M/S. ZF RANE AUTOMOTIVE INDIA PVT. LTD.,CHENNAI V. DCIT, NCC-8(1), CHENNAI

ITTPA 111/CHNY/2024

AI Insights

The case involves M/s ZF Rane Automotive India Pvt. Ltd., which appealed against the order of the Deputy Commissioner of Income Tax regarding transfer pricing adjustments and the treatment of certain incomes and expenses. The Tribunal examined various grounds related to the treatment of export incentives, cash discounts, and the selection of comparable companies for transfer pricing analysis. The Tribunal's decision was influenced by previous rulings in similar cases involving the same Assessee, leading to a favorable outcome for the Assessee in terms of the inclusion of certain comparables and the classification of specific incomes and expenses as operating.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 823104 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 10 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 23-12-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2021-2022
• Appeal Filed On: 13-12-2024
• Other Referred Cases: Hyundai Motor India Limited vs ACIT, M/s. Greenland Exports Pvt Ltd v DCIT, CIT v. Welspun Zucchi Textiles Ltd, Sami Labs vs ACIT, Goodyear India Ltd vs ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARV SREENIVASAN
• Assessee Lawyers: SP CHIDAMBARAM; WAY OF GROUND OF APPEAL NO; WAY OF GROUND OF APPEAL NO; WAY OF GROUND OF APPEAL NO
• Keywords: Set aside; Additional evidence; Transfer pricing; International transaction; Business expenditure; Bad and doubtful debts; Depreciation; TDS
• Section: 37; 28

Judgement Text

"आयकर अपीलीय अिधकरण, ’ड ड ड ड ’’ \u000eयायपीठ, चे\u000eनई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH: CHENNAI माननीय \u0007ी मनु क ुमार िग र, \u000fाियक सद\u0012 एवं माननीय \u0016ी \u0016ी \u0016ी \u0016ी एस एस एस एस.आर आर आर आर.रघुनाथा रघुनाथा रघुनाथा रघुनाथा ,लेखा लेखा लेखा लेखा सद य सद य सद य सद य क े क े क े क े सम सम सम सम । । । । BEFORE HON’BLE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND HON’BLE SHRI S. R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./IT(TP)A No.111/Chny/2024 िनधा\"रण वष\"/Assessment Year: 2021-22 M/s ZF Rane Automotive India Private Limited. Maithri 132, Cathedral Road, Chennai (Gopalpuram), Gopalpuram, Chennai, Tamil Nadu 600086 v. The Deputy Commissioner of Income Tax, Non Corporate Circle-8(1), No.121, Mahatma Gandhi Road, Nungambakkam Chennai-600034 [PAN: AAACR3147C] (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 : 10.12.2025 घोषणाक(तार ख /Date of Pronouncement : 23.12.2025 आदेश / O R D E R PER MANU KUMAR GIRI, JM: This appeal by the Assessee is arising out of the order of the Deputy Commissioner of Income Tax, Non-Corporate Circle-8(1), Chennai passed u/s.143(3) r.w.s.144C(13) r.w.s 144B of the Income Tax Act, 1961 (‘Act’ in Printed from counselvise.com short) vide order dated 09.10.2024 for As 2021-22. 2. The Assessee has broadly before this Tribunal: 2.1 “ Transfer Pricing Grounds to the value of international transactions A. The AO / TPO / DRP erred in adjustment to the value of international transactions in relation to the manufacturing business carried on by the Appellant. 2.2 Incorrect treatment of Export incentives as non operating income while computing margins of the Appellant A. The AO / TPO / DRP erred in law and facts by considering the export incentive i.e., Duty Drawback and MEIS income as non-operating income while computing the margins of the Appellant and the comparable companies. 2.3 Incorrect treatment of cash discount as operating income A. The AO / TPO / DRP erred in law in considering Cash discount as other income not relating to normal operations of the Appellant as per Rule 10TA without appreciating the fact that such cash discounts are directly related to the the Appellant and received for early payment of purchase price. 2.4 Incorrect treatment of provision for doubtful debts written back as non IT(TP)A No.111 M/s. ZF Rane Automotive India Pvt. Ltd. 2 short) vide order dated 09.10.2024 for Assessment year The Assessee has broadly filed the following concise g “ Transfer Pricing Grounds – Downward adjustment to the value of international transactions The AO / TPO / DRP erred in confirming the downward adjustment to the value of international transactions in relation to the manufacturing business carried on by the Appellant. Incorrect treatment of Export incentives as non operating income while computing margins of the The AO / TPO / DRP erred in law and facts by considering the export incentive i.e., Duty Drawback and MEIS income as operating income while computing the margins of the Appellant and the comparable companies. Incorrect treatment of cash discount as operating income The AO / TPO / DRP erred in law in considering Cash discount as other income not relating to normal operations of the Appellant as per Rule 10TA without appreciating the fact that such cash discounts are directly related to the the Appellant and received for early payment of purchase price. Incorrect treatment of provision for doubtful debts written back as non-operating income IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. sessment year (‘AY’ in short) grounds of appeal Downward adjustment confirming the downward adjustment to the value of international transactions in relation to the manufacturing business carried on by the Appellant. Incorrect treatment of Export incentives as non- operating income while computing margins of the The AO / TPO / DRP erred in law and facts by considering the export incentive i.e., Duty Drawback and MEIS income as operating income while computing the margins of the Incorrect treatment of cash discount as non- The AO / TPO / DRP erred in law in considering Cash discount as other income not relating to normal operations of the Appellant as per Rule 10TA without appreciating the fact that such cash discounts are directly related to the business of the Appellant and received for early payment of purchase price. Incorrect treatment of provision for doubtful debts Printed from counselvise.com A. The AO / TPO / DRP failed to take cognizance of the fact that the provision written back d reversal of a portion of provision amount created in the earlier years which were originally treated as operating in nature. 2.5 Incorrect treatment of miscellaneous expenses, bad debts/ expenses written off, provisions for expenses non-operating expense A. The AO / TPO / DRP erred in law and facts by considering the miscellaneous expense, bad debts/ expenses written off, provisions for expenses as non computing the margins of comparable companies. 2.6 Incorrect rejection of comparable companies selected by Appellant A. The AO / TPO / DRP erred in rejecting the following comparable companies selected by the appellant in its transfer pricing documentation. • Jay Ushin Limited • Shivam Autotech Limited • Omax Auto Limited • Minda Vast Access Systems Pvt Ltd 2.7 Inclusion of new comparable companies A. The AO / TPO / DRP erred in not considering the following comparable companies identified by the Appellant based on the updated information available in the public dom of Transfer Pricing Assessment proceedings. • Ashimori India Pvt Ltd • Youngshin Automotive India Pvt Limited • Komos Automotive India Pvt Limited IT(TP)A No.111 M/s. ZF Rane Automotive India Pvt. Ltd. 3 The AO / TPO / DRP failed to take cognizance of the fact that the provision written back during the year pertains to reversal of a portion of provision amount created in the earlier years which were originally treated as operating in nature. Incorrect treatment of miscellaneous expenses, bad debts/ expenses written off, provisions for expenses operating expense The AO / TPO / DRP erred in law and facts by considering the miscellaneous expense, bad debts/ expenses written off, provisions for expenses as non-operating expenses while computing the margins of comparable companies. t rejection of comparable companies selected by Appellant The AO / TPO / DRP erred in rejecting the following comparable companies selected by the appellant in its transfer pricing documentation. Jay Ushin Limited Shivam Autotech Limited Auto Limited Minda Vast Access Systems Pvt Ltd Inclusion of new comparable companies The AO / TPO / DRP erred in not considering the following comparable companies identified by the Appellant based on the updated information available in the public domain at the time of Transfer Pricing Assessment proceedings. Ashimori India Pvt Ltd Youngshin Automotive India Pvt Limited Komos Automotive India Pvt Limited IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. The AO / TPO / DRP failed to take cognizance of the fact uring the year pertains to reversal of a portion of provision amount created in the earlier years which were originally treated as operating in nature. Incorrect treatment of miscellaneous expenses, bad debts/ expenses written off, provisions for expenses as The AO / TPO / DRP erred in law and facts by considering the miscellaneous expense, bad debts/ expenses written off, operating expenses while t rejection of comparable companies The AO / TPO / DRP erred in rejecting the following comparable companies selected by the appellant in its transfer Inclusion of new comparable companies The AO / TPO / DRP erred in not considering the following comparable companies identified by the Appellant based on the ain at the time Printed from counselvise.com • JTEKT India Limited 2.8 Non-exclusion of functionally dissimilar comparable companies A. The AO / TPO / companies which are functionally dissimilar to the business of the Appellant • IAC International Automotive India Private Limited 2.9 Incorrect determination of margins in respect of comparable companies A. The AO / TPO / margin computation of the comparable companies. 2.10 Adjustment for basic custom duty A. The AO / TPO / DRP erred in rejecting the customs duty adjustment without appreciating the fact that adjustment towards basic customs duty if not undertaken would distort the comparability results owing to the differences in the percentage of imports by the Appellant vis comparable companies. 2.11 Adjustment for basic custom duty 2.12 Joint venture arrangemen negotiated arrangement 2.13 Fresh search process undertaken is unwarranted and incorrect 2.14 Short credit of TDS and TCS 2.15 Incorrect computation of Interest u/s 234C “ IT(TP)A No.111 M/s. ZF Rane Automotive India Pvt. Ltd. 4 JTEKT India Limited exclusion of functionally dissimilar comparable The AO / TPO / DRP erred in not excluding comparable companies which are functionally dissimilar to the business of IAC International Automotive India Private Limited Incorrect determination of margins in respect of comparable companies The AO / TPO / DRP erred in not rectifying the errors in margin computation of the comparable companies. Adjustment for basic custom duty The AO / TPO / DRP erred in rejecting the customs duty adjustment without appreciating the fact that adjustment customs duty if not undertaken would distort the comparability results owing to the differences in the percentage of imports by the Appellant vis-à-vis the average imports of comparable companies. Adjustment for basic custom duty Joint venture arrangement in substance is a third party negotiated arrangement Fresh search process undertaken is unwarranted and Short credit of TDS and TCS Incorrect computation of Interest u/s 234C “ IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. exclusion of functionally dissimilar comparable DRP erred in not excluding comparable companies which are functionally dissimilar to the business of IAC International Automotive India Private Limited Incorrect determination of margins in respect of DRP erred in not rectifying the errors in margin computation of the comparable companies. The AO / TPO / DRP erred in rejecting the customs duty adjustment without appreciating the fact that adjustment customs duty if not undertaken would distort the comparability results owing to the differences in the percentage vis the average imports of t in substance is a third party Fresh search process undertaken is unwarranted and Printed from counselvise.com 3. The facts of the case are that the Assessee, a joint Rane Holdings Limited, India, and TRW Automotive JV LLC, USA, is engaged in the manufacture of hydraulic power steering gears, hydraulic pumps, power rack-and systems for the automotive i the Assessee entered into certain international transactions with its Associated Enterprises (AEs). The learned Authorised Representative (Ld. AR) submitted that the Transactional Net Margin Method (TNMM) was adopted as the most appropriate method for benchmarking these transactions. The Assessee reported a margin of 3.56%, while the margins of eight comparable companies ranged from 1.69% to 4.03%, with a median of 3.73%. The Transfer Pricing Officer ( the use of TNMM as the appropriate method. However, the TPO adjusted the margins of the Assessee and the comparable companies by excluding certain income and expenses and by including or excluding certain comparables. As a result, the TPO de 0.58% as against the margins of six comparable companies ranging between 5.52% and 6.14%, with a median of 5.83%. Since the Assessee’s margin did not fall within the acceptable range, a transfer pricing adjustment was proposed based on the difference between the Assessee’s margin of 0.58% and the median margin of the comparable companies at 5.83%. Vide order dated 12.10.2023, the TPO quantified the adjustment at Rs.5,10,00,000/-. Consequently, the Assessing Officer passed a IT(TP)A No.111 M/s. ZF Rane Automotive India Pvt. Ltd. 5 The facts of the case are that the Assessee, a joint Rane Holdings Limited, India, and TRW Automotive JV LLC, USA, is engaged in the manufacture of hydraulic power steering gears, hydraulic and-pinion steering gears, airbags, and safety seat belt systems for the automotive industry. During the assessment year 2021 the Assessee entered into certain international transactions with its Associated Enterprises (AEs). The learned Authorised Representative (Ld. AR) submitted that the Transactional Net Margin Method (TNMM) was opted as the most appropriate method for benchmarking these transactions. The Assessee reported a margin of 3.56%, while the margins of eight comparable companies ranged from 1.69% to 4.03%, with a The Transfer Pricing Officer (‘TPO’ in s the use of TNMM as the appropriate method. However, the TPO adjusted the margins of the Assessee and the comparable companies by excluding certain income and expenses and by including or excluding certain As a result, the TPO determined the Assessee’s margin at 0.58% as against the margins of six comparable companies ranging between 5.52% and 6.14%, with a median of 5.83%. Since the Assessee’s margin did not fall within the acceptable range, a transfer pricing osed based on the difference between the Assessee’s margin of 0.58% and the median margin of the comparable companies at 5.83%. Vide order dated 12.10.2023, the TPO quantified the adjustment at . Consequently, the Assessing Officer passed a IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. The facts of the case are that the Assessee, a joint venture between Rane Holdings Limited, India, and TRW Automotive JV LLC, USA, is engaged in the manufacture of hydraulic power steering gears, hydraulic pinion steering gears, airbags, and safety seat belt During the assessment year 2021-22, the Assessee entered into certain international transactions with its Associated Enterprises (AEs). The learned Authorised Representative (Ld. AR) submitted that the Transactional Net Margin Method (TNMM) was opted as the most appropriate method for benchmarking these transactions. The Assessee reported a margin of 3.56%, while the margins of eight comparable companies ranged from 1.69% to 4.03%, with a ’ in short) accepted the use of TNMM as the appropriate method. However, the TPO adjusted the margins of the Assessee and the comparable companies by excluding certain income and expenses and by including or excluding certain termined the Assessee’s margin at 0.58% as against the margins of six comparable companies ranging between 5.52% and 6.14%, with a median of 5.83%. Since the Assessee’s margin did not fall within the acceptable range, a transfer pricing osed based on the difference between the Assessee’s margin of 0.58% and the median margin of the comparable companies at 5.83%. Vide order dated 12.10.2023, the TPO quantified the adjustment at . Consequently, the Assessing Officer passed a draft Printed from counselvise.com assessment order dated 20.12.2023 incorporating the said transfer pricing adjustment. 4. The Assessee filed objections before the Dispute Resolution Panel (DRP), which, by its directions dated 06.09.2024, upheld the action of the TPO, while directing recomputation of the margins of the comparable companies based on their annual reports and considering foreign exchange loss at INR 0.64 crore instead of INR 0.84 crore. Pursuant to these directions, the TPO recomputed the Assessee’s margin at 0.56% aga the margins of six comparable companies ranging from 5.52% to 5.58%, with a median of 5.55%. Aggrieved by the final assessment order, the Assessee has filed the present appeal before us. 5. The Ld. AR submitted a ground with reference to the findings of the lower authorities. Our attention was drawn to various documents filed in the paper book, the case law compendium, the summary chart, and its annexures. The ld advanced arguments and supported the After hearing the rival submissions and examining the records, our adjudication is as follows. The principal issues requiring our consideration are: (i) Whether export incentives should be treated as operating income while com margin; IT(TP)A No.111 M/s. ZF Rane Automotive India Pvt. Ltd. 6 assessment order dated 20.12.2023 incorporating the said transfer pricing The Assessee filed objections before the Dispute Resolution Panel (DRP), which, by its directions dated 06.09.2024, upheld the action of the ng recomputation of the margins of the comparable companies based on their annual reports and considering foreign exchange loss at INR 0.64 crore instead of INR 0.84 crore. Pursuant to these directions, the TPO recomputed the Assessee’s margin at 0.56% aga the margins of six comparable companies ranging from 5.52% to 5.58%, with a median of 5.55%. Aggrieved by the final assessment order, the Assessee has filed the present appeal before us. The Ld. AR submitted a ground-wise chart and presented argume with reference to the findings of the lower authorities. Our attention was drawn to various documents filed in the paper book, the case law compendium, the summary chart, and its annexures. The ld advanced arguments and supported the orders of the TPO and the After hearing the rival submissions and examining the records, our adjudication is as follows. The principal issues requiring our consideration Whether export incentives should be treated as operating income while computing the Assessee’s IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. assessment order dated 20.12.2023 incorporating the said transfer pricing The Assessee filed objections before the Dispute Resolution Panel (DRP), which, by its directions dated 06.09.2024, upheld the action of the ng recomputation of the margins of the comparable companies based on their annual reports and considering foreign exchange loss at INR 0.64 crore instead of INR 0.84 crore. Pursuant to these directions, the TPO recomputed the Assessee’s margin at 0.56% against the margins of six comparable companies ranging from 5.52% to 5.58%, with a median of 5.55%. Aggrieved by the final assessment order, the wise chart and presented arguments with reference to the findings of the lower authorities. Our attention was drawn to various documents filed in the paper book, the case law compendium, the summary chart, and its annexures. The ld. CIT-DR also orders of the TPO and the ld.DRP. After hearing the rival submissions and examining the records, our adjudication is as follows. The principal issues requiring our consideration Whether export incentives should be treated as puting the Assessee’s Printed from counselvise.com (ii) Whether cash discounts should be treated as operating income while computing the Assessee’s margin; (iii) Whether miscellaneous expenses should be treated as operating expenses in the case of comparable companies; and (iv) Whether functi be included. The ld. AR submitted that the remaining grounds are merely consequential in nature and do not require separate adjudication, as they would become academic if the above issues are decided in favour Assessee. 