M/S. HYUNDAI WIA INDIA PVT. LTD.,KANCHIPURAM V. DCIT, CORPORATE CIRCLE-1(1), CHENNAI

ITTPA 48/CHNY/2024

AI Insights

The case involves M/s. Hyundai Wia India P. Ltd., which appealed against the final assessment order passed by the Assessing Officer pursuant to the directions of the Dispute Resolution Panel. The primary issues revolved around the rejection of the appellant's transfer pricing documentation, the selection of comparable companies by the TPO, and the treatment of export incentives and CSR expenditures. The Tribunal examined the applicability of the Transactional Net Margin Method (TNMM) for both manufacturing and market support services segments of the appellant, and whether export incentives should be considered as operating income. The Tribunal also addressed the issue of whether CSR expenditures qualify for deduction under section 80G of the Income Tax Act.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 825045 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 30-12-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2020-2021
• Appeal Filed On: 05-09-2024
• Other Referred Cases: Same Deutz Fahr India Private Limited v DCIT, ZF Rane Automotive India Private Limited v. DCIT, ZF Commercial Vehicle Control Systems India Ltd. v. DCIT, Greenland Exports Pvt Ltd v. DCIT, CIT v. Welspun Zucchi Textiles Ltd., AB INBEV GCC Services India Pvt. Ltd v. DCIT, Doowon Automotive India Private Limited v. I.T.A. No. 692/Mds/2016, Mobis India Ltd. v. Dy. CIT, M/s. Source Hov India Private Limited v. The DCIT, M/s. Goldman Sachs Services Pvt. Ltd. v, JCIT, First American (India) (P.) Ltd. v. Asstt. CIT, Sling Media (P.) Ltd. v. Deputy Commissioner of Income-tax, Optum Global Solutions (India) (P.) Ltd. v. Deputy Commissioner of Income-tax, Power Mech Projects Ltd. v. Deputy Commissioner of Income-tax
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARV SREENIVASAN
• Assessee Lawyers: S.P.CHIDAMBARAM
• Keywords: Set aside; Business income; Transfer pricing; International transaction; Business expenditure; Depreciation; Wholly owned subsidiary; Charitable institution
• Section: 37; 28; 2; 80G

Judgement Text

"आयकर अपीलीय अिधकरण, ’ड ’ \u000eयायपीठ, चे\u000eनई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH: CHENNAI \u0001ी मनु क ुमार िग र, \u000eाियक सद\u0012 एवं \u0001ी एस. आर. रघुनाथा, लेखा सद\u0012 क े सम BEFORE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRI S.R.RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./IT(TP)A No.48/Chny/2024 िनधा\u0018रण वष\u0018/Assessment Year: 2020-21 M/s. Hyundai Wia India Pvt. Ltd., No.48, Survey No.78-80, Kandamangalam Village, Sengadu Post, Sriperumbudur Taluk, Kanchipuram District - 602 105. PAN: AACCH 3504K Vs. The DCIT, Corporate Circle-1(1), Chennai. (अपीलाथ /Appellant) ( यथ /Respondent) अपीलाथ क ओर से/ Appellant by : Mr. S.P .Chidambaram, Advocate यथ क ओर से /Respondent by : Mr. ARV Sreenivasan, CIT सुनवाईक तार ख/Date of Hearing : 23.10.2025 घोषणाक तार ख /Date of Pronouncement : 30.12.2025 आदेश / O R D E R PER MANU KUMAR GIRI, JM: This appeal has been preferred by the assessee against the final assessment order bearing DIN & Order No. ITBA/AST/S/143(3)/2024- 25/1066517355(1) dated 09.07.2024 passed by the Assessing Officer (“AO”) Printed from counselvise.com pursuant to the directions issued by the Dispute Resolution Panel (“DRP”) vide F.No.147/DRP-2/Bang/2023 21. 2. Ground No.2 being general in nature and no specific arguments having been advanced thereon, the same does not require adjudication and is dismissed. 3. The remaining grounds pertain to both corporate tax issues. At AR”) submitted that certain transfer pricing grounds are consequential and would become academic if the principal issues are decided in favour of the assessee. 4. The Assessee has raised the following 1. Rejection of Transfer Pricing (TP) documentation of the Appellant on account of application of filters for selection of comparable companies by the Appellant. 2. The TPO rejected the transfer pricing documentation maintained by the Appellant and undertook fresh search to identify new comparable companies and confirming the order of TPO in selecting Talbros Engineering Limited and Adroit Industries Limited without appreciating the fact that the said companies are functionally dissimilar. 3. The AO/DRP erred in law and facts by confirming the order of TPO in considering the export incentive and duty drawback income Scheme (MEIS) scrip income as non of the Appellant. 4. Rejection of depreciation cost claimed by the Assessee pertaining to assets installed in 5th phase expansion project as extra ordinary expense. 5. The AO/ DRP having admi erred in not granting the working capital adjustment while determining the operating profit margins of the Appellant. 6. The AO/DRP erred in confirming the disallowance of deduction claimed under section 80G of the Act without appreciating that sections 37 and 80G of the Act are mutually exclusive and restriction of deduction under section 37 will not affect the eligibility of the claim under section 80G. 2 IT(TP)A No. M/s. Hyundai Wia India P. Ltd. pursuant to the directions issued by the Dispute Resolution Panel (“DRP”) vide 2/Bang/2023-24 dated 20.06.2024 for the Assessment Year 2 Ground No.2 being general in nature and no specific arguments having been advanced thereon, the same does not require adjudication and is dismissed. The remaining grounds pertain to both transfer pricing issues . At the outset, the learned Authorised Representative (“Ld. AR”) submitted that certain transfer pricing grounds are consequential and would become academic if the principal issues are decided in favour of the assessee. The Assessee has raised the following Grounds of Appeal. Rejection of Transfer Pricing (TP) documentation of the Appellant on account of application of filters for selection of comparable companies by the Appellant. The TPO rejected the transfer pricing documentation maintained by the Appellant and undertook fresh search to identify new comparable companies and confirming the order of TPO in selecting Talbros Engineering Limited and Adroit without appreciating the fact that the said companies are The AO/DRP erred in law and facts by confirming the order of TPO in considering the export incentive and duty drawback income – Merchandise Exports from India ) scrip income as non-operating income while computing the margins Rejection of depreciation cost claimed by the Assessee pertaining to assets installed in 5th phase expansion project as extra ordinary expense. The AO/ DRP having admitted the additional grounds on working capital adjustment, erred in not granting the working capital adjustment while determining the operating profit margins of the Appellant. The AO/DRP erred in confirming the disallowance of deduction claimed under ction 80G of the Act without appreciating that sections 37 and 80G of the Act are mutually exclusive and restriction of deduction under section 37 will not affect the eligibility of the claim under section 80G. IT(TP)A No.48/Chny/2024 M/s. Hyundai Wia India P. Ltd. pursuant to the directions issued by the Dispute Resolution Panel (“DRP”) vide 24 dated 20.06.2024 for the Assessment Year 2020- Ground No.2 being general in nature and no specific arguments having been advanced thereon, the same does not require adjudication and is dismissed. transfer pricing issues and the outset, the learned Authorised Representative (“Ld. AR”) submitted that certain transfer pricing grounds are consequential and would become academic if the principal issues are decided in favour of the assessee. Grounds of Appeal. Rejection of Transfer Pricing (TP) documentation of the Appellant on account of application of filters for selection of comparable companies by the Appellant. The TPO rejected the transfer pricing documentation maintained by the Appellant and undertook fresh search to identify new comparable companies and erred in confirming the order of TPO in selecting Talbros Engineering Limited and Adroit without appreciating the fact that the said companies are The AO/DRP erred in law and facts by confirming the order of TPO in considering Merchandise Exports from India operating income while computing the margins Rejection of depreciation cost claimed by the Assessee pertaining to assets tted the additional grounds on working capital adjustment, erred in not granting the working capital adjustment while determining the operating The AO/DRP erred in confirming the disallowance of deduction claimed under ction 80G of the Act without appreciating that sections 37 and 80G of the Act are mutually exclusive and restriction of deduction under section 37 will not affect the Printed from counselvise.com 5. The assessee was incorporated on 01.03.2010 as a wholly owned subsidiary of Hyundai Wia Corporation, South Korea. The manufacturing facility of the assessee is located at Chennai, India. The assessee is engaged in the business of manufacturing drive shafts support services, including after (“AEs”). The assessee operates under two segments: • Manufacturing Segment • Market Support Services Segment (“MSS”) 6. During the assessm international transactions with its Associated Enterprises (AEs). The Ld AR submitted that it had adopted TNMM as