Q. company is providing service to its associated enterprises in US. for hedging sundry debtors company entered in derivatives contracts. profit or loss on that derivative cost will be considered as cost for computation of cost plus mark up for transfer pricing.

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answered Aug 14, 2020 By CA Nirmal Kumar Jain, CA, CS, Gurugram
Foreign exchange fluctuation and Derivative cost/premium is NOT considered as operating cost hence while calculating the profit for comparability analysis, derivative cost should be excluded that will result into increase of profit margin on cost and shall be favorable.

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