TaxTMI 
TaxTMI 
2024 (5) TMI 482
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....d by the assessee's' and revenue in ITA Nos. 1365/Chny/2019, 40/Chny/2019, IT(TP)A Nos. 44 & 45/Chny/2019 are directed against the order of the learned Commissioner of Income Tax (Appeals)-3 & 8, Chennai dated 01.02.2019 & 13.03.2019 and pertains to assessment years 2008-09 & 2014-15, respectively. Since, facts are identical and issues are common, for the sake of convenience, the appeals filed by the assessee's and appeals filed by the revenue are being heard and disposed off, by this consolidated order. 2. The assessee's have taken various grounds challenging the issue of forex losses to be treated as non-operating in nature for computing operating margin, working capital adjustment and downward adjustment at entity level. The assessee's had also taken various grounds challenging additions made by the AO towards interest payment u/s. 40(a)(i) of the Act for non-deduction of TDS, re-computation of book profit u/s. 115JB of the Act by making addition towards TP Adjustment as suggested by the TPO and ground relating to set off of brought forward losses. We have identified the issues from various grounds of appeal filed by the assessee's. Therefore, we deem it not necessary to reprod....
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....rating expenses or operating income. He further submitted that, the Hon'ble Supreme Court in the case of Shah Originals vs CIT in Civil Appeal No. 2664/2011, has considered the nature of forex loss/gains in light of deduction u/s. 80HHC of the Act and held that gain from foreign exchange fluctuations from the EEFC account does not fall within the meaning of 'derived from' the export of garments by the assessee. Therefore, he submitted that forex loss/gains cannot be considered as operating in nature while computing PLI of an assessee. In this regard, he relied upon the decision of ITAT, Chennai Benches in the case of DCIT vs M/s. Hanil Tube India Pvt Ltd in ITA No. 1037/Mds/2014. 6. The ld. DR, on the other hand supporting the order of the TPO and CIT(A) submitted that, first of all this issue is decided by the Tribunal in assessee's own case for earlier assessment year in ITA No. 796/Mds/2014, where it has been held that forex loss/forex gains is operating in nature. Further, although, Safe Harbor Rules defines operating expenditure and operating income and also it has excluded forex loss, but the assessee has failed to prove that it has applied Safe Harbor Rules for the purpose ....
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....tions and said Rules has been notified w.e.f. assessment year 2013-14. In the present case, the assessee could not furnish any evidences to prove that it has opted for Safe Harbor Rules for determining ALP of international transactions. Unless, the assessee opts for Safe Harbor Rules for international transactions, the cherry picking of definition provided in Safe Harbor Rules cannot be considered to determine forex loss/gain as operating in nature or not. Since, the appellant itself has treated forex loss/gain as operating in nature for earlier years and also the Tribunal has considered in assessee's own case and held that forex loss is operating in nature, in our considered view there is no merit in grounds taken by the assessee challenging exclusion of forex loss/gain from operating expenditure or operating income. Further, same issue has been decided by the coordinate bench of ITAT, Chennai in the case of M/s. Hyundai Motor India Ltd vs ACIT in ITA No. 3192/Chny/2017, where one of us is also signatory and held that forex loss/gains is revenue is nature and operating expenditure/income. Therefore, we are of the considered view, that there is no error in the reasons given by the ....
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....ds to provide necessary supporting evidence to prove that it has not factored working capital impact on pricing of products or services. In the present case, the assessee claims that it has filed working explaining working capital position of comparable companies vis-a-vis the working capital position of assessee company and suitable adjustment is required to be provided. But, the TPO and CIT(A) rejected the claim of the assessee. The assessee has filed computation explaining working capital adjustment which needs to be considered by the lower authorities. Therefore, we are of the considered view that this issue needs to go back to the file of the AO/TPO to verify the claim of the assessee with reference to computation, if any, along with other supporting evidences to be filed by the assessee for providing working capital adjustments. Thus, we set aside the order of the ld. CIT(A) on this issue and direct the AO/TPO to re-examine the claim of the assessee with regard to working capital adjustments and decide the issue in accordance with law in all cases. 11. The next issue that came up for our consideration from IT(TP)A No. 2159/Chny/2017 and ITA No. 1365/Chny/2019 is entity level....
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....other state. According to the Ld. Counsel for the assessee, interest payment is taxable in the hands of the recipient of other contracting state on receipt basis, but not on accrual basis. In this regard, he relied upon the decision of Hon'ble Bombay High Court in the case of CIT vs M/s. Pramerica ASPF II Cyprus Holding Limited. 15. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. Interest payable by the assessee is taxable in the hands of the assessee under the Income-tax Act, 1961. Further, as per Article 12 of DTAA between India and Korea, interest is taxable in the hands of the AE. There is no dispute on this aspect. But, only dispute is whether said interest is taxable on accrual basis or receipt basis. As per the provisions of section 195 of the Act, any person responsible for paying to a non-resident, shall at the time of credit of such income to the account of the payee or at the time of payment thereof, whichever is earlier, deduct income-tax thereon at the rates in force. Since, the DTAA is silent on taxability of interest income i.e., whether on accrual basis or receipt basis, in our considered view,....
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....s ground was not raised by the assessee before Ld. DRP. The assessee seeks adjudication of the same by relying upon the decision of Hon'ble Supreme Court in NTPC V/s CIT [229 ITR 383] in view of the fact that this is purely a legal ground. It has been submitted that this issue stood covered in assessee's favor by the decision of this Tribunal rendered in Owens Corning (India) Pvt. Ltd. V/s DCIT [ITA No. 8522/Mum/2011] &Cash Edge (India) Pvt. Ltd. V/s ITO [IT A No.64/Del/2015] coupled with the decisions of Hon'ble Supreme Court rendered in Apollo Tyres 255 ITR 273, Malayalam Manorama 300 ITR 152 &HCL Comnet Systems and Services Ltd. 305 ITR 409. 8.2 After careful perusal of cited judicial decisions, we concur with the submissions made by Ld. AR. The relevant observations of co-oridnate bench of Mumbai Tribunal in Owens Corning (India} Pvt. Ltd. V/s DCIT [supra], for ease of reference, could be extracted in the following manner: 4.1. The additional ground being purely legal and not requiring any investigation of fresh facts, the same was admitted in view of the judgment of Hon'ble Supreme Court in the case of NTPC 229 ITR 383. It is noted that section 115JB is s....
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....d consequent write off of creditors should be treated as operating in nature. 20. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. There is no dispute with regard to facts that creditors arises out of purchase of material or receipt of service and in such cases, write off of creditors due to various reasons including price revision in payment etc should be treated as income and partakes the nature of operating income. At the same time, write off of creditors should relates to operating activity of the assessee or any creditor if any, on account of capital account cannot be considered as operating in nature. Further writing back of creditors depends upon wisdom of business enterprises with regard to timing of its identification etc. The very nature of credits written back is such that it is not peculiar to all the business transactions and so it cannot be considered as normal and direct income. Therefore, in our considered view while working out operating margin, only items of receipts and expenditure, which have direct relation for determining the operating profit have to be taken into account. Since, the asses....