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of <h1>Court Affirms ITAT's Decision on Transfer Pricing, Resolves Forex Fluctuation in Assessee's Favor, Dismisses Revenue Appeal.</h1> <h3>Pr. Commissioner Of Income Tax-3 Versus Fiserv India Pvt. Ltd.</h3> The HC dismissed the Revenue's appeal, affirming the ITAT's decision on transfer pricing adjustments. The ITAT upheld the TPO's adjustment to the ... TPA - foreign exchange fluctuation treated as operating expenses/income - Held that:- The Safe Harbour Notification dated 18th September 2013 relied upon by the Revenue is prospective and did not apply to the AY in question. Even otherwise the Court finds that the decisions relied upon by the ITAT in the impugned order covers this issue in favour of the Assessee as far as the AY in question is concerned. Consequently, the Court declines to frame any question on the issue. Rejecting the comparables - Held that:- As far as this question the Court finds that the ITAT has undertaken a detailed factual analysis and given cogent reasons for the exclusion of the comparables in question. The Court is not persuaded to hold that any substantial question of law arises as regards the said issue. Issues:Transfer Pricing AdjustmentExclusion of ComparablesForeign Exchange Fluctuation as Operating ExpensesTransfer Pricing Adjustment:The case involved an appeal by the Revenue against the order passed by the Income Tax Appellate Tribunal (ITAT) regarding a transfer pricing adjustment. The Assessee, a subsidiary of a US-based company, provided software services to its associated enterprises. The Transfer Pricing Officer (TPO) rejected the Assessee's transfer pricing study, proposing an adjustment to the taxable income. The Dispute Resolution Panel (DRP) upheld the TPO's adjustment, leading to a final transfer pricing addition to the Assessee's income. The ITAT addressed the Assessee's grievance regarding the exclusion of certain comparables by the DRP, ultimately dismissing the appeal and upholding the transfer pricing adjustment.Exclusion of Comparables:The ITAT excluded certain comparables from the final set selected by the DRP based on detailed analysis. It excluded companies like Bodhtree Consulting Limited, Infosys Limited, Thirdware Solutions, Sonata Software, Kals Information System, and Mindtree for various reasons, such as being engaged in different services or having significant related party transactions. The ITAT provided valid justifications for each exclusion, emphasizing the importance of comparability in transfer pricing analysis.Foreign Exchange Fluctuation as Operating Expenses:The ITAT addressed the treatment of foreign exchange fluctuation as operating income/expenses, citing a decision in a similar case. It directed the Assessing Officer/Transfer Pricing Officer to consider foreign exchange gain/loss as an operating item and compute the arm's length price of international transactions accordingly. The issue of foreign exchange fluctuation was resolved in favor of the Assessee, based on previous decisions and the specific circumstances of the case.In conclusion, the High Court dismissed the appeal by the Revenue, finding that the ITAT had conducted a detailed factual analysis and provided sufficient reasons for its decisions regarding transfer pricing adjustments and the exclusion of comparables. The Court declined to frame any questions on the foreign exchange fluctuation issue, as it was covered by previous decisions and not applicable to the assessment year in question.
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