Corteva Agriscience Services India Pvt. Ltd. Vs DCIT (ITAT Hyderabad)
ITAT Hyderabad held that revision under section 263 of the Income Tax Act justified as consistency not followed in treatment of foreign exchange gain/loss amounts to error in sofar as it is prejudicial to the interest of revenue.
Facts- Subsequent to the assessment, PCIT issued notice under section 263 of the Act proposing to visit the issue relating to the assessee treating the foreign exchange loss as operating. Notably, the assessee reiterated their stand and also pleaded that there was detailed investigation by TPO and, therefore, no revision of order could be done.
CIT(IT&TP) not considering the nature of the foreign exchange loss in the light of the consistent accounting treatment given by the statutory auditors for the earlier and subsequent years, makes the assessment order erroneous insofar as prejudicial to the interest of Revenue. CIT(IT&TP), therefore, set aside the assessment order.
Being aggrieved, the present appeal is filed.
Conclusion- Held that non-considering of the consistent treatment given by the assessee to the foreign exchange gain/loss either prior or subsequent to 2017-18 amounts to error insofar as it is prejudicial to the interest of Revenue and, therefore, we find it difficult to hold that the learned CIT(IT&TP) committed anything illegality or irregularity in setting it aside and directing the learned TPO to consider the issue afresh, after affording an opportunity of being heard to the assessee.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
Aggrieved by the order dated 27/03/2023 passed under section 263 of the Income Tax Act, 1961 (for short “the Act ”), in the case of M/s. Corteva Agriscience Services India Private Limited (“the assessee”) for the assessment years 2017-18, assessee filed this appeal.
2. Assessee is engaged in the business of providing sourcing, finance including evaluation of prospective customers, telemarketing, processing of purchase orders and fulfilment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, operational assistance for marketing, formation of customer services and pricing policies, infrastructural support services and other transaction processing to Du Point group companies. For the assessment year 2017-18, assessee filed the revised return of income on 23/03/2018 declaring an income of Rs. 1,77,52,150/-. In view of the international transactions of the assessee with the Associated Enterprises (AEs) the determination of the Arm’s Length Price (ALP) was referred to the learned TPO and in respect of interest on delayed receivables, the learned TPO suggested an upward adjustment to the tune of Rs. 18,46,834/-.
3. During the proceedings before the learned TPO, learned TPO proposed to consider the foreign transactions (gain/loss) as operating in nature. The assessee while placing reliance on the decision of the Co-ordinate Benches of the Tribunal in the cases of Bucher Hydraulics Private Limited in ITA No. 124/Del/2017 and DHL Express (India) Private Limited vs. ACIT in ITA No. 7360/Mum/2010 and submitted that the foreign exchange loss on account of realization of foreign currency receivables should be treated as non-operating expense.
4. Learned TPO dealt with this aspect in his order in the following way:
“13. Taxpayers objection regarding the margin computation:
Taxpayer submitted that the TPO has erred in computing margin of the assessee company. Submission of the taxpayer are considered and accordingly, the margins are rectified and the revised margin of the taxpayer is as under:
