M/S. SAME DEUTZ FAHR INDIA PVT. LTD.,VELLORE V. DCIT, CIRCLE-1, VELLORE

ITTPA 45/CHNY/2024

AI Insights

The case involves M/s. SAME Deutz Fahr-India Pvt. Ltd., which appealed against the transfer pricing adjustments made by the Assessing Officer (AO) following a scrutiny of their international transactions for the assessment year 2020-21. The transactions were initially benchmarked using the Transactional Net Margin Method (TNMM), but adjustments were made by the Transfer Pricing Officer (TPO) and upheld by the Dispute Resolution Panel (DRP), leading to a significant upward adjustment in the income declared by the assessee. The Tribunal examined whether the export incentives and miscellaneous expenses should be treated as operating items and whether the interest on outstanding receivables constituted a separate international transaction requiring adjustment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 783787 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 07-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2020-2021
• Appeal Filed On: 30-08-2024
• Other Referred Cases: 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, Hyundai Motor India Limited v. DCIT, Gimpex (P.) Ltd. vs. ACIT, Reynolds Pen India Pvt Ltd vs DCIT, Goodyear India Ltd. vs DCIT, Acqueon Technologies Pvt. Ltd, Doowon Climate Control India Pvt. Ltd, ACIT vs Saipem India Projects Pvt. Ltd, Plintron Global Technology Solutions vs DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARV SREENIVASAN
• Assessee Lawyers: S.P.CHIDAMBARAM
• Keywords: Set aside; Business income; Transfer pricing; International transaction; Business expenditure; Notional interest
• Section: 28; 92B

Judgement Text

"आयकर अपीलीय अिधकरण, ’डी’ \u0001यायपीठ, चे ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH: CHENNAI \u0001ी एबी टी. वक , ाियक सद\u0011 एवं एवं एवं एवं \u0001ी अिमताभ शु\u0018ा, लेखा सद क े सम\u001b BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER IT (TP) A No.45/Chny/2024 िनधा\u000eरण वष\u000e/Assessment Year: 2020-21 M/s. SAME Deutz Fahr-India Pvt. Ltd., 72/72, M SIPCOT Industrial Complex, Ranipet, Industrial Estate S.O., Ranipet, Vellore-632 403. v. The DCIT, Circle-1, Vellore. [PAN: AAHCS 1924 P] (अपीलाथ\u0016/Appellant) (\u0017\u0018यथ\u0016/Respondent) अपीलाथ\u0016 क\u001a ओर से/ Appellant by : Mr.S.P. Chidambaram, Advocate \u0017\u0018यथ\u0016 क\u001a ओर से /Respondent by : Mr. ARV Sreenivasan, CIT सुनवाईक\u001aतारीख/Date of Hearing : 23.09.2025 घोषणाक\u001aतारीख /Date of Pronouncement : 07.11.2025 आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the assessment order dated 02.07.2024 vide DIN No. ITBA/AST/S/143(3)/2024- 25/1066387746(1) for AY 2020-21. 2. Brief facts are that, the assessee is engaged in the business of dealing in parts and accessories of motor vehicles and engines during the relevant year under consideration. For the relevant AY 2020-21, the Printed from counselvise.com IT (TP) A No.45/Chny/2024 (AY 2020-21) M/s. SAME Deutz Fahr India Pvt. Ltd. :: 2 :: assessee had filed its return of income on 08.02.2021 declaring total income of ₹91,05,86,790/-. The case of the assessee was selected for scrutiny under CASS and the AO issued notice u/s.143(2) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act‘) and thereafter, a reference was made u/s.92CA of the Act was made to the TPO for determination of Arms Length Price (ALP) with reference to the transaction reported by the assessee. 3. The assessee in its TP study had aggregated the international transactions and benchmarked them at entity level by applying Transactional Net Margin Method (in short ‘TNMM’). The assessee is noted to have computed its margin at 5.17% and the seven (7) comparables identified had margin in the range of 5.12% to 11.98%. The TPO vide his order dated 05.07.2023 accepted the selection of TNMM method as the most appropriate method and also acceded to the PLI adopted by the assessee. The TPO however was not agreeable to the manner of computation of ‘operating profits’. According to the TPO, the ‘Export Incentives’ were non-operating in nature and therefore excluded the same from the computation of PLI. Accordingly, the TPO reworked the margin of the assessee at 3.06%. The TPO also rejected the search conducted as per TP study report and performed a fresh search and included 4 additional comparable companies while retaining 6 comparable companies Printed from counselvise.com IT (TP) A No.45/Chny/2024 (AY 2020-21) M/s. SAME Deutz Fahr India Pvt. Ltd. :: 3 :: of Assessee, totaling to ten (10) comparable companies and arrived at the markup range of 8.41% to 12.57% with a median of 10.23%. While computing the margins of the comparables, the TPO considered ‘Miscellaneous expenses’ as non-operating though the same was considered as operating for the working out the assessee’s margin. The TPO accordingly proposed an upward adjustment of Rs.53,07,28,841/-. 