TaxTMI 
TaxTMI 
2015 (10) TMI 461
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....diary of Amba Holdings Inc., is engaged in the business of providing Information Technology Enabled Services ('ITES') to its Associated Enterprises ('AE'). For Assessment Year 2009-10, the assessee filed the return of income on 29.9.2009 declaring income of Rs. 60,56,224 after claiming deduction of Rs. 8,82,24,106 under Section 10A of the Income Tax Act, 1961 (in short 'the Act') . The return was processed under Section 143(1) of the Act and the case was subsequently taken up for scrutiny. The Assessing Officer observed that the assessee had reportedly entered into international transactions in the year under consideration and therefore a reference was made under Section 92CA of the Act to the Transfer Pricing Officer ( 'TPO' ) for ....
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....the forex gain / loss with the business activity of the taxpayer and without appreciating that such loss / gain though attributable to the operating activity is not derived from the operating activity. 3. The CIT (Appeals) erred in concluding that forex gain / loss are to be treated as operating in nature without appreciating that though they may be incidental to the operating activity, they cannot be deemed as operating in nature since, they are not critical to operational activities of the business conducted by the taxpayer. 4. The CIT (Appeals) erred in law as well as on facts by directing the TPO to decide the case of the assessee, by applying the principles emerging from the orders of the Delhi Bench of the Hon'bl....
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....g Officer be restored. 8. The appellate craves to add, to alter, to amend or delete any of the grounds that may be urged at the time of hearing of the appeal." 4. The Grounds raised at S.Nos.1, 7 & 8 being general in nature, no adjudication is called for thereon. 5. Ground Nos. 2 to 4 : Transfer Pricing Issues. 5.1 The assessee company, engaged in providing ITES to its AEs has reported the following international transactions entered into by it in the year under consideration :- S.No. Type of Transaction Amount (Rs.) 1. ITES - Research Services 49,35,00,659 2. Cross charges for travelling, training and communication expenses (paid) 3,40,139. 3. Reimbursement of Expenses (Receive....
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....p;46.40 6. Informed Technologies India Ltd. 22.61 7. Cosmic Global Ltd. 40.61 8. Eclerx Services Ltd. 57.50 Average Mean Margin 25.04 5.4 The average mean margin of these 8 comparables was computed at 25.04%. After allowing working capital adjustment of 0.91%, the adjusted mean margin was worked out at 24.13 %. The resultant shortfall amounting to Rs. 4,08,55,503 was taken as the T.P. Adjustment to the ALP of the international transactions of the assessee with its AEs in the ITES field. 5.5 In the Grounds raised at S.Nos.2 to 4, Revenue contends that the learned CIT(A) erred in holding that foreign exchange loss / gain to be operating in nature without ascertaining t....
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....11) 44 SOT 156 (Bang). 5.7 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial decisions cited and placed reliance upon. We observe that it has not been disputed that the foreign exchange gain has arisen as a consequence of the realization of the consideration for rendering ITES services and therefore there is no reason for its exclusion from the operating revenues for the purpose of calculating the operating margin of the assessee. We find that this proposition has been upheld by a co-ordinate bench of this Tribunal in the case of Mindteck (India) Ltd. in IT(TP)A No.70/Bang/2014 dt.21.8.2014 wherein at para 11 thereof it has been held as under :- "11. We have c....
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....ow the ratio laid down by the Hon'ble High Court of Karnataka in the case of CIT V Tata Elxsi Ltd. (349 ITR 98) and exclude telecommunication expenses and other expenses incurred in foreign currency from both export as well as total turnover while computing the deduction under Section 10A of the Act. It is also contended that the Department has not accepted the above decision in the case of Tata Elxsi Ltd. (supra) and has filed an appeal before the Hon'ble Apex Court, which is pending disposal. 6.2 We have heard both the learned Departmental Representative and the learned Authorised Representative and perused and carefully considered the material on record, including the binding decision of Hon'ble High Court of Karnataka in ....