6. Ground no. 2.2- Treatment of export incentives as operating income while computing the margin of Assessee: 7. The first issue for our consideration relates to the treatment of export incentives, namely MEIS incentives and duty drawback, and whether such receipts should be classified as operating or non learned Authorised Representative (Ld. A squarely covered by the decision of the ITAT in the Assessee’s own case for Assessment Year 2020 Tribunal decided the matter in favour of the Assessee. The Tribunal held that export incentives such as duty drawback and MEIS, which effectively reduce operating costs, should be treated as part of “operating revenue” while computing the Assessee’s margin. IT(TP)A No.111 M/s. ZF Rane Automotive India Pvt. Ltd. 7 Whether cash discounts should be treated as operating income while computing the Assessee’s Whether miscellaneous expenses should be treated as operating expenses in the case of comparable companies; and Whether functionally comparable companies should be included. AR submitted that the remaining grounds are merely consequential in nature and do not require separate adjudication, as they would become academic if the above issues are decided in favour Treatment of export incentives as operating income while computing the margin of Assessee: The first issue for our consideration relates to the treatment of export incentives, namely MEIS incentives and duty drawback, and whether such receipts should be classified as operating or non-operating income. The learned Authorised Representative (Ld. AR) submitted that this issue is squarely covered by the decision of the ITAT in the Assessee’s own case for Assessment Year 2020-21 in IT(TP)A No.53/Chny/2024, wherein the Tribunal decided the matter in favour of the Assessee. The Tribunal held incentives such as duty drawback and MEIS, which effectively reduce operating costs, should be treated as part of “operating revenue” while computing the Assessee’s margin. IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. Whether cash discounts should be treated as operating income while computing the Assessee’s Whether miscellaneous expenses should be treated as operating expenses in the case of comparable onally comparable companies should AR submitted that the remaining grounds are merely consequential in nature and do not require separate adjudication, as they would become academic if the above issues are decided in favour of the Treatment of export incentives as operating income The first issue for our consideration relates to the treatment of export incentives, namely MEIS incentives and duty drawback, and whether such operating income. The R) submitted that this issue is squarely covered by the decision of the ITAT in the Assessee’s own case 21 in IT(TP)A No.53/Chny/2024, wherein the Tribunal decided the matter in favour of the Assessee. The Tribunal held incentives such as duty drawback and MEIS, which effectively reduce operating costs, should be treated as part of “operating revenue” Printed from counselvise.com The Ld. DR strongly relied upon and supported the orders and directions of the lower authorities. 8. We have heard the submissions of both parties and carefully examined the material available on record, including the orders of the lower authorities, the paper book filed, and the judicial precedents relied upon. We note that an identica Assessee’s own case for Assessment Year 2020 No.53/Chny/2024. Under an identical set of facts, the Tribunal held that export incentives are to be treated as part of “operating revenue.” The relevant findings of the Tribunal are reproduced below: “5. We have perused the orders and heard the rival contentions. The issue under treatment of export incentives and whether the same were operating income or non Revenue was that the same are non some of the comparable companies do not have such income and hence, the same are margins of Assessee 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 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 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 IT(TP)A No.111 M/s. ZF Rane Automotive India Pvt. Ltd. 8 The Ld. DR strongly relied upon and supported the orders and directions of We have heard the submissions of both parties and carefully examined the material available on record, including the orders of the lower authorities, the paper book filed, and the judicial precedents relied upon. We note that an identical issue was examined by the Tribunal in the Assessee’s own case for Assessment Year 2020- No.53/Chny/2024. Under an identical set of facts, the co-ordinate bench of Tribunal held that export incentives are to be treated as part of “operating evenue.” The relevant findings of the Tribunal are reproduced below: “5. We have perused the orders and heard the rival contentions. The issue under discussion is against treatment of export incentives and whether the same were operating income or non-operating income. The case of Revenue was that the same are non-operating income as some of the comparable companies do not have such income and hence, the same are to be excluded from operating margins of Assessee 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 income is operating or non-operating would be hea 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 uch 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 IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. The Ld. DR strongly relied upon and supported the orders and directions of We have heard the submissions of both parties and carefully examined the material available on record, including the orders of the lower authorities, the paper book filed, and the judicial precedents relied l issue was examined by the Tribunal in the -21 in IT(TP)A ordinate bench of Tribunal held that export incentives are to be treated as part of “operating evenue.” The relevant findings of the Tribunal are reproduced below: “5. We have perused the orders and heard the rival is against treatment of export incentives and whether the same were operating income. The case of operating income as some of the comparable companies do not have such income to be excluded from operating margins of Assessee 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 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 uch 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 Printed from counselvise.com the corporate tax p 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 me 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 cour 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. Apart from this definition, the Cost Accounting Standards elucidates the term Revenue from operations as under: “4.9 Revenue from operat the course of the ordinary activities of an entity from the sale of goods or rendering of services. 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 received. Revenue from operations is generally recognised at the net value excluding indirect taxes. Sometime, revenue is presented at the gross value including excise duty and the excis duty is presented as deduction from such gross value of the revenue. Other Operating Revenue is the incidental income arising in the course of ordinary activities of an entity but not arising from the sale of main goods or services, and it does not incl IT(TP)A No.111 M/s. ZF Rane Automotive India Pvt. Ltd. 9 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 cour 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 l operations. Undoubtedly in the instant case, the export incentive is derived during the course of normal operations. Apart from this definition, the Cost Accounting Standards elucidates the term Revenue from operations as under: “4.9 Revenue from operations: is the income arising in the course of the ordinary activities of an entity from the sale of goods or rendering of services. Revenue from operations represents income arising from the sale of goods or rendering of services and includes other g revenue, such as sale of scrap, government subsidies, or incentives received. Revenue from operations is generally recognised at the net value excluding indirect taxes. Sometime, revenue is presented at the gross value including excise duty and the excis duty is presented as deduction from such gross value of the revenue. Other Operating Revenue is the incidental income arising in the course of ordinary activities of an entity but not arising from the sale of main goods or services, and it does not include Other Income. IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. rovisions 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 aning 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 l operations. Undoubtedly in the instant case, the export incentive is derived during the course of normal operations. Apart from this definition, the Cost Accounting Standards elucidates the term Revenue from operations as under: ions: is the income arising in the course of the ordinary activities of an entity from the sale of goods or rendering of services. Revenue from operations represents income arising from the sale of goods or rendering of services and includes other g revenue, such as sale of scrap, government subsidies, or incentives received. Revenue from operations is generally recognised at the net value excluding indirect taxes. Sometime, revenue is