4. Apart from the above, the TPO also considered the “Outstanding receivables” as a separate international transaction and benchmarked the same by adopting LIBOR+350 BPS i.e., 5.818% after allowing credit period of 30 days and attributed interest thereafter. On the other hand, the assessee had not considered the same as a separate International transaction in its Transfer Pricing Study report as the same arose out of their primary transaction of sale of goods to its AEs and hence did not benchmark the same separately. The TPO is found to have proposed upward adjustment towards interest on outstanding receivables at ₹18,52,12,670/-. Thus, the total transfer pricing adjustment was proposed to the tune of ₹71,59,41,511/- as under: Sl.No. Description of the adjustment made by TPO Amount of adjustment in INR 1 Upward adjustment towards margin 53,07,28,841/- 2 Upward adjustment towards interest on outstanding. 18,52,12,670 Total 71,59,41,511/- Printed from counselvise.com IT (TP) A No.45/Chny/2024 (AY 2020-21) M/s. SAME Deutz Fahr India Pvt. Ltd. :: 4 :: 5. Pursuant to the TPO’s order, the AO passed draft assessment order dated 20.09.2023. Against the said draft assessment order, the assessee filed objections in Form 35A before the DRP. The DRP vide order dated 11.06.2024 confirmed the treatment of ‘Export incentives’ as non- operating in nature. In so far as treatment of ‘Miscellaneous Expenses’ is concerned, the DRP held that Miscellaneous Expenses is non-operating in nature, however, the DRP applied the parity principle and directed the TPO to treat the miscellaneous expenses as non-operating for both the assessee as well as for comparable companies. In so far as TP adjustment on account of interest on outstanding receivables is concerned, the DRP directed the TPO to consider the foreign currency risk and thereby increased the benchmark for Interest on outstanding receivables from LIBOR+350% BPS to LIBOR+450 BPS i.e., 6.818%. Acting upon the directions issued by the DRP, the TPO re-worked the TP adjustments in his order giving effect dated 19.06.2024 as follows: Particulars Adjustment as per TPO order dt.05.07.2023 Adjustment as per this Giving effect to DRP order Margin adjustment Rs.53,07,28,841/- Rs.37,48,27,690/- Interest on outstanding receivables Rs.18,52,12,670/- Rs.21,70,47,093/- Total Rs.71,59,41,511/- Rs.59,18,74,783/- 6. Thereafter, the AO passed the final assessment order u/s.143(3) r.w.s.144C(13) r.w.s.144B of the Act on 02.07.2024 making total TP adjustment to the tune of ₹59,18,74,783/-. Aggrieved by the aforesaid action of the AO, the assessee is in appeal before us. Printed from counselvise.com IT (TP) A No.45/Chny/2024 (AY 2020-21) M/s. SAME Deutz Fahr India Pvt. Ltd. :: 5 :: 7. We first take up the issue relating to primary transfer pricing adjustment of Rs.37,48,27,690/- At the outset, the Ld.AR of the assessee submitted that, if Ground Nos.2.6 & 2.7 are decided in assessee’s favour, then the transfer pricing margin adjustment of Rs.37,48,27,690/- shall stand vacated as the margin(s) would be within the arm’s length range. Hence, with the consent of both the parties, we take up these grounds first. In order to adjudicate the same, we, first of all, reproduce Ground No.2.6 which reads as under: 2.6 The AO/DRP erred in law and facts by considering the export incentive as non-operating while computing the margins of the Appellant and the comparable companies. 8. Assailing the action of the lower authorities, the Ld.AR submitted that during AY 2020-21, the Assessee had received export incentives of Rs. 2,145.1 lakhs 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 at 5.17%. 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. 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 assessee. The Ld. AR also took us through the provisions of Section 28 of the Act and showed us that the Printed from counselvise.com IT (TP) A No.45/Chny/2024 (AY 2020-21) M/s. SAME Deutz Fahr India Pvt. Ltd. :: 6 :: MEIS 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. The assessee also relied on Para No.1.152 of OECD TP guidelines and Para No.3.4.5.15 of UN TP Manual which states that, the Government Rules and Regulations should be treated as conditions of the market in the particular country if they apply in the same way to controlled and uncontrolled transactions. Such Rules inter alia include government interventions in the form of price controls, exchange controls, subsidies for certain sectors, etc. The Ld. AR also placed reliance on Cost Accounting Standard laid down the manner of treatment of revenue in cost statements (CAS-24), wherein operating revenue is defined as - Revenue from operations represents income arising from the sale of goods or rendering of services and includes other operating revenue, such as sale of scrap, government subsidies, or incentives. The Ld. AR thus pointed out that, the entitlement of such incentives is intrinsically related to the export of goods and accordingly, income recognized from export incentive qualifies as a part of operating revenue for the purpose of computation of operating margin of the assessee. Printed from counselvise.com IT (TP) A No.45/Chny/2024 (AY 2020-21) M/s. SAME Deutz Fahr India Pvt. Ltd. :: 7 :: 9. The Ld.AR further highlighted that, the export incentives earned by the assessee in the form of MEIS scrips was directly linked to the export of goods by the assessee to international markets viz., both AE and third- party customers. According to him, though it is not possible to provide a direct correlation of such incentives with the actual pricing of the goods sold to its customers, but it is implied principle that, the quantum of incentives would eventually be reflected in the pricing of the transaction or cost of the transactions and thereby, the overall profitability. The Ld. AR relied on the following case laws wherein export incentives were treated to be operating item. 1. ZF Rane Automotive India Private Limited v. DCIT [2025] 177 taxmann.com 442 (Chennai - Trib.) 2. ZF Commercial Vehicle Control Systems India Ltd., v. DCIT IT(TP)A Nos.: 50 & 132/Chny/2024 3. Greenland Exports Pvt Ltd v. DCIT [2017] 88 taxmann.com 988 (Chennai - Trib.) 4. CIT v. Welspun Zucchi Textiles Ltd., [2017] 77 taxmann.com 137 (Bombay)/ [2017] 245 Taxman 132 (Bombay) 5. AB INBEV GCC Services India Pvt. Ltd v, DCIT [2023] 149 taxmann.com 452 (Bangalore - Trib.) 10. 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 comparables had not earned any such export incentive and therefore inclusion of the same in assessee’s PLI would give Printed from counselvise.com IT (TP) A No.45/Chny/2024 (AY 2020-21) M/s. SAME Deutz Fahr India Pvt. Ltd. :: 8 :: skewed and biased results in favour of the assessee. He thus urged us not to interfere with the order of the lower authorities on this issue. 11. We have heard both the parties and perused the material on record. It is seen that, the assessee was in receipt of incentive of Rs. 2,145.1 lakhs under the MEIS 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. The case of the Revenue however is that, MEIS receipts are not directly related to the ongoing operational activities of the assessee and are non- recurring in nature and therefore ought to be excluded while computing the operating margins of the assessee. Before us, the assessee has placed on record the copy of the MEIS Scheme, which is found to be formulated with the main object to promote the export of goods from India by offsetting some of the costs and infrastructural challenges faced by exporters. It is noted to be incentive given to exporters to mitigate their recurring operational inefficiencies and thereby make them competitive in global markets. The Government accordingly awards \"duty credit scrips\" based on a percentage of the Free-On-Board (FOB) value of exports which can be utilized to pay customs duties, excise duties, service taxes, or other applicable taxes and alternatively these scrips are freely Printed from counselvise.com IT (TP) A No.45/Chny/2024 (AY 2020-21) M/s. SAME Deutz Fahr India Pvt. Ltd. :: 9 :: transferable as well. Having perused 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 revenues. 12. 