DCIT Vs IQOR India Services Pvt. Ltd. (ITAT Delhi)
The Delhi ITAT disposed of the Revenue’s appeal and the assessee’s cross objection arising from the order of the CIT(A)-44, New Delhi for Assessment Year 2012-13. The assessee, engaged in providing IT-enabled services (ITES) to its Associated Enterprise, had benchmarked its international transactions under the Transactional Net Margin Method (TNMM) using Operating Profit to Operating Cost (OP/OC) as the Profit Level Indicator. The Transfer Pricing Officer (TPO) determined a different set of comparables, excluded foreign exchange gain from operating income, and proposed a transfer pricing adjustment of Rs. 8,10,68,752.
The first issue before the Tribunal concerned the treatment of foreign exchange fluctuation gain. The TPO had relied on the Safe Harbour Rules to treat such gain as non-operating. The assessee contended that the Safe Harbour Rules became effective only from 18.09.2013 and were therefore inapplicable to the assessment year under consideration. The CIT(A), relying on the decisions of the Delhi High Court in Ameriprise India Pvt. Ltd., Cashedge India Pvt. Ltd., and Fiserv India Pvt. Ltd., directed the AO/TPO to include foreign exchange gain/loss as operating while computing the operating profit margin of both the assessee and comparable companies. The Tribunal held that the issue stood covered by the Delhi High Court decision in PCIT vs. BC Management Services Pvt. Ltd., which had followed Cashedge India Pvt. Ltd. and Ameriprise India Pvt. Ltd., and observed that the Safe Harbour Rules were not applicable for the relevant assessment year. Accordingly, it upheld the CIT(A)’s order.