the most appropriate method for benchmarking the international transaction and the Assesse following results: - Transfer Pricing Method TNMM (manufacturing segment) TNMM (MSS segment) 7. The TPO has accepted the methodology adopted by the Assessee i.e. TNMM for both the segments and concluded that the margins earned in MSS segment is at arm’s length. However, the TPO has recomputed the margins of 3 IT(TP)A No. M/s. Hyundai Wia India P. Ltd. The assessee was incorporated on 01.03.2010 as a wholly owned subsidiary of Hyundai Wia Corporation, South Korea. The manufacturing facility of the assessee is located at Chennai, India. The assessee is engaged in the business of manufacturing drive shafts for four-wheelers and also renders market support services, including after-sales support, to its Associated Enterprises The assessee operates under two segments: Manufacturing Segment Market Support Services Segment (“MSS”) During the assessment year 2020-21, the Assessee entered into certain international transactions with its Associated Enterprises (AEs). The Ld AR submitted that it had adopted TNMM as the most appropriate method for benchmarking the international transaction and the Assessee had reported the Transfer Pricing Method PLI Assessee’s Margin Weighted average arithmetic mean of comparable companies TNMM (manufacturing segment) Operating Profit/ Operating cost (OP/OC) 4.33% TNMM (MSS segment) 23.53% The TPO has accepted the methodology adopted by the Assessee i.e. TNMM for both the segments and concluded that the margins earned in MSS segment is at arm’s length. However, the TPO has recomputed the margins of IT(TP)A No.48/Chny/2024 M/s. Hyundai Wia India P. Ltd. The assessee was incorporated on 01.03.2010 as a wholly owned subsidiary of Hyundai Wia Corporation, South Korea. The manufacturing facility of the assessee is located at Chennai, India. The assessee is engaged in the wheelers and also renders market sales support, to its Associated Enterprises 21, the Assessee entered into certain international transactions with its Associated Enterprises (AEs). The Ld AR submitted that it had adopted TNMM as the most appropriate method for e had reported the Weighted average arithmetic mean of comparable companies 4.57% 11.43% The TPO has accepted the methodology adopted by the Assessee i.e. TNMM for both the segments and concluded that the margins earned in MSS segment is at arm’s length. However, the TPO has recomputed the margins of Printed from counselvise.com the Assessee in the manufacturing segment by excluding export incentives i.e. MEIS scrip income and duty draw back income as non also by included three more comparable companies in the final list of comparables. The TPO also rejected t adjustment. Accordingly, the TPO has determined the margin of the Assessee in manufacturing segment to be at 1.76% against 8 comparable companies margin of 4.73% to 6.91% with a median of 5.66%.Since the Assessee m fall within the range, the TP adjustment was proposed on the difference between the margin of the Asseesse (i.e. 1.76%) and the median of comparable companies (i.e.5.66%).The TPO vide order dated 22.02.2023 determined the quantum of adjustment at Rs.8,17,27,919/. A draft assessment order dated 25.09.2023 was passed by the Assessing Officer incorporating the TP adjustment. The Assessee filed its objections before the DRP, along with additional ground on working capital adjustment. The DRP issue dated 20.06.2024 upholding the action/order of the TPO rejecting the additional ground. Aggrieved by the final assessment order, the Assessee has preferred the above appeal before us. 8. The Ld. AR placed on record ground by referring to the findings of lower authorities. Our attention has been drawn to 4 IT(TP)A No. M/s. Hyundai Wia India P. Ltd. the Assessee in the manufacturing segment by excluding export incentives i.e. MEIS scrip income and duty draw back income as non-operating income and also by included three more comparable companies in the final list of comparables. The TPO also rejected the Assesseee’s claim on depreciation cost adjustment. Accordingly, the TPO has determined the margin of the Assessee in manufacturing segment to be at 1.76% against 8 comparable companies margin of 4.73% to 6.91% with a median of 5.66%.Since the Assessee m fall within the range, the TP adjustment was proposed on the difference between the margin of the Asseesse (i.e. 1.76%) and the median of comparable companies (i.e.5.66%).The TPO vide order dated 22.02.2023 determined the t at Rs.8,17,27,919/. A draft assessment order dated 25.09.2023 was passed by the Assessing Officer incorporating the TP adjustment. The Assessee filed its objections before the DRP, along with additional ground on working capital adjustment. The DRP issue dated 20.06.2024 upholding the action/order of the TPO rejecting the additional ground. Aggrieved by the final assessment order, the Assessee has preferred the The Ld. AR placed on record ground-wise chart and advan by referring to the findings of lower authorities. Our attention has been drawn to IT(TP)A No.48/Chny/2024 M/s. Hyundai Wia India P. Ltd. the Assessee in the manufacturing segment by excluding export incentives i.e. operating income and also by included three more comparable companies in the final list of he Assesseee’s claim on depreciation cost adjustment. Accordingly, the TPO has determined the margin of the Assessee in manufacturing segment to be at 1.76% against 8 comparable companies margin of 4.73% to 6.91% with a median of 5.66%.Since the Assessee margin did not fall within the range, the TP adjustment was proposed on the difference between the margin of the Asseesse (i.e. 1.76%) and the median of comparable companies (i.e.5.66%).The TPO vide order dated 22.02.2023 determined the t at Rs.8,17,27,919/. A draft assessment order dated 25.09.2023 was passed by the Assessing Officer incorporating the TP adjustment. The Assessee filed its objections before the DRP, along with additional ground on working capital adjustment. The DRP issued directions dated 20.06.2024 upholding the action/order of the TPO rejecting the additional ground. Aggrieved by the final assessment order, the Assessee has preferred the wise chart and advanced arguments by referring to the findings of lower authorities. Our attention has been drawn to Printed from counselvise.com various documents as placed in paper book, case law compendium and the extract of annual report of comparable companies. The Ld. CIT advanced arguments and supported the findings of TPO / DRP. Having heard rival submissions and upon perusal of case records, our adjudication is as under. The core issues which fall for our primary consideration are: a) Treatment of export incentives as operating income while margin of Assessee b) Considering the working capital adjustment claimed by the Assessee. 9. Ground 5 - TPO considered export incentive Scheme (MEIS) scrip income and duty drawback income as non income while computing the margins of the Appellant. 10. The Ld.AR submitted that during AY 2020 export incentives of Rs. 6.24 crores under the Merchandise Exports from India Scheme (‘MEIS’) of the Government of India. The sa operating in nature while computing the operating margins of the assessee. According to the Ld. AR, the incentive received under the MEIS Scheme was in the nature of export incentive which was provided to augment the regular business operations of the assessee and to encourage its exports, designed to reward exporters. These rewards are given by the way of duty credit scrip to exporters. The Ld. AR showed us that, the basis and manner of disbursement of MEIS subsidy was directly linked 5 IT(TP)A No. M/s. Hyundai Wia India P. Ltd. various documents as placed in paper book, case law compendium and the extract of annual report of comparable companies. The Ld. CIT and supported the findings of TPO / DRP. Having heard rival submissions and upon perusal of case records, our adjudication is as under. The core issues which fall for our primary consideration are: Treatment of export incentives as operating income while margin of Assessee Considering the working capital adjustment claimed by the Assessee. TPO considered export incentive -Merchandise Exports from India Scheme (MEIS) scrip income and duty drawback income as non income while computing the margins of the Appellant. The Ld.AR submitted that during AY 2020-21, the Assessee had received export incentives of Rs. 6.24 crores under the Merchandise Exports from India Scheme (‘MEIS’) of the Government of India. The same was considered as operating in nature while computing the operating margins of the assessee. According to the Ld. AR, the incentive received under the MEIS Scheme was in the nature of export incentive which was provided to augment the regular perations of the assessee and to encourage its exports, designed to reward exporters. These rewards are given by the way of duty credit scrip to exporters. The Ld. AR showed us that, the basis and manner of disbursement of MEIS subsidy was directly linked with the quantum of exports made by the IT(TP)A No.48/Chny/2024 M/s. Hyundai Wia India P. Ltd. various documents as placed in paper book, case law compendium and the extract of annual