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 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 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 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 assessee company. In Printed from counselvise.com IT (TP) A No.45/Chny/2024 (AY 2020-21) M/s. SAME Deutz Fahr India Pvt. Ltd. :: 10 :: 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 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 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 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 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 considered by DRP and also emphasised by Ld DR in the case of Goodyear India Ltd Printed from counselvise.com IT (TP) A No.45/Chny/2024 (AY 2020-21) M/s. SAME Deutz Fahr India Pvt. Ltd. :: 11 :: (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 provided below: \"We have perused the orders and heard the rival contentions insofar as duty drawback and export incentives are concerned, the cases relied 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 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 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.\"” 13. Similarly, the co-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 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 and ordered accordingly. Thus, we allow the grounds of appeal filed by the Assessee.” Printed from counselvise.com IT (TP) A No.45/Chny/2024 (AY 2020-21) M/s. SAME Deutz Fahr India Pvt. Ltd. :: 12 :: 14. For the above reasons and following the decisions (supra), we are of the view that the export incentives viz., MEIS awarded by the Government is meant to mitigate the gross operating costs of the assessee, and therefore it ought to be considered as part of the \"operating revenue\" while computing the margin of the assessee. Ground No.2.6 raised by the assessee is accordingly allowed. 15. The next Ground No.2.7 reads as under: 2.7 The AO/DRP erred in law and facts by considering the entire miscellaneous expense as non-operating while computing the margins of the Appellant and comparable companies without providing the breakup of such miscellaneous expenses into operating and non-operating items. 16. It is noted from the TP study placed on record by the assessee that, it had reported operating margin of 5.17% after considering the miscellaneous expenses as operating in nature. Similarly for the comparable companies selected by the Assessee in its TP documentation, the Assessee has computed the margins after considering the miscellaneous expense as operating in nature. The TPO however treated the Miscellaneous Expenses as a Non-Operating item, but excluded the same only while computing the margins of comparable companies and not the PLI of the assessee. Though the DRP in principle upheld the TPO’s action of treating Miscellaneous Expenses as a Non-Operating item, but as a matter of parity, directed that miscellaneous expenses ought to be excluded from the computation of the PLI of the assessee as well. Now Printed from counselvise.com IT (TP) A No.45/Chny/2024 (AY 2020-21) M/s. SAME Deutz Fahr India Pvt. Ltd. :: 13 :: the issue before us is whether the miscellaneous expenses is operating or non-operating in nature. 17. Assailing the action of the TPO/DRP, the Ld.AR submitted that miscellaneous expenses are typically incurred during regular business operations by every company. He explained that, several regular business expenses with small value which are below the materiality threshold are grouped together and reported by way of miscellaneous expenses. Since they support day-to-day functioning of the assessee, the Ld. AR claimed that it aligns with the definition of operating expenses. Accordingly to him, in absence of any evidence to show that any item of miscellaneous expense was non-operational, it should ordinarily be classified as part of operating costs. In support, he cited the following decisions: 1. Doowon Automotive Systems India Private Limited v. DCIT, IT(TP)A No.88/Chny/2024 - Para 14 2. ZF Rane Automotive India Private Limited v. DCIT, IT(TP)A No. 53/Chny/2024-Para 9.3 3. ZF Commercial Vehicle Control Systems India Ltd., v. DCIT, IT(TP)A Nos.50 & 132/Chny/2024 - Para 37 4. ITO vs E Value Serve.Com, ITA no. 393/Del/2010-Para 47. 5. DCIT v. First Rain Software Centre (P) Ltd., ITA No. 4006/Del/2010 - Para 6. 