2022 (11) TMI 1104

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....he Act') pertaining to assessment year 2014-15, in pursuance to the direction of learned Dispute Resolution Panel (DRP). 2. The first issue arising for consideration is, whether foreign exchange fluctuation gain can be treated as operating income while computing the operating profit margin. 3. Briefly the facts are, the assessee is a resident corporate entity engaged in the activity of business process outsourcing (BPO)/debt Processing. It is a wholly owned subsidiary of M/s. Omniglobe International LLC, USA, the Associated Enterprises (AE) of the Assessee. In the year under consideration, the assessee provided BPO services to its AE. The assessee benchmarked the transaction by applying Transactional Net Margin Method (TNMM) and repor....

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....of the assessee. Same view was reiterated by the Tribunal while deciding assessee's appeal in assessment year 2013-14 in ITA No. 6980/Del/2017, dated 15.10.2018. In any case of the matter, when learned DRP has directed the TPO to compute the operating margin of the assessee by considering foreign exchange fluctuation gain as operating income, AO/TPO could not have disregarded the direction of the DRP. 5. Be that as it may, in our view, the issue is squarely covered in favour of the assessee by the decisions of the Tribunal in assessee's own case in assessment years 2012-13 and 2013-14, as discussed above. For the sake of completeness, we must observe at the time of hearing, learned CIT(DR) has drawn our attention to certain observations ....

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.... unsecured loan, the Assessing Officer computed interest by applying rate of 4.33% on the basis of 6 months LIBOR with a mark-up of 400 basis points. Learned DRP upheld the adjustments made by the TPO. 8. Before us, learned counsel appearing for the assessee submitted that the receivables on which the Assessing Officer has imputed interest on account of delay are in relation to provision of BPO services to the AE. He submitted, since the receipts of remittances against invoices raised are closely linking with the provision of BPO services, it cannot be segregated and treated as a separate international transaction. In this contest, he relied upon the following decisions: 1. Pr. CIT Vs. Kusum Healthcare Pvt. Ltd., ITA No.765/2016....

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....the AE, the assessee will be bearing foreign exchange remittances risk. Thus, he submitted, the adjustment made should be sustained. 11. We have considered rival submissions and perused the materials on record. Though, we agree with learned CIT (DR) that there may be instances where the AE is benefited due to delay in remitting the outstanding receivables, however, it depends upon the facts of each case. In the present case, admittedly, the assessee has very negligible interest liability. Further, on perusal of materials placed before us, it is observed that the only borrowing made by the assessee is loan availed for purchasing vehicle. There is no dispute that the assessee had utilized the loan for the purpose of which it was availed an....