TaxTMI 
TaxTMI 
2026 (1) TMI 611
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....umstances of the case and in law, the Appellant craves to prefer an appeal against an order dated 25 June 2024 (received on 26 June 2024) passed by the Assessment Unit, Income Tax Department (hereinafter referred to as 'Ld. AO') under section 143(3) r.w.s 144C(13) and 144B of the Income-tax Act, 1961 ('the Act') in pursuance to the directions dated 27 May 2024 issued by the Hon'ble Dispute Resolution Panel ('DRP') u/s 144C(5) of the Act, on the grounds set out herein: 1. Ground No.1 - Transfer Pricing ('TP') adjustment amounting to INR 4,53, 19,689 in respect of the international transaction pertaining to purchase of raw material. 1.1 That on the facts and circumstances of the case and i....
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....ase and in law, while making the aforesaid TP adjustment, the Ld. TPO erred in adopting the following approach: 1.6.1 Considering 'loss on foreign exchange translation' w.r.t External Commercial Borrowing ('ECB') to the extent of INR 6,79,51, 132 (being a capital loss) as operating in nature for the purpose of calculation of operating profit margin relating to 'manufacturing segment'. 1.6.2 Erroneously rejecting the following functionally comparable companies selected by the Appellant in its TP Study: 'Gandhar Oil Refinery India Ltd.', 'GPPetroleums Ltd.' and 'Tashkent Oil Company Pvt. Ltd.'. 1.6.3 Arbitrarily selecting two companies namely, 'Pratap Tex- Chem Pvt....
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....39; without any basis, disregarding the advance tax paid of INR 11,30,00,000 (being already in excess of tax liability of the Appellant). 4. Ground No. 4: That on the facts and circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under section 270A of the Act. Each of the above grounds are independent and without prejudice to the other grounds of appeal preferred by the Appellant. 3. Brief facts of the case are that, the Assessee filed return of income declaring total income of Rs. 47,40,50,620/-. The case of the Assessee was selected for 'Complete Scrutiny' under CASS. Since the Assessee had entered international transactions and specified domestic transactions with Associates Enterprises....
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....und that margins were not tying up with the financial statements of the comparable companies and the detailed workings vis-a-vis the same was not provided. An Order of the rectification also came to be passed by the TPO on 06/12/2024 by determining the Arm's Length Range of weighted average OP/OI of the comparable independent companies from 5.76% to 8.39% with the median of the data set being 7.28%. Challenging the Final Assessment order, the Assessee preferred the present appeal on the grounds mentioned above. 5. The Ld. Counsel for the Assessee addressing on Ground No. 1.2, submitted that the TPO has committed error computing the margins of comparable companies without providing any basis. The Assessee has produced a Chart summarizing ....
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.... Ltd. 15.97% 15.88% 15.34% 15.88% 13. Valvoline Cummins Ltd. 16.48% 16.53% 16.33% 16.53% 14. Reliance Industries Ltd. (*) 12.79% - - - 15. Castrol India Ltd. (*) 25.26% - - - 35th Percentile 6.81% 6.10% 5.45% 5.76% Median 7.98% 7.28% 6.26% 7.28% 65th Percentile 8.94% 8.41% 7.64% 8.39% Appellant's margin (as per TPO) 5.67% 5.67% 5.67% 5.67% (*) The comparable has been directed to be excluded by the Hon'ble Dispute Resolution Panel ('DRP') 6. The Ld. Assessee's Representative contended that it is merely a calculation error which may be restored to ....
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....he same as arising from capital account transaction and hence it should not have been taxed in the year under consideration. Further submitted that the Financial Year 2016-17 the gain on foreign exchange transaction on the very same ECBs has been considered on non-operating nature. Thus, the Ld. Counsel for the Assessee sought for allowing the Ground No. 1.6.1. 10. Per contra, the Ld. Departmental Representative relying on the orders of the Lower Authorities sought for dismissal of the Ground No. 1.6.1. 11. We have heard both the parties and perused the material available on record. During the TP Study, the Assessee has not considered the forex loss of INR 6,79,51,132/- arising on account of translation of ECB as an "operating cost". ....