18. Per contra, the Ld. DR supported the order(s) of the lower authorities. Printed from counselvise.com IT (TP) A No.45/Chny/2024 (AY 2020-21) M/s. SAME Deutz Fahr India Pvt. Ltd. :: 14 :: 19. Heard both the parties. We find that similar issue had come up for consideration before this Tribunal in the case of ZF Rane Automotive India Private Limited (supra), wherein miscellaneous expenses were held to be item of operating nature, by holding as under: 9.3. We have heard the rival submissions and perused the materials available on record. The case of Revenue was that the Miscellaneous Expense is non- operating expense and it is excluded for comparable companies and similar expenses are excluded for Assessee as well by applying the parity principle. In our view, the approach of the Revenue is fundamentally flawed. We believe the correct approach to determine whether an expense is operating or non- operating would be heavily dependent upon the character of such expense and its proximity to the normal business operation. Viewed from this angle, we feel that Miscellaneous Expense is part of any normal business operation. In fact as per Section 37 of the Act, the same is allowed as business expenditure, accordingly taking a cue from the corporate tax provisions it could be safely inferred that Miscellaneous expense is operating in nature. Therefore Miscellaneous expense incurred by every company in its usual course of business cannot be said that they have no nexus with normal operation of business. The view expressed is supported by the decision of the Delhi Tribunal in the case of ITO vs E Value serve.com (2016) 75 taxmann.com 195 IT (TP)A No.53/Chny/24 (Delhi - Trib) wherein it is held that miscellaneous expenses ought to be treated as operating expenses for Assessee as well as comparable companies. Relevant para of the order is produced below: \"47. Ground no. 6: The main contention of department is that ld. CIT(A) had concluded that misc. income and misc. expenses were operating profits without verifying their nature. We find that ld. CIT(A) has observed in regard to misc. income that the same pertained to income from other sources and the misc. income was included as part of operating profit in the case of comparable company. Therefore, there could not be any prejudice to revenue on this count. As regards misc. expenses, ld. CIT(A) has observed that the same included a multitude of expenses that were too small in value. But since they pertained to the operations of the company, they were treated as operating expenses for both the tested party as well as the comparable companies. The TP analysis, as we have earlier observed, is not an exact science and we have to arrive at reasonable conclusions which would not materially affect the profit margins. Therefore, we do not find any reason to interfere with the finding of ld. CIT(A) on this count. In the result ground no. 6 is dismissed\". 9.4. In view of our above discussions/observation and the judicial precedents as above, we hold that Miscellaneous expense ought to be considered as part of \"operating expense\" of comparable companies (wherever applicable) irrespective of whether the assessee has incurred such Miscellaneous expense or not and we direct so the TPO to redetermine the margin of the comparable companies after including the same. As a result, the ground of appeal no. 2.5 raised by the Assessee is allowed. Printed from counselvise.com IT (TP) A No.45/Chny/2024 (AY 2020-21) M/s. SAME Deutz Fahr India Pvt. Ltd. :: 15 :: 20. We also gainfully rely on the following paragraphs 13 & 14 of the decision rendered by this Tribunal in the case of Doowon Automotive Systems India Private Limited., vs DCIT (supra) holding that miscellaneous expenses should be treated as operating expenses for assessee as well as for comparable companies, which is reproduced below: “13.0 We have heard the rival submissions in the light of materials available on record. We find force in the argument of the Assessee that it is the nature of expenditure which decides whether it is connected to normal business operations or not. We also concur with the view that miscellaneous expense is something which every company would incur for its normal operations and as such we are in agreement with the contention that such miscellaneous expense ought to be treated as \"operating expenses”. Miscellaneous expenses are also part of allowable expenditure under section 37 of the Act. In this regard, we draw support from the decision of the Delhi Tribunal in the case of ITO vs E Value serve.com (2016) 75 taxmann.com 195 (Delhi – Trib) wherein it was held that miscellaneous expenses ought to be treated as operating expenses for Assessee as well as comparable companies. Relevant para of the order is produced below: “47. Ground no. 6: The main contention of department is that