AI Drafter 
TaxTMI 
TaxTMI 
2018 (6) TMI 1707
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....ed Services ["ITES"]. 2. Rejection of benchmarking analysis carried out by the Appellant The learned DCIT pursuant to the directions of the learned DRP erred in law and on the facts and in circumstances of the case in rejecting the benchmarking approach and methodology followed by the Appellant for benchmarking the international transaction of provision of ITES. 3. Erroneous selection of comparable companies The learned DCIT pursuant to the directions of learned DRP has erred in law and on the facts and in circumstances of the case in selecting the following comparable companies. Accentia Technologies Ltd. Acropetal Technologies Limited 4. Erroneous consideration of foreign exchange gain as non-operating income while calculating the Profit Level Indicator ("PLI") of the Appellant The learned Transfer Pricing Officer erred in law and on the facts and in circumstances of the case in erroneously considering foreign exchange gain as non operating in nature while calculating the PLI of the Appellant. 5. Erroneous rejection of comparable companies The learned DCIT pursuant to the directions of learn....
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....ts associated enterprises. Similar services were being provided by the assessee in earlier years also. The assessee applied TNMM method to benchmark its international transactions by adopting the PLI at Operating Profit (OP)/ Operating Cost (OC). The margins declared by the assessee were 11.68% and the margins shown by the comparables picked up by the assessee were at arm's length and hence, the transaction was held to be at arm's length price. There is no dispute as to the nature of business, the application of most appropriate method to benchmark the international transactions and by adopting PLI at OP/OC. However, the TPO rejected the comparables picked up by the assessee and picked up fresh comparables and after comparing the margins shown by the assessee vis-à-vis the margins shown by the comparables, TP adjustment of Rs. 3.69 crores was made in the hands of assessee. 5. The DRP rejected the objections raised by the assessee and consequent thereto, the Assessing Officer passed final assessment order making an adjustment of Rs. 3.69 crores to the value of international transactions entered into by the assessee with its associated enterprises in respect of prov....
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....peal No.7 which is against risk adjustment to be allowed in the hands of assessee, the learned Authorized Representative for the assessee in this regard placed reliance on the ratio laid down by the Pune Bench of Tribunal in Starent Networks India (P) Ltd. Vs. ACIT reported in 90 taxmann.com 367. 11. The learned Departmental Representative for the Revenue fairly admitted that foreign exchange gain is to be included in the operating revenue and for computation purpose, the same may be sent back to the file of Assessing Officer. In respect of exclusion of Accentia Technologies Ltd., the learned Departmental Representative for the Revenue placed reliance on the findings of DRP at page 31 and in respect of inclusion of C & K Management Ltd. and allowing risk adjustment, the learned Departmental Representative for the Revenue fairly admitted that the issue be restored back to the file of Assessing Officer / TPO. 12. We have heard the rival contentions and perused the record. The assessee was providing e-learning solutions i.e. IT enabled services like content technology services, desktop technology services, e-learning and conversion services to its associated enterprises for the ....
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.... next aspect of the issue i.e. with regard to foreign exchange gain, the assessee claimed that foreign exchange fluctuations should be considered while computing PLI of tested party and also the comparables. However, the same was rejected by the TPO. The foreign exchange fluctuation is in respect of revenue earned from the associated enterprises vis-à-vis provision of ITES services and hence, the same forms part of the operating income / cost. The Assessing Officer / TPO is thus, directed to verify the claim of assessee in this regard and re- compute the PLI of assessee and the comparables. It may also be pointed out that the assessee had chosen filter of export sales exceeding 75% for comparables. Thus, the foreign exchange fluctuations arising with regard to exports cannot be treated as non-operating in nature even in the case of comparables. 16. Similar issue has been decided by the Hon'ble High Court of Delhi in Pr.CIT Vs. B.C. Management Services (P.) Ltd. (supra). 17. Now, coming to the last aspect of TP adjustment i.e. inclusion of a concern C & K Management Ltd., which was rejected by the TPO as no annual report was provided during the course of transfer pricin....
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....ITD 448. The learned Authorized Representative for the assessee in this regard placed reliance on the ratio laid down by the Pune Bench of Tribunal in MSC Software Corporation India Pvt. Ltd. Vs. ACIT in ITA No.46/PUN/2013, relating to assessment year 2008-09, order dated 22.03.2017. 19. We find that the issue is squarely covered by earlier decisions of the Pune Bench of Tribunal in MSC Software Corporation India Pvt. Ltd. Vs. ACIT (supra), wherein the said concern was also captive service provider to its associated enterprises and had claimed to be risk free. It had asked for risk adjustment in the margins of finally selected comparables and the Tribunal vide order dated 22.03.2017 held as under:- "34. Following the said ratio, we direct the Assessing Officer to allow the risk adjustment and re-compute the margins of comparables by applying the ratio laid down by Delhi Bench of Tribunal in the case of Sony India Pvt. Ltd. (supra) and compute the TP adjustment, if any, in the hands of assessee. 35. The ground of appeal No.10 raised by the assessee is against applicability of +/- 5% and the benefit can be allowed if the adjustment is within such range and ....