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2016 (4) TMI 1223 - ITAT DELHITPA - whether the foreign exchange gain or loss should be considered as operating revenue / operating cost of the assessee or not? - Held that:- The issue is squarely covered in favour of the assessee in view of the decision in Principal CIT Vs. Fiserve India Pvt. Ltd. [2016 (1) TMI 1276 - DELHI HIGH COURT] wherein as directed to treat the foreign exchange gain/ loss as an operating item. Thus hold that foreign exchange fluctuation gain earned by the assessee is operating income and therefore ld. TPO/AO is directed to adjust the margin of the assessee treating foreign exchange gain as operating income of the assessee for determining PLI for comparability analysis. Working capital adjustments - Held that:- As submitted before us that ld. TPO has considered incorrect margins as the ld. TPO has taken figures from the data base (prowess) and not from the actual balance sheets of the comparable company. A chart is also submitted before us showing error in the calculation wherein in case of each and every comparable there are certain errors pointed out. As the submission made by the assessee is not possible for verification at this stage therefore we set aside this issue to the file of ld AO for verification of the claim made by the assessee and correct the figures accordingly and then grant working capital adjustment to the assessee. Selection to the comparable of Goldstone Technology Ltd - Held that:- Markets in the IS and the India were fundamentally different and, that the results of the Indian segment of the US operations of Goldstone Technologies constituted an inappropriate a comparable cannot be said to be perverse. The basis of allocation of costs and, therefore, the working of the profits was also not clear, is another aspect on which the court is unable to hold that the conclusion is perverse. Disallowance u/s 14A read with Rule 8D (2) - Held that:- Recording of satisfaction on the correctness of claim of the assessee on disallowance u/s 14A before invoking rule 8 D of the Income tax rules 1962 is mandatory. The language of section 14A provides that AO must record a satisfaction if he was unsatisfied with any incorrect claim of the assessee including non-disallowance. If he failed to record such a finding then it cannot be said that he rightly invoked provision of section 14A of the act for application of rule 8D. Thus we direct LD AO to delete the disallowance of ₹ 237585/- u/s 14A of the Act. See I.P. Support Services India (P) Ltd vs. CIT [2015 (10) TMI 752 - DELHI HIGH COURT ] Rectification of mistake - Held that:- As perused the chart of working capital adjustment submitted before us wherein may corrections with respect to each of the comparables have been pointed out by the ld DR. we have also perused the ground No.2.1 as well as ground No.2.2 of the appeal wherein certain errors are pointed out. Surprisingly when passing the order pursuant to order of ld. DRP if it results in to enhancement in adjustment and not reduction therein, Ld. TPO should have granted an opportunity to verify the correctness of the computation as a principle of natural justice. Therefore in the interest of justice we set aside ground No.2 of the appeal on Transfer Pricing issues back to the file of ld. TPO with a direction to verify the computation of margins pointed out by LD AR and then correct them for computation of arms length pricing of the international transaction.
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