TaxTMI 
TaxTMI 
2018 (6) TMI 1762
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....nt are as under: Sr. No. Description of transaction Amounts (Rs.) Name of the AE 1. Sale of ready to serve foods 30,07,10,326 Preferred Brands International Inc. USA 5,37,35,302 Preferred Brands Australia Pty Ltd., Australia Total 35,44,45,628 The assessee applied Transactional Net Margin Method (TNMM) to benchmark its international transactions with respect to RTS food segment and the same was duly accepted by the Transfer Pricing Officer (TPO). The assessee selected ten comparables having arithmetic mean of 5.87% in its TP study report to determine the arm's length price (ALP) of the RTS food segment transactions. Profit Level Indicator (PLI) of the assessee was computed at 15.73%. The TPO applied export filter of 75% and rejected all the companies selected by the assessee as comparables except ADF Foods Ltd. The TPO finally made upward adjustment of Rs. 3,41,94,575/- in the international transactions with its AEs during financial year 2008-09. Based on the order of TPO dated 17.09.2012, the Assessing Officer passed draft assessment order on 13.03.2013. Aggrieved with the adjustment made by the TPO, the assessee filed objections before....
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....or add to the grounds of appeal." 4. Shri Arvind Sonde appearing on behalf of assessee submitted that in TP study, assessee excluded non-operating expenses on account of foreign exchange loss from total cost to arrive at the Operating Cost. However, TPO took a view that foreign exchange loss is operating expenses and included the said amount while arriving at operating margin. The DRP upheld the findings of TPO by observing that assessee has not made any submissions with respect to treatment to be given to foreign exchange loss. It is an admitted fact that in preceding assessment years, the assessee had treated foreign exchange loss as operating in nature. However, in the assessment year under appeal, the assessee treated foreign exchange loss as 'non-operating expenditure' in line with various decisions of the Tribunal. To support his contention, the ld. AR placed reliance on the following decisions: i) BNY Mellon International Operating (India) Pvt. Ltd Vs. ACIT, in ITA No.2380/PN/2012, for assessment year 2008-09, decided on 10.10.2014. ii) M/s. DHL Express (India) Private Limited Vs. ACIT, in ITA No.7360/Mum/2010, for assessment year 2006-07, decided on 27.04.2011. 4.1 Th....
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....2012 for assessment year 2008-09, decided on 17.05.2017. iii) Tamasek Holdings Advisors India P. Ltd. Vs. DCIT, in ITA No.776/Mum/2015, for assessment year 2010-11, decided on 25.02.2016. 7. In respect of ground No. 5, the ld. AR submitted that TPO erred in computing operating margin of ADF Foods Ltd. The correct operating margin of ADF Foods Ltd. for assessment year 2009-10 is 10.31%; whereas TPO has computed the same as 13.83%. While computing margin, TPO has erred in not excluding sale of import license of Rs. 258.05 lacs from the segment results though he has excluded the same from segment revenue. The assessee filed rectification application in this regard; however, the TPO has disregarded the same. The DRP in its directions dated 18.12.2013, has directed the TPO to recheck the material on record and remove the arithmetical error. However, TPO vide order dated 17.01.2014 erroneously considering the PLI as 13.83% instead of 10.31%. 8. In respect of ground No.6, the ld. AR submitted that benefit of +/-5% variation in accordance with the proviso to section 92C(2) of the Act should be granted to the assessee. The TPO has failed to grant the benefit of +/-5% variation despite t....
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....ng foreign exchange fluctuations as non operating expenditure in line with various orders of the Tribunal. We find that the Co-ordinate Bench of Tribunal in the case of BNY Mellon International Operations (India) Pvt. Ltd. Vs. ACIT (supra.) held foreign exchange gain as non operating income. Similar view has been expressed by Mumbai Bench of the Tribunal in the case of M/s. DHL Express (India) Private Limited Vs. ACIT (supra.). It was further pointed to the Bench that DRP in assessment years 2012-13 and 2013-14 has accepted the stand of assessee in treating foreign currency fluctuation as non operating item. This fact has not been controverted by the ld. DR. In so far as reason for accepting change in the method of accounting is concerned, we are satisfied that the change has been made by assessee for the bona-fide reasons. The assessee has changed the method of accounting of foreign exchange fluctuations as non-operating item in line with the judicial pronouncements. The assessee after the change of method in assessment year 2009-10, has been regularly treating foreign exchange fluctuations as non operating item. Therefore, objection raised by the ld. DR against change of treatmen....
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.... filter of 75% has been applied by the TPO for the first time in the assessment year under appeal. Neither the filter was applied in earlier assessment years nor it is applied in the subsequent assessment year. We observe that after applying export turnover filter of 75%, out of total ten comparables selected by assessee in TP study, nine comparables have been rejected by the TPO. The TPO has not selected any other company as comparables while determining ALP. The TPO determined ALP by considering ADF Foods Ltd. as only comparable. The Assessing Officer in the first instance should not have applied a filter to select/reject comparables that was neither used in the past nor in the subsequent years. 'Rule of consistency' demands that uniform filters should be applied to bench mark the international transactions, if there is no material difference in the facts of different assessment years. Our this view is supported by the decision of Chandigarh Bench of the Tribunal in the case of DSM Anti Injectives India Ltd. Vs. DCIT reported as 145 ITD 454 (Chd.). The decision of the Tribunal has been affirmed by the Hon'ble Punjab & Haryana High Court in appeal filed by the Department repor....