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TMI Blog2015 (8) TMI 418X X X X Extracts X X X X X X X X Extracts X X X X ..... ee files objection citing the decided judgments.In the case before us,the DRP has not discussed merits of any of the comparables objected to by the assessee.Similarly,the final decision of the DRP about FAR analysis is very general. Thus the order passed by the DRP is vague and unclear. So,in the interest of justice,matter is being restored back to the file of the DRP for fresh adjudication, who would afford a reasonable opportunity of hearing to the assessee. - Decided in favour of assessee for statistical purposes. Non exclusion of expenses incurred in foreign currency for travelling and communication charges from the total turnover - Held that:- The aforesaid question stands answered against the revenue in view of the decision of this Court in the case of CIT V/s. Gem Plus Jewellery India Ltd. Reported in [2010 (6) TMI 65 - BOMBAY HIGH COURT ] wherein held exemption u/s. 10A to be granted on foreign exchange gain earned (due to fluctuation of foreign exchange) on realization of export receipts in the year of export - Decided in favour of assessee - ITA No.1415/Mum/2014 - - - Dated:- 5-8-2015 - Sh. A.D. Jain and Rajendra, JJ. For The Assessee : S/Sh.M.P. Lohia,Nik ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case; 8.erred in rejecting K PIT Cummins Infosystems Limited as a comparable company on the ground that it has substantial related party transactions, without appreciating that consolidated financial statements was used, which eliminates the effect of related party transactions and also the fact that the TPO himself has used consolidated financial statements for computing operating margins in case of Mind tree Limited and Sasken Limited; 9.erred in rejecting CG-VAK Software and Exports Limited as a comparable company on the ground that the company has persistently incurred losses, disregarding the fact that the company is not a persistently loss making company; 10.erred in rejecting SIP Technologies and Exports Limited as a comparable company on the ground that the company has persistently incurred losses, disregarding the fact that the company has earned operating profits in the previous years; 11.erred in rejecting R S Software (India) Limited as a comparable company on the ground that the company is functionally different disregarding the fact that the company was considered as a comparable by the learned TPO in the previous year; 12.erred in rejecting Indium Sof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred in considering incorrect operating margins for certain companies considered to be comparable to the Appellant for the subject assessment year viz Mindtree Limited, KALS Information System Limited, Sas ken Limited and Axis IT T Limited; 22.erred in computing the operating margin of the Appellant by considering foreign exchange loss as part of operating costs disregarding the Appellant's submission for considering the same as a part of operating revenues; Benefit of +/- 5% 23.erred by not condidering that the adjustment to the arm's length price, if any, should be limited to the lower end of the 5 percent range as the Appellant has the right to exercise this option under the provided to Section 92e of the Act B.Corporate Tax Grounds Incorrect computation of export turnover 24.erred in not excluding expenses incurred in foreign currency for travelling and communication charges from the total turnover whereas the said sums were reduced from the export turnover, while computing the deduction available to the Appellant under section of 10A and Section 10AA of the Act. Incorrect computation of demand of tax 25.erred in short granting credit of taxes ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year under appeal was considered.The assessee contended before the TPO that the PLI reported by it at the rate of 17.03% was better than the average of PLI of the comparables, that the transactions should be treated at Arm s Length.The TPO, after examining the claim of the assessee observed that in its working of the PLI the assessee had reduced Foreign Exchange Loss(FEL)from the sales, that in the annual report FEL had been mentioned in schedule -14 which appeared as one of the items of expenditure, that it had reduced the cost base thereby inflating its OP/TC, that FEL had to be taken as the part of total cost. Accordingly, the TPO re-worked the assessee s PLI. The TPO also examined the comparables selected by the assessee .He was of the opinion that it had wrongly selected some of the comparables.He issued a show cause notice as to why the comparables should not be rejected for the reasons stated against their names.He also observed that the assessee had wrongly rejected some of the comparable which were functionally similar to it.Therefore,it was asked to show cause as to why the following comparables rejected by it in its search matrix should not be admitted to the list of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjustment that was required to be undertaken to account for the differences in level of working capital between the comparables and the assessee,that it did not allow the assessee the benefit of risk adjustment,that the DRP in its directions had not provided any specific findings on contentions of the assessee to reinstate the various comparables.It was further argued that DRP computed the TP adjustment by applying the Arm s mark-up to the entry level cost and compared the resultant ALP with the AE revenue only,that it did not apply entity level revenue,that the DPR had adopted inconsistent approach,that it erred in considering incorrect operating margin for Quintegra Limited,that the DRP considered operating margin as 0.79% on operating costs as against the correct margin of (-)0.79%,that the applications filed by the assessee u/s. 154 of the Act before the AO on 04. 03. 2013 and 24.10.2013 respectively were pending with the AO,that the DRP erred in considering incorrect operating margin for certain companies considered to be comparable to the assessee for AY.under appeal.The AR pressed comparables of Mindtree Limited and Sasken Limited only in that regard.He referred to pages no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Buildwell Assam (P.) Ltd.(133ITR736),the Honble Assam High Court has emphasised the importance of passing a reasoned order as under : Section 250(6) of the I.T. Act, 1961, prescribes the manner of disposal of an appeal. An order must be in writing containing the points for determination and decision.The object is obvious. It enables a party to know the precise points decided in his favour or against him. Absence of formulation of points for decision or want of clarity in decision puts a party in a quandary. A decision against a party enables him to go up in appeal. A decision by its very nature must be firm and should not be vague and unclear. (emphasis added). We have no hesitation in holding that the order passed by the DRP is vague and unclear. So,in the interest of justice,matter is being restored back to the file of the DRP for fresh adjudication, who would afford a reasonable opportunity of hearing to the assessee.It would pass a speaking order and meeting all the objection raised by the assessee.Besides,the AO is directed to decide the rectification applications filed by the assessee before him,if same are not disposed off till the receipt of the order.First effecti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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