2019 (4) TMI 2129

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....ssessment year 2010-11. 02. The Revenue has raised the following effective grounds of appeal : 1. The DRP erred in excluding Persistent Systems and Solutions Ltd from the list of comparables for software development services even though it was satisfying all the quantitative and qualitative filters. 2. The DRP erred in directing the TPO / AO to include the foreign exchange loss / gain for determining the Profit Level Indicator of the assessee in transfer pricing analysis without ascertaining the nexus with the business activity of the assessee even though it is not operating in nature. 3. The DRP erred in directing the TPO to grant risk adjustment without analysing the difference in risk level between the teste....

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....nder : 6.1 In these grounds, the Revenue contends that the DRP has erroneously considered foreign exchange gain / loss as part of operating income when the TPO has excluded this item while computing the operating margins of the assessee. On the contrary, the assessee contends that the foreign exchange loss / gain are closely linked to its business operations and therefore should be considered as operational in nature as has been held by the DRP. 6.2.1 We have heard the rival contentions, perused and carefully considered the material on record. In the case on hand, the DRP has accepted the assessee's contention that foreign exchange loss / gain is operational in nature, by following the decision of the coordinate bench ....

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....and carefully considered the material on record. We find that the DRP, at para 14 of its order, had relied on its decision in the earlier Assessment Year 2010-11 and directed the TPO to allow risk adjustment and decide the percentage of risk adjustment to be allowed. As a matter of guidance, the DRP referred to a decision of the ITAT, Hyderabad in the case of Dy. CIT v. Hellosoft (P.) Ltd.[2013] 32 taxmann.com 101/57 SOT 4 wherein 1% risk adjustment was allowed. From the above, it is seen that the DRP has merely referred to a decision in which 1% risk adjustment was granted and it is not correct to say that DRP directed that 1% risk adjustment is to be granted in this case. 7.3.2 The Bangalore Benches of the Tribunal, while allowin....