TaxTMI 
TaxTMI 
2018 (3) TMI 296
X X X X Extracts X X X X
X X X X Extracts X X X X
....n of income for A.Y. 2012-13 on 29.11.2012 declaring total income of Rs. 3,14,57,063/-. It was noticed that assessee had entered into International Transactions with its Associated Enterprises (A.Es) amounting to Rs. 46,90,15,187/-. Accordingly, reference u/s 92CA(1) of the Act was made to the Transfer Pricing Officer (TPO) for computation of Arms Length Price (ALP) in relation to the International Transactions. Thereafter, the TPO vide order dt.29.01.2016 passed u/s 92CA(3) of the Act did not accept the bench marking of the international transactions done by the assessee with its Associated Enterprises and made an upward adjustment of Rs. 5,47,53,550/-. The assessee was therefore vide show cause notice dt.08.06.2013 asked to show cause as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e learned AO ought to have granted a specific hearing to the appellant before making a reference to the learned TPO in this regard. 2.2 The Learned DRP has erred in law and on facts in confirming and the learned AO/TPO erred in holding that Arm's Length price ('ALP') of the Software Development services provided by the appellant to its AE party should be worked out by considering OP/TC margin of 18.54%, leading to an addition of Rs. 3,18,90,259/-. 2.3 The Learned DRP and learned AO/TPO erred in treating Foreign Exchange gain of Rs. 1,89,07,522 as nonoperative income, not eligible for computation of profit level indicator (PLI) of OP/TC of the appellant company and thus reducing the appellant's margin to 10.20% instead ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 3. The Learned DRP and learned AO/TPO erred in law and on facts in making/sustaining ad-hoc disallowance of Rs. 4,00,000 being 20% of Travelling & Hotel Expenses of Directors debited to P & L account amounting to Rs. 19,98,034." 3. Before us, at the outset, Ld.A.R. submitted that though the assessee has raised various grounds but if ground No.2.3 raised by the assessee is decided in favour of the assessee then the transaction of the assessee would be at ALP and no adjustment would be required and therefore the other grounds raised by the assessee would be rendered academic. Ld.D.R. did not object to the aforesaid submissions of Ld.A.R. In view of the aforesaid submission of Ld.A.R., we proceed to first dispose of ground No.2.3. 4. Durin....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... operations of the assessee. Such income or expenditure which has no connection with the normal business operations of the company is required to be treated as non-operating income/expenditure and should be excluded from the computation of operating profit while determining the operating margins. The support for this view is taken from the definition of the expression "Operating Revenue" and "Operating Expense" furnished in Rule 10TA of the I.T. Rules forming part of the Safe Harbour Rules". Aggrieved by the order of DRP, assessee is now in appeal before us. 5. Before us, Ld.A.R. reiterated the submissions made before TPO and DRP and further submitted that the foreign exchange gains derived by the assessee on trade sales made during the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erational income for the purpose of computing the PLI. Before us, it is assessee's contention that the foreign exchange gains have been earned in the normal course of business and have been derived on account of trade sales made during the year and directly relates to the main business operation of the assessee. The aforesaid submission of the assessee has not been controverted by the Revenue. Further, the Revenue has relied upon Rule 10TA of the I.T. Rules, 1962 for coming to the conclusion that the foreign exchange gains cannot be considered as non-operational income. We find that Hon'ble Delhi High Court in the case of BC Management Services (P) Ltd., (supra), has held that the "Safe Harbour Rules" which were notified by the Revenue auth....