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TMI Blog2018 (6) TMI 1454X X X X Extracts X X X X X X X X Extracts X X X X ..... EMBER For The Assessee : Sh. Rohit Tiwari, Advocate And Sh. Shobhit Tiwari, Advocate For The Department : Sh. Sanjay I Bara, CIT, D.R. ORDER PER K.NARASIMHA CHARY, JM This is an appeal preferred by the assessee challenging the order of by the Deputy Commissioner of Income-tax, Circle 1(1), Gurgaon ( for short ld. AO ) dated 12.01.2015 passed pursuant to the directions given by the Dispute Resolution Panel II, New Delhi vide directions dated 16.12.2014. 2. Brief facts of the case are that assessee is a private limited company, which is engaged in the business of import of assembly of component and reexport of assembled medical disposable balloon catheters as 100 % export oriented unit ( EOU). It is providing a captive production to its parent company and its parent company has helped in setting up and expansion of manufacturing facilities by providing technology, training, and finance administrative and marketing support to the assessee. Assessee imports different sub assemble parts i.e. semi finished balloon catheters which includes the purging of holes in the silicon tubing and fixing with wall, rings and the balloon. The final products are b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng capital adjustments. 7. First coming to the issue relating to the foreign exchange gain, learned TPO considered the foreign exchange gain or loss as non operating in nature basing on the definitions given in Safe Harbour Rules for calculating PLI, operating revenue, cost and operating margins. Learned DRP is also of the same opinion that the foreign exchange gain or loss is non-operating in nature. 8. It is the argument of the learned AR that the safe harbour rules are applicable only from Asstt. Year 2014-15, that too in specific cases. He submits that it has no retrospective effect, and from Asstt. Year 2007-08 till 2009-10, foreign exchange gain or loss is treated as operating gain or loss. As a matter of fact, the learned TPO had followed the same for the Asstt. Year 2009-10. Learned AR relied upon Rule 10TA where it says that such a definition is purpose of the Rule 10TA and Rule 10B to 10G only, and it is not a definition of operational gain or loss for the purpose of income-tax rules as a whole. 9. Further, it is brought to our notice that in assessee s own case in ITA No.895/Del/2014 by order dated 7.11.2016, a coordinate Bench of this Tribunal held that the for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Rules which were notified by the Revenue authority and came into force in 2013. In these circumstances, given that the present assessment period covers AY 2011-12, the treatment cannot be in accordance with those rules as held in 'Principal Commissioner of Income Tax Vs. M/s Cashedge India Pvt. Ltd., ITA 279/2016', decided on 04.05.2016. Consequently, no question of law arises. 12. We, therefore, in view of this established legal position, hold that the foreign exchange or loss is operative in nature and this ground is answered in favour of the assessee. Ground No.3 is accordingly allowed. 13. Now coming to transfer pricing issue, the assessee is challenging the selection of Hindustan Syringes Medical Devices Pvt. Ltd. as a comparable to the assessee to benchmark the international transaction. It is submitted by the learned AR that Hindustan Syringes Medical Devices Pvt. Ltd. is having a turnover of ₹ 365.15 crores, net of excise turnover is ₹ 352.86 crores whereas the assessee s turnover is only ₹ 24.37 crores. He further submits that the turnover of the assessee constitutes around 6.5% of the turnover of the Hindustan Syringes Medical De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computing the margin and bringing the assessee and the comparable on the same lengths. He also brought to our notice that in assessee s own case for AY 2009-10, the contention of the assessee was rejected by a coordinate bench of this Tribunal observing that though the assessee stated that the comparable company had also taken a risk whereas the assessee is a risk free entity, no risk adjustment working was submitted before the Bench. On this score, the Bench refused to entertain that ground relating to risk adjustment. 19. Having gone through the entire record, we are also of the considered opinion that unless the adjustment on account of risk is quantified and working is given, it is not possible to direct the authorities below to allow the risk adjustment as pleaded by the assessee. We, therefore, are of the considered opinion that it is not possible for us either to consider at the Tribunal level or to direct the AO to consider this aspect. Hence, Ground No.8 of the appeal is dismissed. 20. Now coming to Ground No.9 which relates to the working capital adjustment, learned TPO observed that the assessee had not demonstrated as to how its working capital could be compared w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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