Id.CIT(A) had concluded that misc. income and misc. expenses were operating profits without verifying their nature. We find that Id. CIT(A) has observed in regard to misc. income that the same pertained to income from other sources and the misc. income was included as part of operating profit in the case of comparable company. Therefore, there could not be any prejudice to revenue on this count. As regards misc. expenses, Id. CIT(A) has observed that the same included a multitude of expenses that were too small in value. But since they pertained to the operations of the company, they were treated as operating expenses for both the tested party as well as the comparable companies. The TP analysis, as we have earlier observed, is not an exact science and we have to arrive at reasonable conclusions which would not materially affect the profit margins. Therefore, we do not find any reason to interfere with the finding of Id. CIT(A) on this count. In the result ground no. 6 is dismissed\". 14.0 We have noted the facts of the present case are akin to those available in judicial precedence discussed herein above and no distinguishment could be made. Accordingly, in respectful compliance to the same, we are of the considered view that miscellaneous expense ought to be considered as part of \"operating expense\" of comparable companies. The impugned allowance is also permissible in view of its treatment in earlier years in conformity with principles of consistency. Accordingly, we remit the matter to the Ld.TPO with the direction to redetermine the margin of the comparable companies after including the same. Accordingly, the grounds of appeal Nos. 2.16 to 2.17 are allowed for statistical purposes.” 21. Following the above decisions (supra), we hold that miscellaneous expense ought to be considered as part of \"operating expense\" both of Printed from counselvise.com IT (TP) A No.45/Chny/2024 (AY 2020-21) M/s. SAME Deutz Fahr India Pvt. Ltd. :: 16 :: the assessee and comparable companies. Accordingly Ground No. 2.7 of the appeal of the assessee is also allowed 22. The Ld. AR has asserted that, once the export incentives and miscellaneous expenses are treated as operating items, then the PLI i.e. operating of the assessee will be 5.17% and margin(s) range of the comparable companies selected by the TPO will be 5.02% to 9.99% with a median of 8.18%. As such, the Ld. AR has pointed out that, the PLI of the assessee would be well within the arm’s length range and therefore the impugned transfer pricing adjustment would stand deleted in full. The TPO/AO is directed to verify the figures and if found to be correct then pass a speaking order accordingly. 23. We now taken up Ground No. 2.10 concerning the transfer pricing adjustment of Rs.21,70,47,093/- made on account of interest on outstanding receivables, which reads as under: 2.10 The directions of the Dispute Resolution Panel (DRP) - 2, and the consequential final assessment order is erroneous in so far as determining and quantifying upward adjustment of Rs.21,70,47,093/- to the value of international transaction relating to interest on outstanding receivables. 24. Briefly stated the facts relating to this issue are that, the assessee did not report the outstanding receivables of ₹341,75,18,906/- as a separate international transaction nor reported any secondary adjustment thereon. According to the TPO, the assessee has not charged any interest from its AE on this outstanding amount and therefore show caused the Printed from counselvise.com IT (TP) A No.45/Chny/2024 (AY 2020-21) M/s. SAME Deutz Fahr India Pvt. Ltd. :: 17 :: assessee as to why the interest amount should not be computed on outstanding receivables by adopting LIBOR + 350 bps @ 5.818% after allowance of credit period of 30 days. The assessee is found to have explained that, it had adopted TNMM as most appropriate method and benchmarked the transactions on aggregate basis at entity level, and therefore no separate adjustment is required to be made in respect of outstanding receivables. The assessee also pointed out that, it had allowed similar credit period to non-AEs as well and it had not charged any interest from the non-AEs customers and therefore, it was claimed that, same treatment was meted out to the outstanding receivables from AEs. The TPO did not agree with the contention of the assessee and he computed transfer pricing adjustment by way of interest on overdue receivables at ₹18,52,12,670/- by adopting LIBOR + 350 bps @ 5.818% after giving a credit period of ‘30’ days. The DRP is noted to have rejected the objections raised by the assessee and in principle concurred with the TPO’s findings. Having regard to the foreign currency risk borne by the assessee, the DRP directed further markup of 100 bps and thereby, the interest on outstanding receivables stood increased to ₹21,70,47,093/-. 