TaxTMI 
TaxTMI 
2023 (11) TMI 588
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.....2019 along with several other cases of the same group. Subsequently, vide order dated 24.03.2023 in Misc. Application Nos.176 & 213/Del/2020, the aforesaid order was recalled for fresh adjudication. Pursuant to the above recall, we have heard both the parties and perused the records. 3. The grounds of appeal taken by the Revenue read as under :- "1.(a) The Ld. CIT (A) has erred on facts and in law in deleting addition of Rs. 1,09,56542/- made on account of transfer pricing adjustment as : (b) The Ld. CIT (A) has inter-alia erred in law in accepting the assessee's contention that it is only intermediary between third party and AE. (c) The Ld. CIT (A) inter-alia erred in not appreciating that the soul of the Market Support Services fu....
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.... The following international transaction was undertaken by the assessee :- S.No. Description of transaction Method Value (in Rs. ) 1. Providing market Support Service & Other Miscellaneous services TNMM 10,22,44,145 2. Providing distribution support services TNMM 1,03,33,354 3. Interest on ECB loan - 18,04,060 4. One Time Grant received - 1,75,31,533 8. Apropos the issue of action of the TPO charging mark-up on the third party costs incurred by the assessee : As mentioned in the note 10 of schedule 14 of the audited account of the company, during the financial year relevant to the assessment year 2004-05, the assessee renegotiated its agreement with BBC World Ltd. and BBC World Distribution Ltd. An amount of Rs. 7,03,70....
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....of finance, administration and direction were reimbursed at cost. These costs pertain to the expenditure incurred inter-alia on compliance by the assessee with various tax laws, on payment of rent etc. According to the assessee, no extra services were rendered by incurring these expenses. 10. On the other hand, TPO opined that the agreement between the assessee and its associated enterprises (AEs) covers all the activities on which the assessee is expected to provide the services to its AEs. Literally there are no area left which can be considered as an activity which is outside the purview of the service agreement which can be reimbursed at cost. The TPO further analyzed the agreements. In addition, the TPO has concluded that the assessee....
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....e assessee at the request of the overseas entity. The budget was also controlled by the AE. The risk and outcome of these expenses are borne or attributed to the AE. The expenses relating to advertisement are on buying of advertisement space in the newspapers. In such activities the cost involved is too high and the effort required to buy such space is not much. Therefore, they should be treated as pass through cost. Other than these three items all other items should be considered as part of the cost base of the appellant and should be marked up. .......... In view of the above, the pass through cost to the extent which are directly relatable to third parties, namely, 1) advertisement and publicity, 2) business promotion and 3) partici....
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....der of the ld. CIT (A) in this regard. 13. Apropos foreign exchange loss being operational in nature : On this issue, the TPO opined that as the assessee company is a captive service provider all costs inclusive of any loss arising out of forex fluctuations and interest cost should have been marked up. He also opined that in service segment any loan taken for general office purposes cannot be anything else except operation expense. That the assessee is not carrying any significant inventories and therefore the loans and advances taken by it are for the operational purpose only. In this way, he justified the inclusion of interest expenses and forex loss for calculation of the PLI of the assessee. 14. On the other hand, the assessee contend....
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.... exclude it from the calculation of PLI." In view of the above, I hold that these two items, namely, forex fluctuation loss and interest expenses should be excluded while computing the PLI of the assessee." 16. Against the above order, Revenue is in appeal before us. 17. We have heard both the parties and perused the records. Upon careful consideration, we find ourselves in agreement with the reasoning adopted by the ld. CIT (A). Furthermore, ld. Counsel of the assessee has relied upon the decision of ITAT in the case of DHL Express (India) Pvt. Ltd. In ITA No.7360/Mum/2020 for AY 2006-07 for the following proposition :- "We agree with the submissions of the Ld. Counsel of the assessee that interest income, rent receipts, dividend rec....