presented at the gross value including excise duty and the excise duty is presented as deduction from such gross value of Other Operating Revenue is the incidental income arising in the course of ordinary activities of an entity but not arising from the sale of main goods or services, and it Printed from counselvise.com Examples: (i) Sale of By (ii) Sale of manufacturing scrap; (iii) Export incentives received from Government; and (iv) Product related subsidies or grants received from Government” Further, the purpose of these export from the respective schemes as under: Duty Drawback is a trusted and time administered by CBIC to promote exports. It rebates the incidence of customs and Central Excise duties, chargeable on imported and excisable ma inputs for goods to be exported. This WTO compliant scheme ensures that exports are zero burden of the specified taxes. Duty Drawback provides essential support to exporters. The scheme comprises categories, i.e. (i) All industry Rate (ii) Brand Rate and (iii) Drawback on re-export of imported goods. Duty Drawback on re Drawback can also be claimed or the export of duty imported goods. Under this facility, may be exported and Duty Drawback of up to 98% of import duty paid can be claimed on such exports. Proof of duty paid on importation and identification of the export goods as those that were imported earlier are among the primary requirements under this scheme. MEIS What is Merchandise Exports from India Scheme (MEIS) Scheme IT(TP)A No.111 M/s. ZF Rane Automotive India Pvt. Ltd. 10 (i) Sale of By-products; (ii) Sale of manufacturing scrap; (iii) Export incentives received from Government; and (iv) Product related subsidies or grants received from Government” Further, the purpose of these export incentives are implicit from the respective schemes as under: Duty Drawback is a trusted and time-tested scheme administered by CBIC to promote exports. It rebates the incidence of customs and Central Excise duties, chargeable on imported and excisable material respectively when used as inputs for goods to be exported. This WTO compliant scheme ensures that exports are zero-rated and do not carry the burden of the specified taxes. Duty Drawback provides essential support to exporters. The scheme comprises categories, i.e. (i) All industry Rate (ii) Brand Rate and (iii) export of imported goods. Duty Drawback on re-export of imported goods: Duty Drawback can also be claimed or the export of duty imported goods. Under this facility, goods imported earlier may be exported and Duty Drawback of up to 98% of import duty paid can be claimed on such exports. Proof of duty paid on importation and identification of the export goods as those that were imported earlier are among the primary quirements under this scheme. What is Merchandise Exports from India Scheme (MEIS) IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. (iii) Export incentives received from Government; and (iv) Product related subsidies or grants received from incentives are implicit tested scheme administered by CBIC to promote exports. It rebates the incidence of customs and Central Excise duties, chargeable on terial respectively when used as inputs for goods to be exported. This WTO compliant scheme rated and do not carry the burden of the specified taxes. Duty Drawback provides essential support to exporters. The scheme comprises three categories, i.e. (i) All industry Rate (ii) Brand Rate and (iii) export of imported goods: Duty Drawback can also be claimed or the export of duty-paid goods imported earlier may be exported and Duty Drawback of up to 98% of import duty paid can be claimed on such exports. Proof of duty paid on importation and identification of the export goods as those that were imported earlier are among the primary What is Merchandise Exports from India Scheme (MEIS) Printed from counselvise.com A scheme designed to provide rewards to exporters to offset infrastructural inefficiencies and associated costs. The Duty Credit Scrips and goods imported/ against them shall be freely transferable. The Duty Credit Scrips can be used for: (i) Payment of Basic Customs Duty and Additional Customs Duty specified under sections 3(1), 3(3) and 3(5) of the Customs Tariff Act, 1975 for import of inputs or goods, including capital goods, as per DoR Notification, except items listed in Appendix 3A. (ii) Payment of Central excise duties on domestic procurement of inputs or goods, (iii) Payment of Basic Customs Duty and Additional Customs Duty specified ender Sections 3(1), 3(3) and 3(5) of the Customs Tariff Act, 1975 and fee as per paragraph 3.18 of this Policy Objective of the Merchandise Exports from India Scheme (MEIS) is to promote the manufacture and export of notified goods/ products. 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 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. Turni 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 IT(TP)A No.111 M/s. ZF Rane Automotive India Pvt. Ltd. 11 A scheme designed to provide rewards to exporters to offset infrastructural inefficiencies and associated costs. The Duty Credit Scrips and goods imported/ domestically procured against them shall be freely transferable. The Duty Credit Scrips can be used for: Payment of Basic Customs Duty and Additional Customs Duty specified under sections 3(1), 3(3) and 3(5) of the Customs Tariff Act, 1975 for import of inputs or goods, including capital goods, as per DoR Notification, except items listed in Appendix 3A. ment of Central excise duties on domestic procurement of inputs or goods, Payment of Basic Customs Duty and Additional Customs Duty specified ender Sections 3(1), 3(3) and 3(5) of the Customs Tariff Act, 1975 and fee as per paragraph 3.18 of Objective of the Merchandise Exports from India Scheme (MEIS) is to promote the manufacture and export of notified 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. Turni 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 IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. A scheme designed to provide rewards to exporters to offset infrastructural inefficiencies and associated costs. The Duty domestically procured against them shall be freely transferable. The Duty Credit Payment of Basic Customs Duty and Additional Customs Duty specified under sections 3(1), 3(3) and 3(5) of the Customs Tariff Act, 1975 for import of inputs or goods, including capital goods, as per DoR Notification, except ment of Central excise duties on domestic procurement Payment of Basic Customs Duty and Additional Customs Duty specified ender Sections 3(1), 3(3) and 3(5) of the Customs Tariff Act, 1975 and fee as per paragraph 3.18 of Objective of the Merchandise Exports from India Scheme (MEIS) is to promote the manufacture and export of notified 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 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 Printed from counselvise.com 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 w 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 distinguishable on facts. Our view is also supported by the jurisdictional Tribunal decision in the case of M/s. Greenland Exports Pvt Ltd v DCIT ITA No.514/Mds/2016 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 c 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 th 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 m 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.” IT(TP)A No.111 M/s. ZF Rane Automotive India Pvt. Ltd. 12 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 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 M/s. Greenland Exports Pvt Ltd v DCIT ITA No.514/Mds/2016 wherein it was held that export incentives and duty drawback are considered o 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 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.” IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. 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 ere 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 Goodyear is distinguishable on facts. Our view is also supported by the jurisdictional Tribunal decision in the case of M/s. Greenland Exports Pvt Ltd v DCIT ITA No.514/Mds/2016 wherein it was held that export incentives and duty drawback are considered o 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 on by the ld. ase. 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 e 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 argin 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.” Printed from counselvise.com The Hon’ble Bombay High Court in the case of CIT v. Welspun Zucchi Textiles Ltd. In ITA No. 1286/2014 dt 06.01.2017held as under: “4. Regarding question (ii): at the ALP for the export of bathrobes and towels had excluded the DEPB benefi arriving at the operating profits and total cost respectively of the respondent for the purposes of application of the TNMM method to arrive at ALP. This exclusion of DEPB benefit from profit and depreciation from costs, was done o the respondent assessee and not while arriving at the profit margin of the comparables. (b) Being aggrieved, the respondent assessee filed an appeal to the CIT(A). In appeal, the CIT(A) by an order dated 2nd November, 2012 held that both the DEPB as well as the depreciation are part of the operating income/expenses respectively. Thus, they have to be taken into account while arriving at the operating profit and total cost before determining the margin on adoption of TNMM aggrieved, the Revenue carried the issue in appeal to the Tribunal. By the impugned order, the Tribunal held that so far DEPB benefit is concerned, the issue arose for consideration before it in the case of respondent assessee itself for 06 and 2007 to be included for the purposes of arriving at operating profit for the application of TNMM method. This on the basis that comparison should be made on like to like and similar to concerned, the impugned order of the Tribunal adopted the same reasoning which it had applied while holding that DEPB benefit