report of comparable companies. The Ld. CIT-DR also and supported the findings of TPO / DRP. Having heard rival submissions and upon perusal of case records, our adjudication is as under. Treatment of export incentives as operating income while computing the Considering the working capital adjustment claimed by the Assessee. Merchandise Exports from India Scheme (MEIS) scrip income and duty drawback income as non-operating 21, the Assessee had received export incentives of Rs. 6.24 crores under the Merchandise Exports from India me was considered as operating in nature while computing the operating margins of the assessee. According to the Ld. AR, the incentive received under the MEIS Scheme was in the nature of export incentive which was provided to augment the regular perations of the assessee and to encourage its exports, designed to reward exporters. These rewards are given by the way of duty credit scrip to exporters. The Ld. AR showed us that, the basis and manner of disbursement of with the quantum of exports made by the Printed from counselvise.com assessee. The Ld AR also explained that these scrips are utilized by the Assessee only to pay the basic customs duty on imports and also demonstrated it based on the bill of entry and related workings. The Ld. AR als through the provisions of Section 28 of the Act and showed us that the Scheme was specifically mandated as taxable business income of the assessee. It was therefore urged that these export incentives are inextricably connected to the operations of the company and hence rightly considered as operating in nature. 11. The Ld. AR relied on the following case laws wherein export incentives were treated to be operating item: 1. Same Deutz Fahr India Private Limited v DCIT Circle No.45/Chny/2024 2. ZF Rane Automotive India Private Limited v. DCIT [2025] 177 taxmann.com 442 (Chennai - Trib.) 3. ZF Commercial Vehicle Control Systems India Ltd., v. DCIT IT(TP)A Nos.: 50 & 132/Chny/2024 4. Greenland Exports Pvt Ltd v. DCIT [2017] 88 taxmann.c Trib.) 5. CIT v. Welspun Zucchi Textiles Ltd., [2017] 77 taxmann.com 137 (Bombay)/ [2017] 245 Taxman 132 (Bombay) 6. AB INBEV GCC Services India Pvt. Ltd v, DCIT [2023] 149 taxmann.com 452 (Bangalore - Trib.) 12. Per contra, the Ld. DR for the Revenue supported the order of the lower authorities. He submitted that, the MEIS incentive was not directly linked with the operations of the assessee but only the exports and therefore it was rightly excluded from computati 6 IT(TP)A No. M/s. Hyundai Wia India P. Ltd. assessee. The Ld AR also explained that these scrips are utilized by the Assessee only to pay the basic customs duty on imports and also demonstrated it based on the bill of entry and related workings. The Ld. AR als through the provisions of Section 28 of the Act and showed us that the Scheme was specifically mandated as taxable business income of the assessee. It was therefore urged that these export incentives are inextricably connected to ons of the company and hence rightly considered as operating in The Ld. AR relied on the following case laws wherein export incentives were treated to be operating item: Same Deutz Fahr India Private Limited v DCIT Circle-1 Vellore (IT (TP) A ZF Rane Automotive India Private Limited v. DCIT [2025] 177 taxmann.com Trib.) ZF Commercial Vehicle Control Systems India Ltd., v. DCIT IT(TP)A Nos.: 50 & 132/Chny/2024 Greenland Exports Pvt Ltd v. DCIT [2017] 88 taxmann.com 988 (Chennai CIT v. Welspun Zucchi Textiles Ltd., [2017] 77 taxmann.com 137 (Bombay)/ [2017] 245 Taxman 132 (Bombay) AB INBEV GCC Services India Pvt. Ltd v, DCIT [2023] 149 taxmann.com Trib.) Per contra, the Ld. DR for the Revenue supported the order of the lower authorities. He submitted that, the MEIS incentive was not directly linked with the operations of the assessee but only the exports and therefore it was rightly excluded from computation of operating margin. He pointed out that several IT(TP)A No.48/Chny/2024 M/s. Hyundai Wia India P. Ltd. assessee. The Ld AR also explained that these scrips are utilized by the Assessee only to pay the basic customs duty on imports and also demonstrated it based on the bill of entry and related workings. The Ld. AR also took us through the provisions of Section 28 of the Act and showed us that the MEIS Scheme was specifically mandated as taxable business income of the assessee. It was therefore urged that these export incentives are inextricably connected to ons of the company and hence rightly considered as operating in The Ld. AR relied on the following case laws wherein export incentives 1 Vellore (IT (TP) A ZF Rane Automotive India Private Limited v. DCIT [2025] 177 taxmann.com ZF Commercial Vehicle Control Systems India Ltd., v. DCIT IT(TP)A Nos.: om 988 (Chennai - CIT v. Welspun Zucchi Textiles Ltd., [2017] 77 taxmann.com 137 (Bombay)/ AB INBEV GCC Services India Pvt. Ltd v, DCIT [2023] 149 taxmann.com Per contra, the Ld. DR for the Revenue supported the order of the lower authorities. He submitted that, the MEIS incentive was not directly linked with the operations of the assessee but only the exports and therefore it was rightly on of operating margin. He pointed out that several Printed from counselvise.com comparables had not earned any such export incentive and therefore inclusion of the same in assessee’s PLI would give skewed results. The Ld AR also countered this by taking us through the paper book subm export revenue and export incentive received by those comparable companies. 13. We have heard both the parties and perused the material on record. It is seen that, the assessee was in receipt of MEIS scrip income of INR 6.24 crores and duty drawback income of INR 4.16 crores under the Scheme of Government of India which was reported as part of the operating revenues in the audited financial statements of the assessee. The assessee is noted to have considered this government incentive i.e. OP/OC. Though MEIS scrip income and duty draw back income are provided by the Government of India emanates from two separate Act i.e. from the Foreign Trade Policy and the Customs Act, the main in promote exports and boost foreign exchange. The case of the Revenue however is that, MEIS receipts are not directly related to the ongoing operational activities of the assessee and are nonrecurring in nature and theref excluded while computing the operating margins of the assessee is not tenable. 14. In the present case, the Ld.AR has demonstrated that the Assessee has utilized these scrips against the payment of basic customs duty. Having perused 7 IT(TP)A No. M/s. Hyundai Wia India P. Ltd. comparables had not earned any such export incentive and therefore inclusion of the same in assessee’s PLI would give skewed results. The Ld AR also countered this by taking us through the paper book submitted with details of export revenue and export incentive received by those comparable companies. We have heard both the parties and perused the material on record. It is seen that, the assessee was in receipt of MEIS scrip income of INR 6.24 crores nd duty drawback income of INR 4.16 crores under the Scheme of Government of India which was reported as part of the operating revenues in the audited financial statements of the assessee. The assessee is noted to have considered this government incentive as an operating item of income for arriving at its PLI i.e. OP/OC. Though MEIS scrip income and duty draw back income are provided by the Government of India emanates from two separate Act i.e. from the Foreign Trade Policy and the Customs Act, the main intention behind this initiative is to promote exports and boost foreign exchange. The case of the Revenue however is that, MEIS receipts are not directly related to the ongoing operational activities of the assessee and are nonrecurring in nature and theref excluded while computing the operating margins of the assessee is not tenable. In the present case, the Ld.AR has demonstrated that the Assessee has utilized these scrips against the payment of basic customs duty. Having perused IT(TP)A No.48/Chny/2024 M/s. Hyundai Wia India P. Ltd. comparables had not earned any such export incentive and therefore inclusion of the same in assessee’s PLI would give skewed results. The Ld AR also itted with details of export revenue and export incentive received by those comparable companies. We have heard both the parties and perused the material on record. It is seen that, the assessee was in receipt of MEIS scrip income of INR 6.24 crores nd duty drawback income of INR 4.16 crores under the Scheme of Government of India which was reported as part of the operating revenues in the audited financial statements of the assessee. The assessee is noted to have considered as an operating item of income for arriving at its PLI i.e. OP/OC. Though MEIS scrip income and duty draw back income are provided by the Government of India emanates from two separate Act i.e. from the Foreign tention behind this initiative is to promote exports and boost foreign exchange. The case of the Revenue however is that, MEIS receipts are not directly related to the ongoing operational activities of the assessee and are nonrecurring in nature and therefore ought to be excluded while computing