2017 (4) TMI 1552

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....s for our adjudication. 1. The IA. AO, Ld. DRP and Ld. TPO have erred in finalizing an order of assessment which is against the principles of natural justice, violative of provisions of the Act, devoid of merits, without appreciating the fact involved, without appreciating the documents submitted in proper light, without conducting adequate inquiries and as such is without jurisdiction. 2. The IA. TPO has finalized his order with improper adjustments, as a result of misapplying the law pertaining to TP and by adopting faulty processes/methodologies to finalize the adjustment, such as but not limited to, applying filters, functional analysis, selection of comparable companies, computation of profit margins of appellant and ....

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....y foreign exchange loss suffered by the appellant as against the comparable companies. 8. The IA. AO erred in raising a tax demand on the Appellant without adjusting the carry-forward the Appellant eligible for set-off. 3. Ground Nos.1 & 2 are too general, do not require adjudication. 3.1 At the time of hearing, the ld. A.R of the assessee did not press Ground Nos.5 & 8. Accordingly, Ground Nos. 5 & 8 are dismissed as not pressed. 4. Ground No.3 is with regard to non-granting the adjustment for differences in working capital levels. Before the DRP, the assessee sought for working capital adjustment, which was rejected by the DRP on the reason that calculation of working capital adjustments between the assessee and the comp....

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....e ld. counsel pointed out that while computing the arm's length price, the TPO added the provision amount of Rs. 4,27,16,385/- to the operating cost of Rs. 219,19,46,556/-. Also while computing the transfer pricing adjustment, the TPO added the amount of provision to the operating revenue of Rs. 234,26,60,885/- ( Page 493 of the paper book). The Tribunal in the case of Sony India Private Ltd. reported in (2009) 315 ITR (80) 150 (Del.) (Paras 146 to 149) held that provisions written back should not be excluded from the P & L account when computing the operating profit. The ld. counsel for the assessee ITA No.1129/Bang/2011 therefore submitted that its net margin should be taken as 9% and not 6.88% as computed by the TPO. Similarly, ....

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....see entered into contract in adverse prices fixed on the prevailing exchange rate and due to fluctuation in exchange rate, there is loss and that exchange fluctuation to be considered while determining the ALP. 9. We find force in the argument of the ld. AR. It is normal that exchange rate is subject to fluctuation due to economic conditions. While determining the ALP, one has to consider these factors, more so, our view is fortified by the decision of the Tribunal in the cases of Honda Trading Corp. India Pvt. Ltd. V. ACIT in ITA No.5297/Del/2011 for the assessment year 2007-08 and DHL Express (India) Pvt. Ltd. V. ACIT in ITA No.7360/Mum/2010 for the assessment year 2006-07. Accordingly, we direct the TPO to provide considera....