25. Aggrieved, the assessee is before us. Printed from counselvise.com IT (TP) A No.45/Chny/2024 (AY 2020-21) M/s. SAME Deutz Fahr India Pvt. Ltd. :: 18 :: 26. At the time of hearing, the Ld. AR submitted that, if the primary transaction of manufacturing and export/sales is at arm’s length under TNMM, then there is no necessity to separately benchmark the underlying transaction of outstanding receivables as the underlying transaction gets automatically subsumed and forms an inseparable part of primary transaction. For this, he relied on the decision of this Tribunal in the case of Gimpex (P.) Ltd. vs. ACIT [2021] 124 taxmann.com 618 (Chennai - Trib.). The Ld. AR additionally also brought to our notice that, the Assessee has not charged interest on outstanding receivables from Non-AE’s wherein the weighted average credit period is 179 days vis-à-vis the weighted average credit period for AEs which was around 142 days. According to him therefore, applying the parity principle, when no interest was charged for a higher credit period of belated receipt of receivables from Non-AE’s, the same principle was rightly followed for AE receivables as well. In support, the Ld. AR relied on the following decisions:- 1) Gimpex P Ltd vs ACIT - [2021] 124 taxmann.com 618 (Chennai - Trib.) 2) Reynolds Pen India Pvt Ltd vs DCIT - IT(TP)A No.60/Chny/2024 3) Goodyear India Ltd. vs DCIT - [2024] 165 taxmann.com 830 (Delhi - Trib.) 4) Acqueon Technologies Pvt. Ltd - IT(TP)A Nos: 34 & 115/CHNY/2024 5) Doowon Climate Control India Pvt. Ltd - ITA No.1352/Hyd/2024 6) ACIT vs Saipem India Projects Pvt. Ltd - ITA No.2319/Chny/2024 Printed from counselvise.com IT (TP) A No.45/Chny/2024 (AY 2020-21) M/s. SAME Deutz Fahr India Pvt. Ltd. :: 19 :: 7) Plintron Global Technology Solutions vs DCIT - [2019] 102 taxmann.com 684 (Chennai - Trib.) 27. Per contra, the Ld. DR supporting the action of the DRP/TPO submitted that the receivables is included under the amended definition of international transactions under Section 92B of the Act and thus the TPO’s action of computing the ALP on the outstanding receivables cannot be faulted with. He submitted that, the assessee has allowed excess credit period which was over and above the normal credit period of AE, and therefore it was rightly benchmarked by TPO/DRP and thus urged us to uphold the order of the lower authorities. 28. Heard both the parties. Having regard to our findings and observations made while adjudicating Ground Nos. 2.6 & 2.7 above, it is seen that, the assessee had adopted entity level TNMM Method to benchmark the international transactions and its revised PLI worked out to 5.17% which was within the arm’s length range of 5.02% - 9.99%. According to us, when the primary transaction has been benchmarked under TNMM and found to be at arm’s length, then even though, the receivables is an international transaction, but no separate adjustment is required to be made in respect of such receivables, particularly when there is uniformity in not charging any interest from any party, whether Associated Enterprises or non- Associated Enterprises, as held by this Printed from counselvise.com IT (TP) A No.45/Chny/2024 (AY 2020-21) M/s. SAME Deutz Fahr India Pvt. Ltd. :: 20 :: Tribunal in the case of Gimpex P Ltd Vs ACIT (supra), whose relevant findings are reproduced below:- 7. We have heard both the parties, perused the material available on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that receivables is included under the definition of international transactions by amending section 92B by the Finance Act, 2012 w.e.f. 01.04.2002. Therefore, we are of the considered view that there is no merit in the arguments advanced by the assessee that receivables is not international transactions. As regards benchmarking international transactions, once the assessee has adopted TNMM as most appropriate method, whether separate adjustment is required to be made in respect of receivables or not has been the subject matter of deliberations by the co-ordinate Bench of the Tribunal in assessee’s own case