the operating margins of the assessee is not tenable. In the present case, the Ld.AR has demonstrated that the Assessee has utilized these scrips against the payment of basic customs duty. Having perused Printed from counselvise.com the terms of the scheme, we find that the MEIS incentive was directly and intrinsically related to the exports made by the assessee both to AEs and non AEs and therefore in our considered view, it ought to form part of the operating revenue .The Tribunal in th (TP)A No.45/Chny/2024) has held that “………We are unable to countenance the reasoning given by the lower authorities that, the export incentive ought to be excluded while computing the PLI because so not have such export incentives and therefore it may result in distorted comparison. According to us, this cannot be a reason to debar the assessee from considering export incentive, which otherwise as noted have, has the features of operating revenue. Only because some of the comparables operated only in domestic markets or had minimal exports cannot justify the TPO’s action of excluding the MEIS receipts from the operating revenues of the assessee. Rather, considering th the scheme and having regard to the fact that this incentive is directly linked with all exports, irrespective whether made to AEs or non there is merit in the assessee’s plea that, this incentive would impliedly be inter alia reflected whi cost of exports and thereby the overall profitability from exports. Hence, we are of the view that the exclusion of such export incentive from operating revenues would distort the operating profits of the asse company in our considered view therefore, the lower authorities were unjustified in treating the export incentives earned by the assessee under the MEIS Scheme to be non supported by the decision of the coordinate Rane Automotive India Private Limited v. DCIT (supra) rendered on similar facts and circumstances, wherein the incentives received in relation to exports were held to be item of operating nature. The relevant portion of the judgmen “…. whether an income is operating or non dependent upon the character of such income and its proximity to the normal business operation. Viewed from this angle, we feel that both the export incentives ar manufacturing and export as the entitlement of such incentive is wholly on manufacturing and export. In fact, Section 28 of the Act, specifically 8 IT(TP)A No. M/s. Hyundai Wia India P. Ltd. terms of the scheme, we find that the MEIS incentive was directly and intrinsically related to the exports made by the assessee both to AEs and non AEs and therefore in our considered view, it ought to form part of the operating revenue .The Tribunal in the case of Same Deutz Fahr India Private Limited (IT A No.45/Chny/2024) has held that “………We are unable to countenance the reasoning given by the lower authorities that, the export incentive ought to be excluded while computing the PLI because some of the comparable companies may not have such export incentives and therefore it may result in distorted comparison. According to us, this cannot be a reason to debar the assessee from considering export incentive, which otherwise as noted features of operating revenue. Only because some of the comparables operated only in domestic markets or had minimal exports cannot justify the TPO’s action of excluding the MEIS receipts from the operating revenues of the assessee. Rather, considering th the scheme and having regard to the fact that this incentive is directly linked with all exports, irrespective whether made to AEs or non there is merit in the assessee’s plea that, this incentive would impliedly be inter alia reflected while pricing the transaction or ascertaining the cost of exports and thereby the overall profitability from exports. Hence, we are of the view that the exclusion of such export incentive from operating revenues would distort the operating profits of the asse company in our considered view therefore, the lower authorities were unjustified in treating the export incentives earned by the assessee under the MEIS Scheme to be non-operating in nature. Our view is ably supported by the decision of the coordinate Bench in the case of ZF Rane Automotive India Private Limited v. DCIT (supra) rendered on similar facts and circumstances, wherein the incentives received in relation to exports were held to be item of operating nature. The relevant portion of the judgment is as under:- “…. whether an income is operating or non-operating would be heavily dependent upon the character of such income and its proximity to the normal business operation. Viewed from this angle, we feel that both the export incentives are intertwined with the core operation of manufacturing and export as the entitlement of such incentive is wholly on manufacturing and export. In fact, Section 28 of the Act, specifically IT(TP)A No.48/Chny/2024 M/s. Hyundai Wia India P. Ltd. terms of the scheme, we find that the MEIS incentive was directly and intrinsically related to the exports made by the assessee both to AEs and non- AEs and therefore in our considered view, it ought to form part of the operating India Private Limited (IT “………We are unable to countenance the reasoning given by the lower authorities that, the export incentive ought to be excluded while me of the comparable companies may not have such export incentives and therefore it may result in distorted comparison. According to us, this cannot be a reason to debar the assessee from considering export incentive, which otherwise as noted features of operating revenue. Only because some of the comparables operated only in domestic markets or had minimal exports cannot justify the TPO’s action of excluding the MEIS receipts from the operating revenues of the assessee. Rather, considering the terms of the scheme and having regard to the fact that this incentive is directly linked with all exports, irrespective whether made to AEs or non-AEs, there is merit in the assessee’s plea that, this incentive would impliedly le pricing the transaction or ascertaining the cost of exports and thereby the overall profitability from exports. Hence, we are of the view that the exclusion of such export incentive from operating revenues would distort the operating profits of the assessee company in our considered view therefore, the lower authorities were unjustified in treating the export incentives earned by the assessee operating in nature. Our view is ably Bench in the case of ZF Rane Automotive India Private Limited v. DCIT (supra) rendered on similar facts and circumstances, wherein the incentives received in relation to exports were held to be item of operating nature. The operating would be heavily dependent upon the character of such income and its proximity to the normal business operation. Viewed from this angle, we feel that both e intertwined with the core operation of manufacturing and export as the entitlement of such incentive is wholly on manufacturing and export. In fact, Section 28 of the Act, specifically Printed from counselvise.com states that these export incentives will chargeable to tax as \"profit gains of business or profession\", accordingly taking a cue from the corporate tax provisions, it could be safely inferred that export incentives are operating in nature. Further, the Act does not provide any specific definition of the specific term \" refer to other related Enactments/Rules to decipher the meaning of the aforesaid term. In this regard, the Safe Harbour Rules 10TA (1)(i) defines \"operating revenue\" in an inclusive manner to mean \"the revenue earned by the international transaction during the course of its normal operations but not including the following, namely. (vii) other incomes not relating to normal operations of the assessee\". From this definition it i an income to form part of operating income it should be derived from normal operations. Undoubtedly in the instant case, the export incentive is derived during the course of normal operations. “……… 6. Therefore,one cannot have qualms abo export incentives and it forms part of the core business operation. Accordingly, the same will have to be treated as operating revenue in the hands of the Assessee while computing its margin for the purpose of Transfer Pricing benchma We also hold that merely because some of the comparables may not have such export incentive cannot debar the Assessee from considering such income as operating revenue. Turning to the decisions relied on by the Ld the said decision it has been held in principle that export incentive is operating revenue, therefore this decision does not actually aid the contention of the Ld DR/DRP. The other decision which was co by DRP and also emphasised by Ld DR in the case of Goodyear India Ltd (supra), the issue was whether export incentive and rebate should be reduced from cost of goods. What was held was that such incentives were available to an Assessee only after therefore, could not go to reduce the cost of goods. Apparently, the issue for consideration in the aforesaid case is different from the issue under consideration. Therefore, the decision of Goodyear is distinguishable on facts. O Tribunal decision in the case of Greenland Exports (P.) Ltd. (supra) wherein it was held that export incentives and duty drawback are considered to be operating in nature. Relevant extract of the ruling is provided below: “….We have perused the orders and heard the rival contentions insofar as duty drawback and export incentives are concerned, the cases relied 9 IT(TP)A No. M/s. Hyundai Wia India P. Ltd. states that these export incentives will chargeable to tax as \"profit gains of business or profession\", accordingly taking a cue from the corporate tax provisions, it could be safely inferred that export incentives are operating in nature. Further, the Act does not provide any specific definition of the specific term \"operating income\". Therefore we refer to other related Enactments/Rules to decipher the meaning of the aforesaid term. In this regard, the Safe Harbour Rules 10TA (1)(i) defines \"operating revenue\" in an inclusive manner to mean \"the revenue earned by the assessee in the previous year in relation to the international transaction during the course of its normal operations but not including the following, namely. (vii) other incomes not relating to normal operations of the assessee\". From this definition it i an income to form part of operating income it should be derived from normal operations. Undoubtedly in the instant case, the export incentive is derived during the course of normal operations. “……… 6. Therefore,one cannot have qualms about the nature of such export incentives and it forms part of the core business operation. Accordingly, the same will have to be treated as operating revenue in the hands of the Assessee while computing its margin for the purpose of Transfer Pricing benchmarking analysis with comparable companies. We also hold that merely because some of the comparables may not have such export incentive cannot debar the Assessee from considering such income as operating revenue. Turning to the decisions relied on by the Ld DR. in the case of Sami Labs (supra), we find that in the said decision it has been held in principle that export incentive is operating revenue, therefore this decision does not actually aid the contention of the Ld DR/DRP. The other decision which was co by DRP and also emphasised by Ld DR in the case of Goodyear India Ltd (supra), the issue was whether export incentive and rebate should be reduced from cost of goods. What was held was that such incentives were available to an Assessee only after the exports were made and therefore, could not go to reduce the cost of goods. Apparently, the issue for consideration in the aforesaid case is different from the issue under consideration. Therefore, the decision of Goodyear is distinguishable on facts. Our view is also supported by the jurisdictional Tribunal decision in the case of Greenland Exports (P.) Ltd. (supra) wherein it was held that export incentives and duty drawback are considered to be operating in nature. Relevant extract of the ruling is “….We have perused the orders and heard the rival contentions insofar as duty drawback and export incentives are concerned, the cases relied IT(TP)A No.48/Chny/2024 M/s. Hyundai Wia India P. Ltd. states that these export incentives will chargeable to tax as \"profits and gains of business or profession\", accordingly taking a cue from the corporate tax provisions, it could be safely inferred that export incentives are operating in nature. Further, the Act does not provide any operating income\". Therefore we refer to other related Enactments/Rules to decipher the meaning of the aforesaid term. In this regard, the Safe Harbour Rules 10TA (1)(i) defines \"operating revenue\" in an inclusive manner to mean \"the assessee in the previous year in relation to the international transaction during the course of its normal operations but not including the following, namely. (vii) other incomes not relating to normal operations of the assessee\". From this definition it is clear that an income to form part of operating income it should be derived from normal operations. Undoubtedly in the instant case, the export incentive ut the nature of such export incentives and it forms part of the core business operation. Accordingly, the same will have to be treated as operating revenue in the hands of the Assessee while computing its margin for the purpose rking analysis with comparable companies. We also hold that merely because some of the comparables may not have such export incentive cannot debar the Assessee from considering such income as operating revenue. Turning to the decisions DR. in the case of Sami Labs (supra), we find that in the said decision it has been held in principle that export incentive is operating revenue, therefore this decision does not actually aid the contention of the Ld DR/DRP. The other decision which was considered by DRP and also emphasised by Ld DR in the case of Goodyear India Ltd (supra), the issue was whether export incentive and rebate should be reduced from cost of goods. What was held was that such incentives the exports were made and therefore, could not go to reduce the cost of goods. Apparently, the issue for consideration in the aforesaid case is different from the issue under consideration. Therefore, the decision of Goodyear is ur view is also supported by the jurisdictional Tribunal decision in the case of Greenland Exports (P.) Ltd. (supra) wherein it was held that export incentives and duty drawback are considered to be operating in nature. Relevant extract of the ruling is “….We have perused the orders and heard the rival contentions insofar as duty drawback and export incentives are concerned, the cases relied Printed from counselvise.com on by the ld. AR do support Assessee's case. As for the case of Goodyear India Ltd (supra) re was whether export incentive and rebate could be reduced from cost of goods. What was held was that such incentives were available to an Assessee only after the exports were made and therefore, could not go to reduce the cost of goods. In the cases relied by the Assessee, it has been uniformly held that such incentives were to be considered as a part of operational income under TNM method while working out the margin of an Assessee for comparability. hence we set of the authorities below on this issue and direct the Assessing officer/TPO to rework the results of the Assessee after considering the above terms as operational in nature.” Similarly, the co-ordinate Bench of this Tribunal in the case o Commercial Vehicle Control Systems India Ltd. (supra), has also held that export incentive ought to be treated as “operating revenue” while computing the margins of the tested party (i.e. Assessee therein). The relevant extract of paragraph 44 of the reproduced below: “44. We have heard the rival contentions, and we find that the issue of considering the incentives / grants as part of the operating income for computing the margin earned has already been decided by this tribuna (supra). Therefore, by following the decision of this tribunal we direct the TPO to consider government grants received by the Assessee as operating income and accept the margin computation of the Assessee and ordered accordingly. Thus, we allow the grounds of appeal filed by the Assessee.” 15. For the above reasons and are of the view that the export incentives viz., MEIS scrips and the duty drawback scheme awarded by the Government is meant to mitigate the gross operating costs of the assessee, and therefore \"operating revenue\" while computing the margin of the assessee. Ground No 5 raised by the assessee is accordingly allowed. 10 IT(TP)A No. M/s. Hyundai Wia India P. Ltd. on by the ld. AR do support Assessee's case. As for the case of Goodyear India Ltd (supra) relied on by the Assessing Officer, the issue was whether export incentive and rebate could be reduced from cost of goods. What was held was that such incentives were available to an Assessee only after the exports were made and therefore, could not go duce the cost of goods. In the cases relied by the Assessee, it has been uniformly held that such incentives were to be considered as a part of operational income under TNM method while working out the margin of an Assessee for comparability. hence we set aside the orders of the authorities below on this issue and direct the Assessing officer/TPO to rework the results of the Assessee after considering the above terms as operational in nature.” ordinate Bench of this Tribunal in the case o Commercial Vehicle Control Systems India Ltd. (supra), has also held that export incentive ought to be treated as “operating revenue” while computing the margins of the tested party (i.e. Assessee therein). The relevant extract of paragraph 44 of the order of this Tribunal is reproduced below: “44. We have heard the rival contentions, and we find that the issue of considering the incentives / grants as part of the operating income for computing the margin earned has already been decided by this tribunal in the case of Hyundai Motor India Limited (supra). Therefore, by following the decision of this tribunal we direct the TPO to consider government grants received by the Assessee as operating income and accept the margin computation of the Assessee rdered accordingly. Thus, we allow the