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TMI Blog2014 (5) TMI 1184X X X X Extracts X X X X X X X X Extracts X X X X ..... er Pricing Officer (hereafter TPO) and confirmed by the Dispute Resolution Panel (hereafter DRP) of Rs. 89,49,290/- qua its transactions with the parent company. In the course of hearing, the assessee has vehemently argued that the impugned adjustment has been wrongly made by rejecting M/s KPIT Cummins as a comparable and also after excluding foreign exchange as a relevant factor for the purpose of determining arm's length price. In support, it places on record paper books and case law (which would be dealt with in succeeding paragraphs) and prays for acceptance of the appeal. 3. In reply, the Revenue strongly supports the adjustment in question made by the lower authorities and prays for confirmation thereof. 4. The assessee is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one M/s L&T Valdel as a comparable. In the course of proceedings before the TPO, it quoted another comparable by the name of M/s KPIT Cummins. The TPO did not agree with the comparability thereof. After taking into consideration the material quoted by the assessee, he issued show cause rejecting its pleas, inter alia, observing that despite an agreement between the assessee and its parent to enter into a service agreement based on 'cost +' method after transfer pricing study, no such consequential action had been forthcoming. Similarly, the TPO noticed that the transfer pricing study was inappropriate as in a correspondence dated 1.3.2007, the assessee had proposed invoices at the rate of cost + 20% by following consistency which wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2011 reiterated the comparability of M/s KPIT Cummins vis-à-vis the impugned international transactions on the ground that the parent entity place of operations in UAE fell in rest of the world category. It drew parallels of the other two comparables with itself and the PLI was computed @ 15.78% (assessee), 19.43% (M/s L&T Valdel) and 10.81%(M/s KPIT Cummins). The assessee submitted that the operating profits also were required to be fine tuned, inter-alia, keeping in mind the foreign exchange difference (gain/loss) in view of Accounting Standard 11. It quoted Company law to contend that income booked and realized might be different on the basis of prevailing rate on the date of invoice and realization. Per assessee, the said cost h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s produced assessment order as well as TPO's order pertaining to succeeding assessment year dated 31.10.2012 and 26.3.2013. The Authorized Representative states that the very entity M/s KPIT Cummins stands accepted as a comparable in succeeding assessment year whereas in the impugned assessment year, the relevant claim has been turned down. Thereafter, the assessee invites our attention to the paper book page 249 to explain that M/s KPIT Cummins is also engaged in product engineering solutions, automotive sub-systems, compliance engineering, product design and development etc. 8. The Revenue objects to the aforesaid documents of the succeeding assessment years on the ground that the same are not part of the case record. 9. Having peru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings in accordance with law. We also leave it open for the TPO to adjudicate upon the functional similarity of the said comparable vis-à-vis facts of this case. It is made clear that in case it is found that M/s KPIT Cummin has not been treated/admitted as a comparable in the succeeding assessment year 2009-10, this appeal would be deemed to have been dismissed. 10. Now we come to the second issue of inclusion of foreign exchange as a relevant factor in computation of ALP in transfer pricing proceedings. The TPO as well as the DRP in the present case are of the view that such a factor has to be excluded. In case law quoted by the assessee i.e. Four Soft Ltd. v. Dy. CIT [2011] 142 TTJ (Hyd) 358, the co-ordinate bench has held ..... X X X X Extracts X X X X X X X X Extracts X X X X
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