for the assessment year 2014-15 in IT(TP)No. 57/Chny/2018, where the Tribunal after considering relevant facts has held that once TNMM method is considered as the most appropriate method, the net margin worked out thereunder could take care of all such notional interest cost, wherever it could be imputed and there could be no arm’s length price adjustment for any overdue receivables. The Bench has also observed that once there is complete uniformity in not charging any interest from any party, whether Associated Enterprises or non- Associated Enterprises, there could not be any selective imputing of notional interest on receivable from AE for belated realization of export bills. The relevant findings of the Tribunal in IT(TP) No.57/Chny/2018 dated 05.04.2019 are as under:- 23. Now we take up the dispute regarding the Arms Length Price adjustment imputing interest on overdue receivables. It is not disputed by the Revenue that assessee had not charged interest either from its Associated Enterprise or from Non Associated Enterprises, for delay in collection of receivables. It is also not disputed that out of the total transactions of the assessee almost 57% were with its Non Associated Enterprises. Once there is complete uniformity followed by assessee in not charging any interest from any party, whether Associated Enterprise or Non Associated Enterprises, in our opinion there could not be any selective imputing of notional interest. Submission of the assessee that out of total sales of about of ₹261 Crores to its Associated Enterprise, ₹100 Crores was received well within the due date and small delays were only in the balance of ₹161 Crores has not been disputed by the ld. Departmental Representative. Assessee had not offered any discount to any party for payment of bills before the expiry of the credit period. Hence, it is only a natural corollary that it did not charge any interest for delays also. Where a good part of the dues were collected earlier to the due date, in our opinion the instances where there were delays could not be selectively elected for a levy of charge of notional interest. Such an approach if accepted will completely overlook commercial realties. That apart, once TNMM method is considered as the most appropriate method, as held by Ahmedabad Bench of the Tribunal in the cases of Bisazza India (P) Ltd (supra) and Gemstone Glass Pvt Ltd (supra) the net margin worked out there under could take care of all such notional interest cost, wherever it could be imputed and there could be no Arms Length Price adjustment for any overdue receivables. We therefore delete Arms Length Price adjustment of ₹6,18,43,887/- made on overdue receivables.” 8. In this view of the matter and consistent with the view taken by the co-ordinate Bench of this Tribunal in assessee’s own case for the earlier assessment year, we are of the considered view that when TNMM method has been applied as most appropriate method it could take care of all notional interest costs wherever it could be applied and there could be no separate upward adjustments on export receivables for belated realization of export bills. Hence, we direct the Assessing Officer to delete upward adjustment made towards overdue receivables from Associated Enterprises. Printed from counselvise.com IT (TP) A No.45/Chny/2024 (AY 2020-21) M/s. SAME Deutz Fahr India Pvt. Ltd. :: 21 :: 29. The Ld. DR was unable to bring on record any decision contrary to the above. We further find that the facts involved in the assessee’s case is similar to that involved in the above decision (supra) and therefore following the ratio laid down therein, we are of the view that, in the given facts as well, no separate adjustment is required to be made in respect of outstanding receivables. Therefore, we direct the AO to delete the upward adjustment made towards overdue receivables from the AEs, and allow this ground of the assessee. 30. In the result, appeal filed by the assessee is allowed. Order pronounced on the 07th day of November, 2025, in Chennai. Sd/- (अिमताभ शु\u0018ा) (AMITABH SHUKLA) लेखा सद\u0003य/ACCOUNTANT MEMBER Sd/- (एबी टी. वक ) (ABY T. VARKEY) \u0005याियक सद\u0003य/JUDICIAL MEMBER चे ई/Chennai, !दनांक/Dated: 07th November, 2025. TLN आदेश क\u001a \u0017ितिलिप अ$ेिषत/Copy to: 1. अपीलाथ /Appellant 2. \u000e\u000fथ /Respondent 3. आयकरआयु\u0015/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय\u000eितिनिध/DR 5. गाड फाईल/GF Printed from counselvise.com "