2023 (9) TMI 1167 - HC - Income Tax

Treatment of foreign exchange gain/loss by categorizing it as operating income/ operating loss - HELD THAT As appellant cannot but accept that it stands covered against the appellant/revenue by a decision titled Pr. Commissioner of Income Tax-3 v. Fiserv India Pvt. Ltd. 2016 (1) TMI 1276 - DELHI HIGH COURT TP Adjustment - comparable selection - Tribunal excluding two comparables i.e., Wipro Technologies Services Ltd. and Infosys Ltd - HELD THAT - As it cannot be disputed the fact that assessee is in the business of providing software development services. The two comparables i.e., Wipro Technologies Services Ltd. and Infosys Ltd. are in the business of not only software development services but also in the sale of software products. Clearly, since according to the Tribunal the segmental information was not available, the comparables were ordered to be excluded. We are of the opinion that there is no error in the approach adopted by the Tribunal, which is otherwise in line with the view taken by the coordinate bench.

Summary

Issues:
1. Whether the Tribunal erred in the treatment of foreign exchange gain/loss by categorizing it as operating income/operating loss?
2. Whether the Tribunal erred in law while excluding two comparables, Wipro Technologies Services Ltd. and Infosys Ltd?

Issue 1:
The appellant/revenue sought to challenge the order passed by the Income Tax Appellate Tribunal regarding the treatment of foreign exchange gain/loss. It was noted that a previous decision had ruled against the appellant/revenue on this issue.

Issue 2:
Regarding the exclusion of comparables, specifically Infosys Ltd. and Wipro Technologies Services Ltd., it was discussed that Infosys Ltd. was excluded based on previous Tribunal rulings for AYs 2007-08 and 2008-09. The exclusion of Wipro Technologies Services Ltd. was supported by a decision of the Tribunal in a related case.

In conclusion, the High Court found no error in the Tribunal's approach in excluding the comparables based on the lack of segmental information. The Court also clarified that certain notifications and guidelines did not apply to the case due to the specific assessment year in question. Ultimately, the appeal was closed as no substantial question of law was found to arise for consideration.