9911796707
TMI Blog2019 (6) TMI 478X X X X Extracts X X X X X X X X Extracts X X X X ..... ce (ALP) of the Manufacturing as well as Trading segment by excluding Foreign Exchange Gain/Loss (forex). 3. Briefly stated, the facts of the case are that the assessee is one of the companies of INA brand of Schaeffler group worldwide. It is a wholly owned subsidiary of Schaeffler KG, Germany. The assessee is engaged in the business of manufacturing, development, marketing and distribution of roller bearing, linear bearings system and engine components. The assessee filed its return declaring total income at Rs. Nil. Certain international transactions entered into by the assessee with its Associated Enterprises (AEs) were reported in Form No. 3CEB. The Assessing Officer (AO) referred the matter of determination of the arm's length price ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rables. When we advert to the nature of such foreign exchange gain earned by the assessee, it has not been controverted by the ld. DR that the same is in relation to the trading items emanating from the international transactions. If the foreign exchange gain/loss directly results from the trading items, we fail to appreciate as to how such foreign exchange fluctuation gain/loss can be considered as non-operating. 7. 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 sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax Vs. Ameriprise India Private Limited (ITA 206/2016) decided on 23.03.2016, holding foreign exchange gains earned by the assessee, which is in relation to trading items and emanating from international transactions, cannot be treated as non-operating losses and gains, the Hon'ble Delhi High Court in Pr. CIT VS. B.C. Management Services Pvt. Ltd. (2018) 403 ITR 45 (Del) reiterated held that foreign exchange fluctuation in relation to trading transactions, prior to safe harbor rules from 2013, is operating gain or loss. In view of the foregoing discussion, we are of the considered opinion that the amount of foreign exchange gain/loss arising out of trading transactions is required to be considered as an item of operating revenue/cost, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O held that the ALP of this transaction was to be taken at Nil. He, therefore, recommended transfer pricing adjustment amounting to Rs. 5.25 crore vide para 8.11 on page 87 of his order. However at the end of his order on page 89, he proposed only a transfer pricing adjustment of Rs. 7,35,83,486/- in relation to the Trading segment. In the penultimate para of his order, the TPO concluded that : `In view of the discussion as above, the arm's length price of the international transactions of the assessee company is not being disturbed except for transaction relating to Trading segment.' 11. It can be seen from the order of the Assessing Officer that he computed total income at Rs. 7,35,83,486/- by making the solitary transfer pricing additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nally recommended nor any addition was made by the AO. The enhancement notice was given by the ld. CIT(A) only qua the enhancement proposed by the TPO during remand proceedings, which also remained inconclusive ending with a direction from the ld. CIT(A) to the AO for making a further enquiry and then deciding, which is impermissible under law as such a power of restoration has been withdrawn from the CIT(A) by the Finance Act, 2001 w.e.f. 1.6.2001. The Revenue vide its ground no. 3 has also challenged the order of the ld. CIT(A) : `in directing the TPO to re-examine the issue of the management services paid'. Under such circumstances, it is palpable that the adjudication by the ld. CIT(A) on this issue has no legal legs to stand on. We, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he end of sub-section (2) of 92C. We, therefore, hold that the ld. CIT(A) was justified in extending the benefit of +/-5% margin in determining the ALP of the international transactions. This ground of the Revenue fails. 16. The only other effective ground of the Revenue is the direction of the ld. CIT(A) for exclusion of additional companies selected by the TPO from the list of comparables, which as per the Revenue, are comparable. 17. The facts concerning this issue are that the TPO ventured to determine the ALP of the international transactions recorded by the assessee. He tinkered with the list of comparables drawn by the assessee and introduced certain fresh comparables. The AO made the addition accordingly, which was challenged by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