is includable in arriving at the net profit in its order in the earlier assessment years 2 06 and 2007 IT(TP)A No.111 M/s. ZF Rane Automotive India Pvt. Ltd. 13 e Bombay High Court in the case of CIT v. Welspun Zucchi Textiles Ltd. In ITA No. 1286/2014 dt 06.01.2017held “4. Regarding question (ii):- (a) The TPO while arriving at the ALP for the export of bathrobes and towels had excluded the DEPB benefit and depreciation while arriving at the operating profits and total cost respectively of the respondent for the purposes of application of the TNMM method to arrive at ALP. This exclusion of DEPB benefit from profit and depreciation from costs, was done only while arriving at the profits of the respondent assessee and not while arriving at the profit margin of the comparables. (b) Being aggrieved, the respondent assessee filed an appeal to the CIT(A). In appeal, the CIT(A) by an order dated 2nd November, 012 held that both the DEPB as well as the depreciation are part of the operating income/expenses respectively. Thus, they have to be taken into account while arriving at the operating profit and total cost before determining the margin on adoption of TNMM method. (c) Being aggrieved, the Revenue carried the issue in appeal to the Tribunal. By the impugned order, the Tribunal held that so far DEPB benefit is concerned, the issue arose for consideration before it in the case of respondent assessee itself for Assessment year 2005 06 and 2007-08 and the Tribunal held that the same has to be included for the purposes of arriving at operating profit for the application of TNMM method. This on the basis that comparison should be made on like to like and similar. So far as the depreciation is concerned, the impugned order of the Tribunal adopted the same reasoning which it had applied while holding that DEPB benefit is includable in arriving at the net profit in its order in the earlier assessment years 2 06 and 2007-08 in the subject assessment year with IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. e Bombay High Court in the case of CIT v. Welspun Zucchi Textiles Ltd. In ITA No. 1286/2014 dt 06.01.2017held (a) The TPO while arriving at the ALP for the export of bathrobes and towels had t and depreciation while arriving at the operating profits and total cost respectively of the respondent for the purposes of application of the TNMM method to arrive at ALP. This exclusion of DEPB benefit from profit and depreciation nly while arriving at the profits of the respondent assessee and not while arriving at the profit margin of the comparables. (b) Being aggrieved, the respondent assessee filed an appeal to the CIT(A). In appeal, the CIT(A) by an order dated 2nd November, 012 held that both the DEPB as well as the depreciation are part of the operating income/expenses respectively. Thus, they have to be taken into account while arriving at the operating profit and total cost before determining method. (c) Being aggrieved, the Revenue carried the issue in appeal to the Tribunal. By the impugned order, the Tribunal held that so far DEPB benefit is concerned, the issue arose Assessment year 2005- 08 and the Tribunal held that the same has to be included for the purposes of arriving at operating profit for the application of TNMM method. This on the basis that comparison should be made on like to like and similar. So far as the depreciation is concerned, the impugned order of the Tribunal adopted the same reasoning which it had applied while holding that DEPB benefit is includable in arriving at the net profit in its order in the earlier assessment years 2005- 08 in the subject assessment year with Printed from counselvise.com regard to claim of depreciation. Therefore, the DEPB was includable in arriving at the operating profit and depreciation was includable while arriving at the total costs of the respondent assessee as t excluded in arriving at the profits of the comparable companies. (d)We find that so far as exclusion of DEPB benefit in arriving at the operating profit of the respondent assessee is concerned, the order of the Tribunal for the assessment ye were appealed by the revenue to this Court. Mr. Suresh Kumar, learned Counsel appearing for the Revenue very fairly states that this very issue was raised by the Revenue in its appeal before this Court for the earlier assessment yea 2013 relating to AY 2005 No.171 of 2014 relating to AY 2007 Court by orders dated 22 2005-06 and 1st July, 2016 for AY 2007 the Revenue’s appeal. In the above view, the issue with regard to the exclusion of the DEPB benefit stands concluded by virtue of order of this Court against the Revenue and in fa 7. In view of our elaborate discussions/observation as above, we arrive at an emphatic conclusion that export incentives like Duty drawback and MEIS which have the effect of reducing the operating cost, ought to be consid “operating revenue” while computing the margin of the Assessee and we direct so the TPO to re of the Assessee after including the same. Thus, this ground of appeal is decided in favour of the Assessee. Ground No.2.2 is allowed. “ 9. In view of the facts and circumstances of the present respectfully following the decision of the coordinate bench of the Tribunal IT(TP)A No.111 M/s. ZF Rane Automotive India Pvt. Ltd. 14 regard to claim of depreciation. Therefore, the DEPB was includable in arriving at the operating profit and depreciation was includable while arriving at the total costs of the respondent assessee as the same is not excluded in arriving at the profits of the comparable companies. (d)We find that so far as exclusion of DEPB benefit in arriving at the operating profit of the respondent assessee is concerned, the order of the Tribunal for the assessment years 2005-06 and 2007 were appealed by the revenue to this Court. Mr. Suresh Kumar, learned Counsel appearing for the Revenue very fairly states that this very issue was raised by the Revenue in its appeal before this Court for the earlier assessment years being Income Tax Appeal No.1827 of 2013 relating to AY 2005-06 and Income Tax Appeal No.171 of 2014 relating to AY 2007-08. However, this Court by orders dated 22nd September, 2015 for AY 06 and 1st July, 2016 for AY 2007-08, dismissed the Revenue’s appeal. In the above view, the issue with regard to the exclusion of the DEPB benefit stands concluded by virtue of order of this Court against the Revenue and in favour of the respondent assessee.” 7. In view of our elaborate discussions/observation as above, we arrive at an emphatic conclusion that export incentives like Duty drawback and MEIS which have the effect of reducing the operating cost, ought to be considered as part of “operating revenue” while computing the margin of the Assessee and we direct so the TPO to re-determine the margin of the Assessee after including the same. Thus, this ground of appeal is decided in favour of the Assessee. Ground No.2.2 is In view of the facts and circumstances of the present respectfully following the decision of the coordinate bench of the Tribunal IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. regard to claim of depreciation. Therefore, the DEPB was includable in arriving at the operating profit and depreciation was includable while arriving at the total he same is not excluded in arriving at the profits of the comparable companies. (d)We find that so far as exclusion of DEPB benefit in arriving at the operating profit of the respondent assessee is concerned, the order of the 06 and 2007-08 were appealed by the revenue to this Court. Mr. Suresh Kumar, learned Counsel appearing for the Revenue very fairly states that this very issue was raised by the Revenue in its appeal before this Court for the earlier rs being Income Tax Appeal No.1827 of 06 and Income Tax Appeal 08. However, this September, 2015 for AY 08, dismissed the Revenue’s appeal. In the above view, the issue with regard to the exclusion of the DEPB benefit stands concluded by virtue of order of this Court against the vour of the respondent assessee.” 7. In view of our elaborate discussions/observation as above, we arrive at an emphatic conclusion that export incentives like Duty drawback and MEIS which have the effect of reducing ered as part of “operating revenue” while computing the margin of the determine the margin of the Assessee after including the same. Thus, this ground of appeal is decided in favour of the Assessee. Ground No.2.2 is In view of the facts and circumstances of the present case and respectfully following the decision of the coordinate bench of the Tribunal Printed from counselvise.com in the Assessee’s own case for Assessment Year 2020 Assessing Officer to recompute t incentives as operating income. Consequently, Ground No. 2.2 raised by the Assessee stands allowed. 10. The next issue raised by the Assessee by way of ground of appeal No. 2.3 is against treatment of cash discount as non The Ld. AR submitted that this issue is also squarely covered by the decision of the ITAT in the Assessee’s 21 in IT(TP)A No.53/Chny/2024, wherein the Tribunal decided the issue in favour of the Assessee by holding that cash discount income arises from the regular business operations and, therefore, should be treated as part of “operating revenue” while computing the Assessee’s margin. 11. On the other hand, the learned Departmental Representative (Ld. DR) strongly relied upon and supported the orders and directions of the lower authorities. 