The main issue revolves around a transfer pricing adjustment made to the international transaction of import of machine parts. The appellant company is involved in the manufacturing of filling and packing equipment for various industries.

The appellant challenges the operating sales figure adopted by the department. It is the claim that the revenue has overlooked the amounts of insurance claim receipt and foreign exchange fluctuation gain. The appellant also contends that the adjustment should have been made at the transaction level and not at the entity level with the necessary backing of various judicial precedents. The Hon’ble DRP in total disregard to the contention of the Assessee has given no directions.

The Hon’ble Tribunal concurring with the appellant’s contentions regarding the adjustment to be restricted to the transaction level, directed the Assessing Officer to verify the computation accordingly. Further also held that the department having not controverted the upward revision of the operating revenue, the same is to be added to the operating revenue of the assessee for the purpose of arriving at arm’s length price of the international transaction. (AY. 2010-11)