TaxTMI 
TaxTMI 
2018 (6) TMI 1454
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....ed 16.12.2014. 2. Brief facts of the case are that assessee is a private limited company, which is engaged in the business of import of assembly of component and reexport of assembled medical disposable balloon catheters as 100 % export oriented unit ( EOU). It is providing a captive production to its parent company and its parent company has helped in setting up and expansion of manufacturing facilities by providing technology, training, and finance administrative and marketing support to the assessee. Assessee imports different sub assemble parts i.e. semi finished balloon catheters which includes the purging of holes in the silicon tubing and fixing with wall, rings and the balloon. The final products are being sold only to one customer....
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....nd confirmed the same. Hence, the assessee filed this appeal by on as many as 10 grounds. Ground Nos. 1,2 & 10 are general in nature whereas ground Nos.4,5,& 7 are not pressed by the assessee at the time of the argument. Therefore, what effectively remains for adjudication are ground nos. 3 relating to the treatment of the foreign exchange gains as non operating; ground no.6 relates to transfer pricing issue; ground No.8 challenges the non allowance of risk adjustment and ground No.9 not allowing the working capital adjustments. 7. First coming to the issue relating to the foreign exchange gain, learned TPO considered the foreign exchange gain or loss as non operating in nature basing on the definitions given in Safe Harbour Rules for calc....
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....ibunal in ITA No.895/Del/2014 held as follows: "With respect to the foreign exchange fluctuations He submitted that these have been considered as nonoperational items. However, the assessee has considered the foreign exchange loss of Rs. 1953939/- as operational as the issue is those foreign exchanges fluctuations have arisen and because of the adjustment on account of sale or realization of the debts. He further submitted that if the same is excluded from the PLI working of the assessee and considered it as a nonoperational then the margin of the company also increases substantially to 1.20169%. In any way he submitted that this is an operational expenditure and therefore in case of the comparable companies also, it should be included wh....
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.... view of this established legal position, hold that the foreign exchange or loss is operative in nature and this ground is answered in favour of the assessee. Ground No.3 is accordingly allowed. 13. Now coming to transfer pricing issue, the assessee is challenging the selection of Hindustan Syringes & Medical Devices Pvt. Ltd. as a comparable to the assessee to benchmark the international transaction. It is submitted by the learned AR that Hindustan Syringes & Medical Devices Pvt. Ltd. is having a turnover of Rs. 365.15 crores, net of excise turnover is Rs. 352.86 crores whereas the assessee's turnover is only Rs. 24.37 crores. He further submits that the turnover of the assessee constitutes around 6.5% of the turnover of the Hindustan Syr....
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....from the final list of the comparables and to recompute the arm's length price for the international transaction. Ground no.6 is answered accordingly. 17. Ground No.8 relates to risk adjustment. Learned TPO held that the risk adjustment as a general rule cannot be allowed unless it is clearly shown that the comparables had actually undertaken such risk and how the same material affected the margins. Learned DRP held that the adjustment had functional difference, if any, can be made only it hose difference can be ascertained accurately and their impact on the margins can be assessed with reasonable accuracy. It is further found that in the absence of any information, the quantification of the adjustment is not payable. 18. It is the argume....
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....ost plus mark up basis and as per the agreement, it has to be reimbursed 4 to 6% mark up on total cost. The assessee was not reimbursed on cost plus mark up. Since the average OP/OC of the comparables is at 9.64%, within the range of mark up of 4 to 6%, which the assessee was supposed to get from the AE, working capital adjustment is not a significant issue in this matter. 21. Learned DRP observed that it is only when the hose different and the impact can be ascertained accurately then it is only possible to grant working capital adjustment. 22. It is argued before us by the learned AR that there are three critical elements in capital policy of the firm, viz., (a) lags between the time products are sold and payments on these sales are rec....