TaxTMI 
TaxTMI 
2026 (9) TMI 374
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.... account of TP adjustment in arm's length price as the Ld. CIT(A) failed to appreciate the fact that Rule 108(4) very clearly states that the data of the comparables transactions should be the data pertaining to the financial year in which the taxpayer has entered into international transactions. 2) The Ld. CIT(A) has erred in law and on facts in directing the Transfer Pricing Officer (TPO) to exclude M/s. Accentia Technologies Ltd. from the final list of comparables on account of TP adjustment in arm's length price as the Ld. CIT(A) failed to appreciate the fact that the company has defined Health Receivable Cycle Management (HRCM) services in its Annual Reports which are part and parcel of IT Enabled Services and the company in its annual report has defined only this segment (HRCM). 3) The Ld. CIT(A) has erred in law and on facts in directing the Transfer Pricing Officer (TPO) to exclude M/s. Acropetal Technologies Ltd. from the final list of comparables on account of TP adjustment in arm's length price as the Ld. CIT(A) failed to appreciate the fact that the services offered by this company in "Engineering Design Services" segment are in the nature ....
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.... "A.3 R Systems International Ltd. A.3.1 I find that the TPO rejected the R Systems on the ground that it follows a different financial year and is in violation of the provision of Rule 108(4). A.3.2 This company has been accepted as a comparable in number of judgments by ITAT Delhi on the ground that the data for the financial year adopted by the assessee can be easily compiled from the audited statements of such company to align it to the provisions of Rule 10B(4). Since the sole reason to exclude was the different financial year closing, therefore, the conditions of Rule 10B(4) can be met if the quarterly data is available in public domain. AO is directed to accept it as a good comparable if the assessee produces quarterly data available in public domain for the subject year." 5. That being the case, the Revenue could hardly dispute that the learned CIT(A) has duly issued a conditional direction to include this entity M/s. R System International Limited subject to a rider that the assessee shall produce the relevant financials going by Rule 10B(4) of the Income Tax Rules. We thus find no reason to interfere with the same. 6. Next comes the second....
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....,500/- as having incurred in relating to its exempt income. Learned CIT(A) appears to have noticed the clinching fact that the assessee has not derived any exempt income in the relevant previous year in light of Cheminvest Limited Vs. Commissioner of Income Tax (2015) 378 ITR 33 (Del). Rejected accordingly. This Revenue's appeal ITA No.7526/Del/2017 fails therefore. 12. Next comes the assessee's cross appeal ITA No.7669/Del/2017 raising the following grounds: 1. On the facts and circumstances of the case and in law the Hon'ble Commissioner of Income Tax 42 ['Hon'ble CIT(A)'] has erred in confirming the disallowance of employee's (Appeals) contribution to Recognized Provident Fund ('EPF'), Employee State Insurance ('ESI') and Labour Welfare Fund ('LWF') by alleging that there has been a delay in deposit of the contribution before the due date mentioned under the Employees Provident Funds and Miscellaneous Provisions Act, 1952, Employee's State Insurance Act, 1948 and various Labour Welfare Fund Act. 2. On the facts and circumstances of the case and in law the Hon'ble CIT(A) has failed to appreciate that the emp....
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....is a direct outcome of the purchase or sale transaction, it partakes of the same character as that of the transaction to which it relates. The Special Bench of the Tribunal in the case of Asstt. CIT v. Prakash L. Shah [2008] 115 ITD 167 (Mum) has held that foreign exchange fluctuation gain is a part of export turnover. Though such decision was rendered in the context of section 80HHC, but the same logic applies generally as well. The essence of the matter is that any gain or loss arising out of change in foreign currency rate in respect of transaction for import or export of goods is nothing, but inherent part of the price of import or the value of export. The Hon'ble Supreme Court in Sutlej Cotton Mills Ltd. v. CIT [1979] 116 ITR 1 has held that : 'where profit or loss arises to an assessee on account of appreciation or depreciation in the value of foreign currency held by it, on conversion into another currency, such profit or loss would ordinarily be trading profit or loss if the foreign currency is held by the assessee on revenue account or as a trading asset or as part of circulating capital embarked in the business'. When we read the ratio of the case of Sutlej Co....
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....ould be considered. 4.4 We again find this contention to be untenable. The obvious reason is that the calculation under TNMM proceeds on the basis of method of account consistently followed by the assessee. In the case of companies, it is only mercantile system of accounting which is applicable. Under mercantile system of accounting, any income arising out of transactions during the year is accounted for irrespective of its actual receipt. Similarly expenses are recorded at the time of incurring of liability irrespective of the actual payment. TNMM does not require the splitting of expenses and incomes into actually paid and received and then determining the profit margin. It is simple that profit margin is calculated with the figures from the Trading and profit and loss account which are recorded on accrual basis. TNMM does not mandate to first recast the Trading and profit and loss account with the figures of actual receipt or payments in respect of international transaction and then calculate the profit margin. If we accept the contention of the ld. AR, then it would not only disturb the calculation of operating profits, but also the method of accounting on which TNMM i....
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....to note that the assessee applied TNMM as the most appropriate method. The calculation of ALP under this method is prescribed in rule 10B(1)(e). Clause (ii) of this sub-rule provides that the : 'net profit margin realised by the enterprise or by an unrelated enterprise from a comparable uncontrolled transaction or a number of such transactions is computed having regard to the same base'. Clause (iii), which is quite relevant for our purpose provides that : 'the net profit margin referred to in sub-clause (ii) arising in comparable uncontrolled transactions is adjusted to take into account the differences, if any, between the international transaction and the comparable uncontrolled transactions, or between the enterprises entering into such transactions, which could materially affect the amount of net profit margin in the open market '. The position which follows on conjoint reading of clauses (ii) and (iii) is that net profit margin realized from comparable uncontrolled transactions is adjusted for differences between the international transaction and uncontrolled transactions. It follows that the adjustment is made in respect of the net profit margin of comparable....