12. We have heard the rival submissio available on record, including the orders of the lower authorities, the paper book filed, and the judicial precedents relied upon. We note that this issue has already been decided by the coordinate bench of the Tribunal in the Assessee’s own case for Assessment Year 2020 No.53/Chny/2024. The relevant findings of the Tribunal are reproduced below: IT(TP)A No.111 M/s. ZF Rane Automotive India Pvt. Ltd. 15 in the Assessee’s own case for Assessment Year 2020-21, we direct the Assessing Officer to recompute the Assessee’s margin by treating export incentives as operating income. Consequently, Ground No. 2.2 raised by the Assessee stands allowed. The next issue raised by the Assessee by way of ground of appeal No. 2.3 is against treatment of cash discount as non-operating income. The Ld. AR submitted that this issue is also squarely covered by the decision of the ITAT in the Assessee’s own case for Assessment Year 2020 21 in IT(TP)A No.53/Chny/2024, wherein the Tribunal decided the issue in favour of the Assessee by holding that cash discount income arises from the regular business operations and, therefore, should be treated as part of “operating revenue” while computing the Assessee’s margin. On the other hand, the learned Departmental Representative (Ld. DR) strongly relied upon and supported the orders and directions of the We have heard the rival submissions and examined the material available on record, including the orders of the lower authorities, the paper book filed, and the judicial precedents relied upon. We note that this issue has already been decided by the coordinate bench of the Tribunal in the Assessee’s own case for Assessment Year 2020– No.53/Chny/2024. The relevant findings of the Tribunal are reproduced IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. 21, we direct the he Assessee’s margin by treating export incentives as operating income. Consequently, Ground No. 2.2 raised by The next issue raised by the Assessee by way of ground of appeal No. operating income. The Ld. AR submitted that this issue is also squarely covered by the own case for Assessment Year 2020- 21 in IT(TP)A No.53/Chny/2024, wherein the Tribunal decided the issue in favour of the Assessee by holding that cash discount income arises from the regular business operations and, therefore, should be treated as part of “operating revenue” while computing the Assessee’s margin. On the other hand, the learned Departmental Representative (Ld. DR) strongly relied upon and supported the orders and directions of the ns and examined the material available on record, including the orders of the lower authorities, the paper book filed, and the judicial precedents relied upon. We note that this issue has already been decided by the coordinate bench of the Tribunal in the –21 in IT(TP)A No.53/Chny/2024. The relevant findings of the Tribunal are reproduced Printed from counselvise.com \"8.4 We have heard the contentions of the rival parties and perused the material available on record and we proceed to decide the issue without considering the additional evidence in this regard. The question is whether the cash discount reflected as income in the Profit and Loss can be treated as operating revenue. It is quite explicit from the undisputed facts of the case that the income in relation to cash discount is nothing, but an income earned due to early payment of invoices to suppliers. The Ld AR also contended that expense could be reduced by the component of cash discount and net amount could have been disclosed alternative gross amount of expense is disclosed as debit to P&L and the corresponding cash discount is separately shown as income in the P&L, in either case the overall impact and the nature of such cash discount remains the same. We principal that cash discount ought to be treated as operating revenue and observation of the DRP by placing reliance on Rule 10TA of Safe Harbour Rules is not correct. In fact, even as per the definition of Safe harbour Rules, we are of the view that the said income is derived from the normal operation of business and therefore it ought to be treated as operating revenue. We also note that issue arising in the present appeal is squarely covered by the decision of this Tribunal in the case of M/s. Hyundai Motor India Limited vs ACIT 3912/Chny/2017 wherein it has been held that discount income are to be considered as operating income for the purpose of computing operating margins. Relevant extract of the said decision is provided below: \" 52. As regards commission / discount income, incentives and insurance claim income, we find that all these incomes are generated from main business activity of the Assessee of manufacturing and sales of cars. The Assessee has received commission / discount procurement of raw materials and insurance claim is received towards damaged cars manufactured by the IT(TP)A No.111 M/s. ZF Rane Automotive India Pvt. Ltd. 16 \"8.4 We have heard the contentions of the rival parties and perused the material available on record and we proceed to decide the issue without considering the additional evidence in this regard. The question is whether the cash discount reflected as income in the Profit and Loss can be treated as operating revenue. It is quite explicit from the undisputed e that the income in relation to cash discount is nothing, but an income earned due to early payment of invoices to suppliers. The Ld AR also contended that expense could be reduced by the component of cash discount and net amount could have been disclosed as expense or in the alternative gross amount of expense is disclosed as debit to P&L and the corresponding cash discount is separately shown as income in the P&L, in either case the overall impact and the nature of such cash discount remains the same. We principal that cash discount ought to be treated as operating revenue and observation of the DRP by placing reliance on Rule 10TA of Safe Harbour Rules is not correct. In fact, even as per the definition of Safe harbour Rules, we are of the view that the said income is derived from the normal operation of business and therefore it ought to be treated as operating revenue. We also note that issue arising in the present appeal is squarely covered by the decision of this Tribunal in the case Hyundai Motor India Limited vs ACIT - 3912/Chny/2017 wherein it has been held that discount income are to be considered as operating income for the purpose of computing operating margins. Relevant extract of the said decision is provided below: 52. As regards commission / discount income, incentives and insurance claim income, we find that all these incomes are generated from main business activity of the Assessee of manufacturing and sales of cars. The Assessee has received commission / discount procurement of raw materials and insurance claim is received towards damaged cars manufactured by the IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. \"8.4 We have heard the contentions of the rival parties and perused the material available on record and we proceed to decide the issue without considering the additional evidence in this regard. The question is whether the cash discount reflected as income in the Profit and Loss can be treated as operating revenue. It is quite explicit from the undisputed e that the income in relation to cash discount is nothing, but an income earned due to early payment of invoices to suppliers. The Ld AR also contended that expense could be reduced by the component of cash discount and net as expense or in the alternative gross amount of expense is disclosed as debit to P&L and the corresponding cash discount is separately shown as income in the P&L, in either case the overall impact and the nature of such cash discount remains the same. We agree in principal that cash discount ought to be treated as operating revenue and observation of the DRP by placing reliance on Rule 10TA of Safe Harbour Rules is not correct. In fact, even as per the definition of Safe harbour Rules, we are of the view that the said income is derived from the normal operation of business and therefore it ought to be treated as operating revenue. We also note that issue arising in the present appeal is squarely covered by the decision of this Tribunal in the case - ITA No. 3912/Chny/2017 wherein it has been held that discount income are to be considered as operating income for the purpose of computing operating margins. Relevant extract of 52. As regards commission / discount income, incentives and insurance claim income, we find that all these incomes are generated from main business activity of the Assessee of manufacturing and sales of cars. The Assessee has received commission / discount on procurement of raw materials and insurance claim is received towards damaged cars manufactured by the Printed from counselvise.com Assessee. When the Assessee is recognizing income from sale of cars as operating in nature, then insurance claim received towards damaged cars is also nature and hence, we are of the considered view that the ld. TPO has erred in considering commission / discount income, incentives and insurance income as non-operating income. Hence, we direct the ld. TPO to consider commission / discount i insurance claim as operating income for the purpose of computing operating margin.\" 8.5 Following this decision, we direct so the TPO to re determine the margin of the Assessee after including the same. Thus this ground of appeal is Assessee. The grounds of appeal No.2.3 raised by Assessee is thus, allowed.\" 13. As the issue involved and the submissions made are identical to those considered in the Assessee’s own case for Assessment Year 2020 direct the Assessing Officer to recompute the Assessee’s margin by treating cash discount as operating income. Consequently, Ground No. 2.3 raised by the Assessee is allowed. 14. The next issue in this appeal that came up for our consideration from ground of appeal No. 2.5 is against treatment of miscellaneous expenses as non-operating expense while computing the margins of comparable companies. 15. The Ld. AR submitted that this issue is also covered by the decision of the ITAT in the Assessee’s IT(TP)A No.111 M/s. ZF Rane Automotive India Pvt. Ltd. 17 Assessee. When the Assessee is recognizing income from sale of cars as operating in nature, then insurance claim received towards damaged cars is also operating in nature and hence, we are of the considered view that the ld. TPO has erred in considering commission / discount income, incentives and insurance income as operating income. Hence, we direct the ld. TPO to consider commission / discount income, incentives and insurance claim as operating income for the purpose of computing operating margin.