TaxTMI 
TaxTMI 
TaxTMI 
2022 (12) TMI 246
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....brief facts of the case is that the Assessee company "M/s. HSI Automotives Limited" was established in the year 1997. The company is having its manufacturing facility in Sriperumbudur and is producing major products such as low pressure hose, rubber profile car roof sealing layout parts, power steering parts, fuel hose, brake hose, intercooler hose, water hose, radiator hose, weather strips and aircon hose. The company caters mostly to original equipment manufacturers like the Hyundai Motor India Limited, For India and General Motors India. The Assessee followed the Transactional Net Margin Method [TNMM] and the Most Appropriate Method [MAM] for calculating the Arm's Length Price [ALP]. In both the years, the issues that are agitated by the Assessee are common. In short, the facts are that the Assessee was availing foreign exchange fluctuation loss as non-operative expenses. The claim behind the non-operating Foreign Exchange Fluctuation Loss [FEFL] is that, it is extraordinary in nature. The Assessee states that there was a sharp volatility in the transacting currencies of about 19.15% during the period for the Financial Year 2007- 2008 to the Financial Year 2011-2012 indicating t....
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.... loss are accounted in the cost of goods sold and not as separate foreign exchange amount like the transactional related losses. Mr. B. Ramana kumar, Advocate referred to the judgement of ITAT, New Delhi in the case of Honda Trading Corporation India Private Limited, New Delhi Vs. The Assistant Commissioner of Income Tax, New Delhi in I.T.A. No.5297/DEL/2011. He respectfully submitted the observation of the Co-ordinate Bench of ITAT, Chennai in the case of M/s Kwang Jin India Autosystems Pvt. Ltd., Kancheepuram Vs. The Deputy Commissioner of Income Tax, Chennai [IT(TP)A No.38/Chny/2018] and in the case of Motonic India Automotive Pvt. Ltd., Vs. The Assistant Commissioner of Income-tax, Company Circle-IV(3), Chennai - 600 034, dated 17.08.2016 [ITA No. 741/Mds/2014]. The relevant paragraph is extracted as under: "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....
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....he nature of overhead fixed costs that arouse due to under-utilization of resources. As per the learned Counsel of the Assessee, the Transfer Pricing Officer [TPO] did not dispute the submission of documents and calculated the electricity expenditure but the Hon'ble DRP has recorded that the Assessee has not given any detailed workings for adjustment. In this respect, the Assessee had filed a written submission and a consolidated case-book which are kept in the records. 5. The learned CIT-DR vehemently argued and submitted a written submission which is placed on record. He relied on the order of the learned Transfer Pricing Officer and the relevant portions are extracted as under: "Power Related Adjustment: Rs.10,71,63,792/- 4. The said adjustment is based on your claim that your entity is situated in Sriperumbudur, Tamilnadu and due to the poor electric supply prevailing in Tamil Nadu, you had to depend on your own power generation. Your claim is apparently based on the assumption that had you relied upon the power supplied by TNEB, instead of using the diesel generators what would have been the saving in cost claimed as an item of reduction from the operating cost. The abov....
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....s. Description Amount in Rs. Amount in Rs. Revenue 4550900499 Less: Cost 4779139884 Profit before Tax -228239385 Less: Finance Cost 124197161 Less : Less on sale of assets 2824512 127021673 Loss 101217712 Revenue 4550900499 Margin on revenue (-)2.22 % 8. You have benchmarked your operating margin with reference to the solitary comparable M/s. Sundaram Industries Limited. Fresh search was done using the Prowess data base which resulted in four additional comparables as mentioned in the Annexure of which PPAP was considered as a comparable in the earlier assessment year also. The revised stand alone operating margin of the comparables is 10.97% measured on revenue. Your revised operating margin on revenue is (-)2.22% 9. Arm's Length Price is proposed to be determined by taking your operating loss at 2.22% and your comparable operating margin of 10.97% which calls a total adjustment of 13.19% on your revenues [unquote]. Reply to show-cause notice: 6. Assessee clarified that the value of Forex considered in the Cash Flow Statement represents gain of Rs.4,84,72,577 and not loss as ....
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....Rs.3,24,04,929 and translational loss was Rs.10,09,59,985. So, this loss was only the notional loss or paper loss and it was not a crystallized loss. 8. We considered the issues and relied on the documents available on record. All the issues together are remanded back to the learned Assessing Officer for de novo adjudication. The learned Assessing Officer should consider afresh on the basis of the above mentioned discussion. The learned Counsel of the Assessee pointed out that the foreign exchange loss is a genuine loss which is not at all a notional loss. The Assessee was also directed to submit all relevant documents before the learned Assessing Officer to substantiate its claim. Nonetheless, a reasonable opportunity should be allowed to the Assessee for redressal of its grievances. 9. Corporate Taxes: The learned Counsel of the Assessee, Mr. B. Ramanakumar, Advocate also agitated three issues related to the disallowance payment of profit which is of the Employees State Insurance. The issues were highly discussed in different orders in the Co-ordinate Benches. He mentioned that the payment was made before the due date of filing the return u/s.139(1) of the Act. But at this mome....