grounds of appeal filed by For the above reasons and respectfully following the decisions (supra), we are of the view that the export incentives viz., MEIS scrips and the duty drawback scheme awarded by the Government is meant to mitigate the gross operating costs of the assessee, and therefore, it ought to be considere \"operating revenue\" while computing the margin of the assessee. Ground No 5 raised by the assessee is accordingly allowed. IT(TP)A No.48/Chny/2024 M/s. Hyundai Wia India P. Ltd. on by the ld. AR do support Assessee's case. As for the case of lied on by the Assessing Officer, the issue was whether export incentive and rebate could be reduced from cost of goods. What was held was that such incentives were available to an Assessee only after the exports were made and therefore, could not go duce the cost of goods. In the cases relied by the Assessee, it has been uniformly held that such incentives were to be considered as a part of operational income under TNM method while working out the aside the orders of the authorities below on this issue and direct the Assessing officer/TPO to rework the results of the Assessee after considering the ordinate Bench of this Tribunal in the case of ZF Commercial Vehicle Control Systems India Ltd. (supra), has also held that export incentive ought to be treated as “operating revenue” while computing the margins of the tested party (i.e. Assessee therein). The order of this Tribunal is reproduced below: “44. We have heard the rival contentions, and we find that the issue of considering the incentives / grants as part of the operating income for computing the margin earned has already been l in the case of Hyundai Motor India Limited (supra). Therefore, by following the decision of this tribunal we direct the TPO to consider government grants received by the Assessee as operating income and accept the margin computation of the Assessee rdered accordingly. Thus, we allow the grounds of appeal filed by following the decisions (supra), we are of the view that the export incentives viz., MEIS scrips and the duty drawback scheme awarded by the Government is meant to mitigate the gross operating it ought to be considered as part of the \"operating revenue\" while computing the margin of the assessee. Ground No 5 Printed from counselvise.com 16. Ground 7 – Working Capital Adjustment The next issue before us is the ground on working capital adjustment. The Ld AR submitted that this ground was raised as an additional ground before the Dispute Resolution Panel (DRP).The DRP having admitted the grounds has not allowed the adjustment on working capital. The Ld AR placed reliance on Jurisdictional ruling in the case of Doowon Automotive India Private Limited I.T.A. No. 692/Mds/2016 for AY 2011 14 , the Tribunal has held under: “……We have heard the rival contentions. With regard to the allowability of working capital adjustment, the Tribunal has considered similar issue in the assessment year 2011 692/Mds/2016, the Tribunal has observed and held as under: “7. The Ld. AR argued that the Assessing Officer/DRP has confirmed the action of the TPO in not providing working capital adjustment while determining net profit margin of the assessee. In the assessee's own case in the assessment year 2009 directed the TPO to examine the issue and consider working capital adjustment. Whereas, the Ld. TPO observed that the assessee company is actually buying the parts from the AE and working capital adjustment to be allowed if the assessee demonstrates with AE of allowing the credit period to the assessee and DRP confirm the action of the TPO and the Ld. AR demonstrated the Arithmetic Mean of 4.58% of seven comparables selected at Page 41 of paper book and referred to the worki adjustment PLR of 12.26% with the comparables current assets being sundry creditors, sundry debtors and inventories at Page 42 and supported working capital adjustment of comparables company based on the financial statements. The Ld. DR relied o prayed for no adjustment is required. Considering the facts and material on record the financial statements and the paper book, there is necessity 11 IT(TP)A No. M/s. Hyundai Wia India P. Ltd. Working Capital Adjustment The next issue before us is the ground on working capital adjustment. The Ld AR submitted that this ground was raised as an additional ground before the Dispute Resolution Panel (DRP).The DRP having admitted the grounds has not allowed rking capital. The Ld AR placed reliance on Jurisdictional ruling in the case of Doowon Automotive India Private Limited I.T.A. No. 692/Mds/2016 for AY 2011-12and also I.T.A. No. 3061/Chny /2017 for AY 2013 ribunal has held under: rd the rival contentions. With regard to the allowability of working capital adjustment, the Tribunal has considered similar issue in the assessment year 2011-12 and vide its order in I.T.A. No. 692/Mds/2016, the Tribunal has observed and held as under: “7. The Ld. AR argued that the Assessing Officer/DRP has confirmed the action of the TPO in not providing working capital adjustment while determining net profit margin of the assessee. In the assessee's own case in the assessment year 2009-10, DRP in its order dated 20.12.2013 has directed the TPO to examine the issue and consider working capital adjustment. Whereas, the Ld. TPO observed that the assessee company is actually buying the parts from the AE and working capital adjustment to the assessee demonstrates with AE of allowing the credit period to the assessee and DRP confirm the action of the TPO and the Ld. AR demonstrated the Arithmetic Mean of 4.58% of seven comparables selected at Page 41 of paper book and referred to the worki adjustment PLR of 12.26% with the comparables current assets being sundry creditors, sundry debtors and inventories at Page 42 and supported working capital adjustment of comparables company based on the financial statements. The Ld. DR relied on the order of TPO and prayed for no adjustment is required. Considering the facts and material on record the financial statements and the paper book, there is necessity IT(TP)A No.48/Chny/2024 M/s. Hyundai Wia India P. Ltd. The next issue before us is the ground on working capital adjustment. The Ld AR submitted that this ground was raised as an additional ground before the Dispute Resolution Panel (DRP).The DRP having admitted the grounds has not allowed rking capital. The Ld AR placed reliance on Jurisdictional ruling in the case of Doowon Automotive India Private Limited I.T.A. No. 12and also I.T.A. No. 3061/Chny /2017 for AY 2013- rd the rival contentions. With regard to the allowability of working capital adjustment, the Tribunal has considered similar issue in 12 and vide its order in I.T.A. No. “7. The Ld. AR argued that the Assessing Officer/DRP has confirmed the action of the TPO in not providing working capital adjustment while determining net profit margin of the assessee. In the assessee's own case n its order dated 20.12.2013 has directed the TPO to examine the issue and consider working capital adjustment. Whereas, the Ld. TPO observed that the assessee company is actually buying the parts from the AE and working capital adjustment to the assessee demonstrates with AE of allowing the credit period to the assessee and DRP confirm the action of the TPO and the Ld. AR demonstrated the Arithmetic Mean of 4.58% of seven comparables selected at Page 41 of paper book and referred to the working capital adjustment PLR of 12.26% with the comparables current assets being sundry creditors, sundry debtors and inventories at Page 42 and supported working capital adjustment of comparables company based on n the order of TPO and prayed for no adjustment is required. Considering the facts and material on record the financial statements and the paper book, there is necessity Printed from counselvise.com for working capital adjustment and accordingly we remit the issue to the file of AO to consider the material for fresh consideration. 5.3 By giving effect to the order of the ITAT, vide order dated 28.10.2018, the TPO had examined and allowed the benefit of working capital adjustment. Thus, respectfully following the above decision of the Coordinate Benches of the Tribunal, for the assessment year under consideration also, we direct the Assessing Officer to give suitable adjustment against the working capital component while determining the ALP.” 17. Per contra, the Ld DR also placed reli in the case of Mobis India Ltd. v. Dy. CIT [2013] 38 taxmann.com 231/[2014] where the decision was based on the factual aspect that the Assessee was not able to demonstrate the impact of working capital adjustment. The L objected to the argument of the Ld capital adjustment working has been given by the Assessee and a copy of the same is at pages 212 to 260 of the Assessee's paper book. 18. We perused the material on record a and furnished before the lower authority. Therefore, we direct the TPO to consider the working capital adjustment as provided in paper book page nos. 212 to 260 and grant adjustment while arriving at the arm’s length p is allowed. 12 IT(TP)A No. M/s. Hyundai Wia India P. Ltd. for working capital adjustment and accordingly we remit the issue to the consider the material for fresh consideration. 