\" 8.5 Following this decision, we direct so the TPO to re determine the margin of the Assessee after including the same. Thus this ground of appeal is decided in favour of the Assessee. The grounds of appeal No.2.3 raised by Assessee is As the issue involved and the submissions made are identical to those considered in the Assessee’s own case for Assessment Year 2020 e Assessing Officer to recompute the Assessee’s margin by treating cash discount as operating income. Consequently, Ground No. 2.3 raised by the Assessee is allowed. The next issue in this appeal that came up for our consideration from appeal No. 2.5 is against treatment of miscellaneous expenses operating expense while computing the margins of comparable The Ld. AR submitted that this issue is also covered by the decision of the ITAT in the Assessee’s own case for Assessment Year 2020 IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. Assessee. When the Assessee is recognizing income from sale of cars as operating in nature, then insurance operating in nature and hence, we are of the considered view that the ld. TPO has erred in considering commission / discount income, incentives and insurance income as operating income. Hence, we direct the ld. TPO to ncome, incentives and insurance claim as operating income for the purpose of 8.5 Following this decision, we direct so the TPO to re- determine the margin of the Assessee after including the decided in favour of the Assessee. The grounds of appeal No.2.3 raised by Assessee is As the issue involved and the submissions made are identical to those considered in the Assessee’s own case for Assessment Year 2020-21, we e Assessing Officer to recompute the Assessee’s margin by treating cash discount as operating income. Consequently, Ground No. 2.3 raised The next issue in this appeal that came up for our consideration from appeal No. 2.5 is against treatment of miscellaneous expenses operating expense while computing the margins of comparable The Ld. AR submitted that this issue is also covered by the decision own case for Assessment Year 2020-21 in Printed from counselvise.com IT(TP)A No.53/Chny/2024, wherein the Tribunal held that miscellaneous expenses should be treated as operating expenses. 16. The Ld. DR relied upon and supported the orders and directions of the lower authorities. 17. We have heard the submissions of both parties and examined the material available on record, including the orders of the authorities below. We observe that an identical issue was considered by the Tribunal in the Assessee’s own case for Assessment Year 2 No.53/Chny/2024, wherein it was held that miscellaneous expenses, being incurred by every company in the normal course of business, are operating in nature. The relevant findings of the Tribunal are reproduced below: “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 excluded for comparable companies and similar expenses are excluded for Assess 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 dependent upon the character of su 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, according 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 nexu IT(TP)A No.111 M/s. ZF Rane Automotive India Pvt. Ltd. 18 IT(TP)A No.53/Chny/2024, wherein the Tribunal held that miscellaneous expenses should be treated as operating expenses. The Ld. DR relied upon and supported the orders and directions of We have heard the submissions of both parties and examined the material available on record, including the orders of the authorities below. We observe that an identical issue was considered by the Tribunal in the Assessee’s own case for Assessment Year 2020- No.53/Chny/2024, wherein it was held that miscellaneous expenses, being incurred by every company in the normal course of business, are operating in nature. The relevant findings of the Tribunal are reproduced below: 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, according 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 nexu IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. IT(TP)A No.53/Chny/2024, wherein the Tribunal held that miscellaneous The Ld. DR relied upon and supported the orders and directions of We have heard the submissions of both parties and examined the material available on record, including the orders of the authorities below. We observe that an identical issue was considered by the Tribunal in the -21 in IT(TP)A No.53/Chny/2024, wherein it was held that miscellaneous expenses, being incurred by every company in the normal course of business, are operating in nature. The relevant findings of the Tribunal are reproduced below: 9.3. We have heard the rival submissions and perused the materials available on record. The case of Revenue was that operating expense and it is excluded for comparable companies and similar expenses are ee 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 operating would be heavily ch 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 Printed from counselvise.com 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 (Delhi 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 prof 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. Therefo 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 w 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 pro 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 Mi 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 o the comparable companies after including the same. As a IT(TP)A No.111 M/s. ZF Rane Automotive India Pvt. Ltd. 19 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 (Delhi wherein it is held that miscellaneous expenses ought to be s operating expenses for Assessee as well as comparable companies. Relevant para of the order is produced “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 w 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 Mi 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 o the comparable companies after including the same. As a IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. 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 (Delhi – Trib) wherein it is held that miscellaneous expenses ought to be s operating expenses for Assessee as well as comparable companies. Relevant para of the order is produced “47. Ground no. 6: The main contention of department is that ld. CIT(A) had concluded that misc. income and its 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 re, 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 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 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 Printed from counselvise.com result, the ground of appeal no. 2.5 raised by the Assessee is allowed.” 18. In view of the foregoing and respectfully following the decision of the Tribunal in the Assessee’s own case, we hold tha should be treated as operating expenses of the comparable companies, wherever applicable, irrespective of whether the Assessee itself has incurred such expenses. Accordingly, we direct the Assessing Officer to recompute the margins expenses. Consequently, Ground No. 2.5 raised by the Assessee is allowed. 9. Next, with respect to Ground of Appeal No. 2.6, at the time of hearing, the Ld. AR confined his submissions to the inclusion of o three comparable companies: (a) Jay Ushin Limited (b) Shivam Autotech Limited (c) Omax Autos Limited Jay Ushin Limited (“Jay Ushin”) The ld. AR submitted that Jay Ushin is engaged in the manufacture of auto ancillary products such as security systems, switches, body parts, fuel units, and heater control panels, which are comparable to the Assessee’s business of manufacturing occupant safety pr industry. It was further pointed out that the fuel units and heater control panels manufactured by Jay Ushin are similar to the products manufactured by Talbros Automotive Components Limited (“Talbros Automotive”), which has been IT(TP)A No.111 M/s. ZF Rane Automotive India Pvt. Ltd. 20 result, the ground of appeal no. 2.5 raised by the Assessee is In view of the foregoing and respectfully following the decision of the Tribunal in the Assessee’s own case, we hold that miscellaneous expenses should be treated as operating expenses of the comparable companies, wherever applicable, irrespective of whether the Assessee itself has incurred such expenses. Accordingly, we direct the Assessing Officer to recompute the margins of the comparable companies after including such expenses. Consequently, Ground No. 2.5 raised by the Assessee is allowed. Next, with respect to Ground of Appeal No. 2.6, at the time of hearing, the Ld. AR confined his submissions to the inclusion of o three comparable companies: Jay Ushin Limited Shivam Autotech Limited Omax Autos Limited Jay Ushin Limited (“Jay Ushin”) – Functional Similarity AR submitted that Jay Ushin is engaged in the manufacture of auto ancillary products such as security systems, switches, body parts, fuel units, and heater control panels, which are comparable to the Assessee’s business of manufacturing occupant safety products for the automotive industry. It was further pointed out that the fuel units and heater control panels manufactured by Jay Ushin are similar to the products manufactured by Talbros Automotive Components Limited (“Talbros Automotive”), which has been accepted as a comparable by the TPO. On IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. result, the ground of appeal no. 2.5 raised by the Assessee is In view of the foregoing and respectfully following the decision of the t miscellaneous expenses should be treated as operating expenses of the comparable companies, wherever applicable, irrespective of whether the Assessee itself has incurred such expenses. Accordingly, we direct the Assessing Officer to of the comparable companies after including such expenses. Consequently, Ground No. 2.5 raised by the Assessee is allowed. Next, with respect to Ground of Appeal No. 2.6, at the time of hearing, the Ld. AR confined his submissions to the inclusion of only the following Functional Similarity AR submitted that Jay Ushin is engaged in the manufacture of auto ancillary products such as security systems, switches, body parts, fuel units, and heater control panels, which are comparable to the Assessee’s oducts for the automotive industry. It was further pointed out that the fuel units and heater control panels manufactured by Jay Ushin are similar to the products manufactured by Talbros Automotive Components Limited (“Talbros accepted as a comparable by the TPO. On Printed from counselvise.com this basis, it was argued that Jay Ushin ought not to have been excluded from the final set of comparables. The learned AR further submitted that this issue is squarely covered by the decision of the Tribunal in the Assessee’s own case for Assessment Year 2020 No.53/Chny/2024, wherein the Tribunal decided the issue in favour of the Assessee and directed the TPO to include Jay Ushin in the final list of comparable companies. 