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TMI Blog2018 (11) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... in the field of Transfusion Technology, supplying Blood processing systems as well as Blood bags and filters. The assessee filed its Audit report in Form no. 3CEB declaring eight international transactions. The Assessing Officer (AO) referred the matter to Transfer Pricing Officer (TPO) for determining the Arm's Length Price (ALP) of the international transactions. The assessee applied the TNMM in respect of three international transactions; Comparable uncontrolled Price (CUP) method in respect of one international transaction; and the RPM in respect of one international transaction, as the most appropriate methods for demonstrating them to be at ALP. There is no dispute on the determination of the ALP of any of the international transactions except the transaction reported at Sr. No. 2, that is, `Import of Finished goods' with transacted value of Rs. 58,12,31,464/- . The assessee applied the RPM to demonstrate that this international transaction was at ALP. The TPO observed that the assessee under this transaction was engaged in the `Distribution activity'. The assessee imported finished goods under this transaction from its Associated enterprises (AEs) and resold the same to non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st not granting functional adjustment relating to foreign exchange (forex) loss. The assessee treated forex loss of the comparables as non-operational and computed their PLI accordingly. The TPO while determining the ALP of the international transaction did not concur with the assessee that the foreign exchange loss should be taken as an item of non-operating nature. The ld. CIT(A) approved the TPO's stand that such foreign exchange loss should be taken as operating in nature, against which the assessee has come up before the Tribunal. 6. We have heard the rival submissions and gone through the relevant material on record. The Special Bench of the Tribunal in ACIT Vs Prakash I. Shah (2008) 115 ITD 167 (Mum)(SB) has held that the gain due to fluctuations in the foreign exchange rate emanating from export is its integral part and cannot be differentiated from the export proceeds simply on the ground that the foreign currency rate has increased subsequent to sale but prior to realization. It went on to add that when goods are exported and invoice is raised in a currency of the country where such goods are sold and subsequently when the amount is realized in that foreign currency and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as only before the ld. CIT(Appeals) that the assessee requested for granting adjustment on account of import duty paid because it incurred higher import duty in comparison with the comparable companies. The ld. CIT(A) rejected the assessee's contention by relying on the order passed by Delhi High Court in the case of Sony India (P) Ltd. Vs. DCIT (2008) 118 TTJ (Del) 865. Now the assessee is aggrieved by the rejection of such a claim. 10. After considering rival submissions and perusing relevant material on record, we find that the contention of the assessee for allowing separate adjustment in respect of higher payment of import duty is not tenable. 11. There can be no dispute on the principle that calculation of 'Gross profit' as envisaged under Rule 10B(1)(b) embraces cumulative effect of all the items of income and expenses leading to the determination of the amount of gross profit. Ordinarily, there can be no question of considering each item of such expenses or revenue in isolation de hors the other corresponding expenses or items of revenue to claim adjustment on the ground of any particular item of expenditure or income of the assessee on the higher side seen individually o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... torcycle & Scooters India Pvt. Ltd. VS. ACIT in ITA No. 1379/Del/2011 vide its order passed in the year 2015. 12. Reverting to the facts of the case, it is noticed that the assessee has made out a case that it paid import duty in respect of 100% of its goods purchased, whereas, the comparables incurred import duty only @ 2% of their purchases. In our considered opinion the fact whether the import duty has been paid or not or paid to lower extent by the comparables cannot have any effect over computation of gross profit margin of the comparables. If the assessee has made costly purchases, it will naturally earn more revenue from the sales as well. One can compare apple with apple and not with orange. If purchase of goods is of higher quality and costly, it is but natural that the sale will also be correspondingly at a higher price. It is impermissible to claim that the amount of higher import duty paid by the assessee should be adjusted in isolation without having effect on the higher sales price realized from the sale of such imported goods. Once we take figure of gross profit, it takes into account not only the higher debit side of cost of purchases but also the higher credit sid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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