Case Law Analysis
|Income Tax Appellate Tribunal
Transfer Pricing | Foreign Exchange Gains Classified as Operating Income Under TNMM, Expense Allocation Tied to Gross Profit Margins: ITAT Delhi
ITAT Delhi has ruled that foreign exchange gains arising from international transactions must be treated as operating income for transfer pricing purposes, and expense allocation must be calibrated using gross profit margins to determine the arm's length price. This sets a critical precedent for multinational enterprises using TNMM, forcing a reevaluation of how forex volatility and cost allocation impact their TP documentation and compliance strategy.