5.3 By giving effect to the order of the ITAT, vide order dated 28.10.2018, the TPO had examined and allowed the benefit of working capital adjustment. Thus, respectfully following the above decision of the Coordinate Benches of the Tribunal, for the assessment year under consideration also, we direct the Assessing Officer to give suitable adjustment against the working capital component while determining the Per contra, the Ld DR also placed reliance on a decision of Chennai ITAT in the case of Mobis India Ltd. v. Dy. CIT [2013] 38 taxmann.com 231/[2014] where the decision was based on the factual aspect that the Assessee was not able to demonstrate the impact of working capital adjustment. The L objected to the argument of the Ld. DR and pointed out that complete working capital adjustment working has been given by the Assessee and a copy of the same is at pages 212 to 260 of the Assessee's paper book. We perused the material on record and find that the working is available and furnished before the lower authority. Therefore, we direct the TPO to consider the working capital adjustment as provided in paper book page nos. 212 to 260 and grant adjustment while arriving at the arm’s length p IT(TP)A No.48/Chny/2024 M/s. Hyundai Wia India P. Ltd. for working capital adjustment and accordingly we remit the issue to the 5.3 By giving effect to the order of the ITAT, vide order dated 28.10.2018, the TPO had examined and allowed the benefit of working capital adjustment. Thus, respectfully following the above decision of the Coordinate Benches of the Tribunal, for the assessment year under consideration also, we direct the Assessing Officer to give suitable adjustment against the working capital component while determining the ance on a decision of Chennai ITAT in the case of Mobis India Ltd. v. Dy. CIT [2013] 38 taxmann.com 231/[2014] where the decision was based on the factual aspect that the Assessee was not able to demonstrate the impact of working capital adjustment. The Ld AR DR and pointed out that complete working capital adjustment working has been given by the Assessee and a copy of the nd find that the working is available and furnished before the lower authority. Therefore, we direct the TPO to consider the working capital adjustment as provided in paper book page nos. 212 to 260 and grant adjustment while arriving at the arm’s length price. This ground Printed from counselvise.com 19. Ground 8 – Disallowance of deduction claimed u/s 80G This ground deals with disallowance of deduction claimed under section 80G of the Act on CSR expenditure. The Ld AR for the Appellant submitted that the Assessee had made contribution towards Corporate Social Responsibility (“CSR”) amounting to Rs.17,13,153 deduction under section 80G of the Act (eligible @ 50% to the tune of Rs.8,19,673/-), the Assessee had claimed the same as de NaFAC disallowed the claim of deduction under section 80G of the Act on the ground that CSR expenses do not qualify for any benefit under section 80G of the Act. 20. The Ld AR submitted that the Ministry of Corporate Affairs issued its FAQ’s on CSR expenditure as per section 135 of the Companies Act vide Circular No. 01/2016 dated 12 January 2016. As per FAQ No.6 of the said Circular, it was noted that while no specific tax exemption has been extended to CSR expenses, the specific activities as mentioned in Schedule VII of the Companies Act, 2013 already enjoy tax exemptions under different sections of the Income Tax Act. The Ld AR provides that while computing the total deduction in respect of such sum paid by the Assessee as a donation. Deduction 13 IT(TP)A No. M/s. Hyundai Wia India P. Ltd. Disallowance of deduction claimed u/s 80G: This ground deals with disallowance of deduction claimed under section 80G of the Act on CSR expenditure. The Ld AR for the Appellant submitted that made contribution towards Corporate Social Responsibility (“CSR”) amounting to Rs.17,13,153/- and since the same was eligible for deduction under section 80G of the Act (eligible @ 50% to the tune of ), the Assessee had claimed the same as deduction. However, the NaFAC disallowed the claim of deduction under section 80G of the Act on the ground that CSR expenses do not qualify for any benefit under section 80G of The Ld AR submitted that the Ministry of Corporate Affairs issued its FAQ’s on CSR expenditure as per section 135 of the Companies Act vide Circular No. 01/2016 dated 12 January 2016. As per FAQ No.6 of the said Circular, it was noted that while no specific tax exemption has been extended to , the specific activities as mentioned in Schedule VII of the Companies Act, 2013 already enjoy tax exemptions under different sections of The Ld AR further submits that Section 80G(1) of the Act provides that while computing the total income of the Appellant, there shall be a deduction in respect of such sum paid by the Assessee as a donation. Deduction IT(TP)A No.48/Chny/2024 M/s. Hyundai Wia India P. Ltd. This ground deals with disallowance of deduction claimed under section 80G of the Act on CSR expenditure. The Ld AR for the Appellant submitted that made contribution towards Corporate Social Responsibility and since the same was eligible for deduction under section 80G of the Act (eligible @ 50% to the tune of duction. However, the NaFAC disallowed the claim of deduction under section 80G of the Act on the ground that CSR expenses do not qualify for any benefit under section 80G of The Ld AR submitted that the Ministry of Corporate Affairs (MCA) has issued its FAQ’s on CSR expenditure as per section 135 of the Companies Act vide Circular No. 01/2016 dated 12 January 2016. As per FAQ No.6 of the said Circular, it was noted that while no specific tax exemption has been extended to , the specific activities as mentioned in Schedule VII of the Companies Act, 2013 already enjoy tax exemptions under different sections of submits that Section 80G(1) of the Act income of the Appellant, there shall be a deduction in respect of such sum paid by the Assessee as a donation. Deduction Printed from counselvise.com under Chapter VI-A comes into play only after the gross total income has been computed. The provisions of section 80G is under “Part B respect of certain payments” in Chapter VI contributions made to certain funds, charitable institutions are eligible for deduction under section 80G subject to the fulfilment of the attendant conditions. 21. The Assessee placed reliance on the following decisions to support its arguments: M/s. FNF India Private Ltd v. The ACIT, Circle 3(1)(1), Bengaluru No.1565/Bang/2019 No.1693/Bang/2019 22. The Ld AR further contended that there is no specific exclusion for expenditure on CSR activities under section 80G of the Act. As per section 80G of the Act, restriction is placed only for specific donations such as Swachh Bharat Kosh [Sec 80G(2)(iiihk)] and C has been spent in pursuance to CSR activities. Hence, only those contributions made in pursuance to CSR activities to the above qualify for deduction u/s 80G of the Act. This is made to funds or institutions covered under section 80G(2)(iv) and hence, all 14 IT(TP)A No. M/s. Hyundai Wia India P. Ltd. A comes into play only after the gross total income has been computed. The provisions of section 80G is under “Part B respect of certain payments” in Chapter VI-A of the Act. Accordingly, the contributions made to certain funds, charitable institutions are eligible for deduction under section 80G subject to the fulfilment of the attendant conditions. The Assessee placed reliance on the following decisions to support its M/s. FNF India Private Ltd v. The ACIT, Circle 3(1)(1), Bengaluru and Allegis Services (India) Pvt. Ltd. v. ACIT in ITA d AR further contended that there is no specific exclusion for expenditure on CSR activities under section 80G of the Act. As per section 80G of the Act, restriction is placed only for specific donations such as Swachh Bharat Kosh [Sec 80G(2)(iiihk)] and Clean Ganga Fund [Sec 80G(2)(iiihl)], provided if it has been spent in pursuance to CSR activities. Hence, only those contributions made in pursuance to CSR activities to the above-mentioned funds would not qualify for deduction u/s 80G of the Act. This is not the case with any donations made to funds or institutions covered under section 80G(2)(iv) and hence, all IT(TP)A No.48/Chny/2024 M/s. Hyundai Wia India P. Ltd. A comes into play only after the gross total income has been computed. The provisions of section 80G is under “Part B – Deductions in A of the Act. Accordingly, the contributions made to certain funds, charitable institutions are eligible for deduction under section 80G subject to the fulfilment of the attendant conditions. The Assessee placed reliance on the following decisions to support its M/s. FNF India Private Ltd v. The ACIT, Circle 3(1)(1), Bengaluru in ITA Allegis Services (India) Pvt. Ltd. v. ACIT in ITA d AR further contended that there is no specific exclusion for expenditure on CSR activities under section 80G of the Act. As per section 80G of the Act, restriction is placed only for specific donations such as Swachh Bharat lean Ganga Fund [Sec 80G(2)(iiihl)], provided if it has been spent in pursuance to CSR activities. Hence, only