Further, he submitted, the assessee more or less is a debut free compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions and perused the materials on record. Though, we agree with learned CIT (DR) that there may be instances where the AE is benefited due to delay in remitting the outstanding receivables, however, it depends upon the facts of each case. In the present case, admittedly, the assessee has very negligible interest liability. Further, on perusal of materials placed before us, it is observed that the only borrowing made by the assessee is loan availed for purchasing vehicle. There is no dispute that the assessee had utilized the loan for the purpose of which it was availed and paying interest on that. Further, on perusal of the documents placed before us, it is observed that in the year under consideration, the assessee has paid interest of sm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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