TMI Blog2017 (4) TMI 1621X X X X Extracts X X X X X X X X Extracts X X X X ..... nal transaction and has been benchmarked by applying CUP method and no addition has been made in the hands of assessee. We find no merit in the methodology adopted by the TPO in rejecting the method applied by the assessee. Loss suffered on account of foreign exchange fluctuations - revenue or capital loss - HELD THAT:- The Hon ble Supreme Court in CIT Vs. Woodward Governor India (P.) Ltd. [ 2009 (4) TMI 4 - SUPREME COURT] had held that the losses suffered by the assessee on account of foreign exchange difference as on the date of balance sheet was an item of expenditure allowable u/s 37(1). The assessee before us has also borrowed loan in foreign exchange and on the close of each of the year was reporting the outstanding liability following the accounting method prescribed in this regard. For the year under consideration, the assessee had claimed loss on the said account of foreign exchange i.e. valuation of loan outstanding as on date of close of the year borrowed in foreign exchange. The said loss is to be allowed as deduction in the hands of assessee, following the same method as in the earlier year when gain arising at the close of the year has been added as income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant prays the order of the Assessing Officer may be restored. 5. The appellant prays to adduce such further evidence to substantiate his case. 3. The first issue raised by the Revenue vide ground of appeal No.1 is against deletion of transfer pricing adjustment of Rs.4,37,30,383/-. 4. Briefly, in the facts of the case, the assessee for the year under consideration had filed the return of income declaring total income of Rs.43,68,70,518/-. Since the assessee had entered into international transactions with its associate enterprises, the Assessing Officer had made reference for determination of arm's length price with reference to the transactions reported by the assessee. The assessee was engaged in the business of producing the entire range of non ageing, energy conserving Power Core Electrical steel products namely Cold Rolled Non Grain Oriented (CRNGO) in fully and semi processed varieties. The assessee also produced special quality carbon steel products of Automotive, white goods and Engineering applications. During the year under consideration, the assessee had entered into following international transactions:- Sr. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue had deleted the transfer pricing addition on the transaction of receipt of commission. As regards the export sales, the TPO had rejected the CPM method applied by the assessee and had applied CUP method by considering sale of small quantities of left over stock which was nowhere comparable to very much quantities sold by the assessee to its associate enterprises in foreign currency. The transaction considered in CUP method by the TPO was not in line with provisions of Rule 10B and 10C of the Income Tax Rules, 1962, was the finding of the CIT(A). Hence, the addition made by the Assessing Officer / TPO on TP adjustment on account of commission and export sales was deleted. 7. The Revenue is in appeal against the order of CIT(A). 8. The learned Departmental Representative for the Revenue pointed out that the assessee was engaged in the export of steel to its associate enterprises in Italy, for which the TPO applied the CUP method to benchmark the arm's length price of said international transactions. In respect of commission receipts from associate enterprises in Germany for marketing of products, the TPO / Assessing Officer applied internal rate of return. He placed r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the associate enterprises. The assessee in the TP study report while benchmarking the transaction of export to associate enterprises had applied the CPM method for the year under consideration and also for assessment years 2008-09 to 2010-11. The TPO was of the view that CUP method was most appropriate method to be applied. His finding was on the basis of small sales made by the assessee of similar components. However, the transaction picked up for comparison was very negligible and hence, the CIT(A) held that there is no merit in applying the CUP method. Further, the methodology adopted by the assessee in applying the CPM method had been accepted from assessment years 2008-09 to 2010-11 by the TPO himself and no adjustment has been made in the hands of assessee. The assessee has filed on record the assessment orders relating to assessment years 2009-10 and 2010-11 which clearly reveal the transaction of export to associate enterprises being entered into by the assessee with its associate enterprises. In the totality of the above said facts and circumstances, we find no merit in the order of TPO in applying the CUP method to benchmark the international transaction of export to as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as capital. 14. The CIT(A) allowed the claim of assessee and held it to be revenue in nature as similar claim was allowed in earlier years as revenue expenditure. 15. The Revenue is in appeal against the order of CIT(A) in this regard. 16. The learned Authorized Representative for the assessee pointed out that the issue stands covered by the order of Hon ble Supreme Court in CIT Vs. Woodward Governor India (P.) Ltd. (2009) 312 ITR 254 (SC). 17. The learned Departmental Representative for the Revenue placed reliance on the order of Assessing Officer. 18. We have heard the rival contentions and perused the record. The Hon ble Supreme Court in CIT Vs. Woodward Governor India (P.) Ltd. (supra) had held that the losses suffered by the assessee on account of foreign exchange difference as on the date of balance sheet was an item of expenditure allowable under section 37(1) of the Act. In the facts before the Hon ble Supreme Court, the enterprise had reported outstanding liability relating to import of raw material using closing rate of foreign exchange and the difference i.e. loss or gain, arising on conversion of said liability at closing date was recognized in the Profit ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