those contributions mentioned funds would not not the case with any donations made to funds or institutions covered under section 80G(2)(iv) and hence, all Printed from counselvise.com donations made to such institutions or funds are allowable whether spent through CSR or otherwise. The Ld AR has placed its reliance on the follow i.) M/s. Source Hov India Private Limited v. The DCIT, Corporate Circle 6(2) Chennai in ITA No.2454/Chny/2024: It was held as under: “It could thus be seen that there is prohibition on claiming such expenditure u/s 37. However, there is no such restriction for claiming deduction thereof u/s 30 to 36. In other words, It is quite possible to claim the deduction in other sections subject t fulfillment of conditions of those sections and allowability of CSR expenditure is not completely ruled out. … We find that there is no such restriction for donation out of CSR funds to Prime Minister’s National Relief Fund. Considering all the above fa we are of the considered opinion that the impugned deduction u/s 80G would be available to the assessee.” ii.) M/s. Goldman Sachs Services Pvt. Ltd., v, JCIT in IT(TP)A No.2355/Bang/2019; iii.) First American (India) (P.) Ltd. v. Asstt. CIT [IT Appeal No. 1762 (Bang.) of 2019, dated 29 iv.) Sling Media (P.) Ltd. v. Deputy Commissioner of Income 135 taxmann.com 164 (Bangalore v.) Optum Global Solutions (India) (P.) L Income-tax [2023] 154 taxmann.com 651 (Hyderabad vi.) Power Mech Projects Ltd. v. Deputy Commissioner of Income [2023] 156 taxmann.com 575 (Hyderabad 15 IT(TP)A No. M/s. Hyundai Wia India P. Ltd. donations made to such institutions or funds are allowable whether spent through CSR or otherwise. The Ld AR has placed its reliance on the follow M/s. Source Hov India Private Limited v. The DCIT, Corporate Circle 6(2) Chennai in ITA No.2454/Chny/2024: It was held as under: “It could thus be seen that there is prohibition on claiming such expenditure u/s 37. However, there is no such restriction for claiming deduction thereof u/s 30 to 36. In other words, It is quite possible to claim the deduction in other sections subject t fulfillment of conditions of those sections and allowability of CSR expenditure is not completely ruled out. … We find that there is no such restriction for donation out of CSR funds to Prime Minister’s National Relief Fund. Considering all the above facts and circumstances of the case, we are of the considered opinion that the impugned deduction u/s 80G would be available to the assessee.” M/s. Goldman Sachs Services Pvt. Ltd., v, JCIT in IT(TP)A ; First American (India) (P.) Ltd. v. Asstt. CIT [IT Appeal No. 1762 (Bang.) of 2019, dated 29-4-2020]; Sling Media (P.) Ltd. v. Deputy Commissioner of Income 135 taxmann.com 164 (Bangalore - Trib.); Optum Global Solutions (India) (P.) Ltd. v. Deputy Commissioner of tax [2023] 154 taxmann.com 651 (Hyderabad - Trib.); Power Mech Projects Ltd. v. Deputy Commissioner of Income [2023] 156 taxmann.com 575 (Hyderabad - Trib.)[31-08-2023] IT(TP)A No.48/Chny/2024 M/s. Hyundai Wia India P. Ltd. donations made to such institutions or funds are allowable whether spent through CSR or otherwise. The Ld AR has placed its reliance on the following decisions: M/s. Source Hov India Private Limited v. The DCIT, Corporate Circle- 6(2) Chennai in ITA No.2454/Chny/2024: It was held as under: “It could thus be seen that there is prohibition on claiming such expenditure u/s 37. However, there is no such restriction for claiming deduction thereof u/s 30 to 36. In other words, It is quite possible to claim the deduction in other sections subject to fulfillment of conditions of those sections and allowability of CSR … We find that there is no such restriction for donation out of cts and circumstances of the case, we are of the considered opinion that the impugned deduction u/s M/s. Goldman Sachs Services Pvt. Ltd., v, JCIT in IT(TP)A First American (India) (P.) Ltd. v. Asstt. CIT [IT Appeal No. 1762 Sling Media (P.) Ltd. v. Deputy Commissioner of Income-tax, [2022] td. v. Deputy Commissioner of ; Power Mech Projects Ltd. v. Deputy Commissioner of Income-tax 2023]. Printed from counselvise.com 23. Per contra,, the Ld. DR for the Re assessment order passed by the AO and submitted that expenses under the head CSR as per Companies Act 2013 cannot be allowed as deduction under section 80G of the Income Tax Act. 24. We have heard the rival submissions in th records and the judicial precedents submitted before us. We have taken note of the MCA Circular No.01/2016 and the attendant conditions dealing with the allowability of deductions under section 80G of the Act. We are of th view that while CSR expenses do not qualify as a business expenditure, there cannot be any extraneous conditions imposed on the allowability of deduction under section 80G of the Act (other than the conditions mentioned therein). It is worthwhile to note that section 80G already contains the list of CSR expenses which do not qualify as deductions namely contributions to Swachh Bharat Kosh [Sec 80G(2)(iiihk)] and Clean Ganga Fund [Sec 80G(2)(iiihl)]. Accordingly, when restrictions for allowability u CSR contributions, it cannot be said that that 80G prohibits all expenses towards CSR contributions. The AO has not brought on record any material to support his case that restriction under section expenses. Accordingly, we direct the AO to delete the impugned addition of 16 IT(TP)A No. M/s. Hyundai Wia India P. Ltd. , the Ld. DR for the Revenue vehemently supported the assessment order passed by the AO and submitted that expenses under the head CSR as per Companies Act 2013 cannot be allowed as deduction under section 80G of the Income Tax Act. We have heard the rival submissions in the light of materials available on records and the judicial precedents submitted before us. We have taken note of the MCA Circular No.01/2016 and the attendant conditions dealing with the allowability of deductions under section 80G of the Act. We are of th view that while CSR expenses do not qualify as a business expenditure, there cannot be any extraneous conditions imposed on the allowability of deduction under section 80G of the Act (other than the conditions mentioned therein). It is ile to note that section 80G already contains the list of CSR expenses which do not qualify as deductions namely contributions to Swachh Bharat Kosh [Sec 80G(2)(iiihk)] and Clean Ganga Fund [Sec 80G(2)(iiihl)]. Accordingly, when ty u/s.80G of the Act are specifically called out towards CSR contributions, it cannot be said that that 80G prohibits all expenses towards CSR contributions. The AO has not brought on record any material to support his case that restriction under section 80G should be extended to cover all CSR expenses. Accordingly, we direct the AO to delete the impugned addition of IT(TP)A No.48/Chny/2024 M/s. Hyundai Wia India P. Ltd. venue vehemently supported the assessment order passed by the AO and submitted that expenses under the head CSR as per Companies Act 2013 cannot be allowed as deduction under e light of materials available on records and the judicial precedents submitted before us. We have taken note of the MCA Circular No.01/2016 and the attendant conditions dealing with the allowability of deductions under section 80G of the Act. We are of the considered view that while CSR expenses do not qualify as a business expenditure, there cannot be any extraneous conditions imposed on the allowability of deduction under section 80G of the Act (other than the conditions mentioned therein). It is ile to note that section 80G already contains the list of CSR expenses which do not qualify as deductions namely contributions to Swachh Bharat Kosh [Sec 80G(2)(iiihk)] and Clean Ganga Fund [Sec 80G(2)(iiihl)]. Accordingly, when are specifically called out towards CSR contributions, it cannot be said that that 80G prohibits all expenses towards CSR contributions. The AO has not brought on record any material to support his 80G should be extended to cover all CSR expenses. Accordingly, we direct the AO to delete the impugned addition of Printed from counselvise.com Rs.8,19,673/- on account of disallowance of deduction claimed under section 80G of the Act. This ground is allowed. 25. In the result, the a Order pronounced on Sd/- (एस. आर. रघुना था ) (S.R.RAGHUNATHA) लेखा सद)य/ACCOUNTANT MEMBER चे\u000eनई/Chennai, *दनांक/Dated: 30th December, 2025. EDN, Sr. PS आदेशक ितिल+पअ,े+षत 1. अपीलाथ /Appellant 2. यथ /Respondent 3. आयकरआयु-/CIT, Chennai / Madurai / Salem / Coimbatore. 4. +वभागीय ितिनिध/DR 5. गाड\u0018फाईल/GF 17 IT(TP)A No. M/s. Hyundai Wia India P. Ltd. on account of disallowance of deduction claimed under section 80G of the Act. This ground is allowed. In the result, the appeal of the assessee is partly allowed. Order pronounced on 30th day of December, 2025 at Chennai. ) (S.R.RAGHUNATHA) /ACCOUNTANT MEMBER Sd/ (मनु क ुमा र (MANU KUMAR GIRI) \u000eयाियक सद)य/JUDICIAL MEMBER cember, 2025. CIT, Chennai / Madurai / Salem / Coimbatore. IT(TP)A No.48/Chny/2024 M/s. Hyundai Wia India P. Ltd. on account of disallowance of deduction claimed under section ssessee is partly allowed. 5 at Chennai. Sd/- क ुमार िग र) (MANU KUMAR GIRI) /JUDICIAL MEMBER Printed from counselvise.com "