19. On the other hand, the le DR) relied upon the orders of the lower authorities, which rejected Jay Ushin on the ground of functional dissimilarity. 20. We have considered the rival submissions and examined the material available on record. We observe that the coordinate bench of this Tribunal has dealt with an identical issue in the Assessee’s own case for Assessment Year 2020–21. In that decision, the Tr Ushin, and Talbros Automotive are all engaged in the manufacture of auto components and, accordingly, directed inclusion of Jay Ushin in the final list of comparable companies. The relevant findings of the Tribunal in the earlier decision are reproduced below: “11.3 We have heard both the parties and considered relevant material available on record. We find that the Assessee has chosen Talbros Automotive as comparable company and the said company has been accepted by the T Assessee, Talbros Automotive and Jay Ushin are all in the same line of manufacturing auto components we hold that Jay IT(TP)A No.111 M/s. ZF Rane Automotive India Pvt. Ltd. 21 this basis, it was argued that Jay Ushin ought not to have been excluded from the final set of comparables. The learned AR further submitted that this issue is squarely covered by the decision of the Tribunal in the Assessee’s own case for Assessment Year 2020- No.53/Chny/2024, wherein the Tribunal decided the issue in favour of the Assessee and directed the TPO to include Jay Ushin in the final list of comparable companies. On the other hand, the learned Departmental Representative (Ld. DR) relied upon the orders of the lower authorities, which rejected Jay Ushin on the ground of functional dissimilarity. We have considered the rival submissions and examined the material available on record. We observe that the coordinate bench of this Tribunal has dealt with an identical issue in the Assessee’s own case for Assessment 21. In that decision, the Tribunal held that the Assessee, Jay Ushin, and Talbros Automotive are all engaged in the manufacture of auto components and, accordingly, directed inclusion of Jay Ushin in the final list of comparable companies. The relevant findings of the Tribunal in the earlier decision are reproduced below: “11.3 We have heard both the parties and considered relevant material available on record. We find that the Assessee has chosen Talbros Automotive as comparable company and the said company has been accepted by the TPO. Since the Assessee, Talbros Automotive and Jay Ushin are all in the same line of manufacturing auto components we hold that Jay IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. this basis, it was argued that Jay Ushin ought not to have been excluded from the final set of comparables. The learned AR further submitted that this issue is squarely covered by the decision of the Tribunal in the -21 in IT(TP)A No.53/Chny/2024, wherein the Tribunal decided the issue in favour of the Assessee and directed the TPO to include Jay Ushin in the final list of arned Departmental Representative (Ld. DR) relied upon the orders of the lower authorities, which rejected Jay We have considered the rival submissions and examined the material available on record. We observe that the coordinate bench of this Tribunal has dealt with an identical issue in the Assessee’s own case for Assessment ibunal held that the Assessee, Jay Ushin, and Talbros Automotive are all engaged in the manufacture of auto components and, accordingly, directed inclusion of Jay Ushin in the final list of comparable companies. The relevant findings of the Tribunal in the “11.3 We have heard both the parties and considered relevant material available on record. We find that the Assessee has chosen Talbros Automotive as comparable company and the PO. Since the Assessee, Talbros Automotive and Jay Ushin are all in the same line of manufacturing auto components we hold that Jay Printed from counselvise.com Ushin should also be included as a comparable company. Therefore, we direct the TPO to include Jay Ushin in the final list of comparables companies.” 21. Since this issue has already been adjudicated in IT(TP)A No. 53/Chny/2024 for Assessment Year 2020 and direct the Assessing Officer to include Jay Ushin in the final list of comparable companies. Shivam Autotech Limited (“Shivam Autotech”) dissimilar The Ld. AR submitted that Shivam Autotech is engaged in the manufacture of various auto transmission components, including transmission gears, transmission shafts, spline shafts which is similar to the Assessee’s business of manufacturing steering gear systems. The Ld. AR further noted that the transmission shafts, spline shafts, plungers, and power train components produced by Shivam Autotech are comparable to the products of Auto International Private Limited (“Auto International”), which has been accepted as a comparable company by the TPO. Therefore, Shivam Autotech should not be excluded from the final list of comparable companies. The L this issue is squarely covered by the Tribunal’s decision in the Assessee’s own case for Assessment Year 2020 where the Tribunal ruled in favour of the Assessee and directed the TPO to include Shivam Autotech in the final list of comparables. IT(TP)A No.111 M/s. ZF Rane Automotive India Pvt. Ltd. 22 Ushin should also be included as a comparable company. Therefore, we direct the TPO to include Jay Ushin in the final f comparables companies.” Since this issue has already been adjudicated in IT(TP)A No. 53/Chny/2024 for Assessment Year 2020-21, we follow the same decision and direct the Assessing Officer to include Jay Ushin in the final list of companies. Shivam Autotech Limited (“Shivam Autotech”) The Ld. AR submitted that Shivam Autotech is engaged in the manufacture of various auto transmission components, including transmission gears, transmission shafts, spline shafts, plungers, and power train components, which is similar to the Assessee’s business of manufacturing steering gear systems. The Ld. AR further noted that the transmission shafts, spline shafts, plungers, and power train components produced by Shivam ch are comparable to the products of Auto International Private Limited (“Auto International”), which has been accepted as a comparable company by the TPO. Therefore, Shivam Autotech should not be excluded from the final list of comparable companies. The Ld. AR also submitted that this issue is squarely covered by the Tribunal’s decision in the Assessee’s own case for Assessment Year 2020-21 in IT(TP)A No. 53/Chny/2024, where the Tribunal ruled in favour of the Assessee and directed the TPO to Shivam Autotech in the final list of comparables. IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. Ushin should also be included as a comparable company. Therefore, we direct the TPO to include Jay Ushin in the final Since this issue has already been adjudicated in IT(TP)A No. 21, we follow the same decision and direct the Assessing Officer to include Jay Ushin in the final list of Shivam Autotech Limited (“Shivam Autotech”) - Functional The Ld. AR submitted that Shivam Autotech is engaged in the manufacture of various auto transmission components, including transmission gears, , plungers, and power train components, which is similar to the Assessee’s business of manufacturing steering gear systems. The Ld. AR further noted that the transmission shafts, spline shafts, plungers, and power train components produced by Shivam ch are comparable to the products of Auto International Private Limited (“Auto International”), which has been accepted as a comparable company by the TPO. Therefore, Shivam Autotech should not be excluded d. AR also submitted that this issue is squarely covered by the Tribunal’s decision in the Assessee’s 21 in IT(TP)A No. 53/Chny/2024, where the Tribunal ruled in favour of the Assessee and directed the TPO to Printed from counselvise.com 22. On the other hand, the Ld.DR relied upon the orders of the lower authorities, which excluded Shivam Autotech on the ground of functional dissimilarity. 23. We have considered the rival submissions and on record. We note that the coordinate bench of this Tribunal has already dealt with this issue in the Assessee’s own case for Assessment Year 2020 21, where it was held that the Assessee, Shivam Autotech, and Auto International are engaged in the same line of manufacturing auto components, and Shivam Autotech was directed to be included in the final list of comparable companies. The relevant findings of the Tribunal in the earlier decision are reproduced below: “11.6 We have heard bot material available on record. We find that the Assessee has chosen Auto International as comparable company, and the said company has bene accepted by the TPO. Auto International is engaged in manufacture of suspension absorbers, radiators, silencers, exhaust pipes and it is on the same line that of Shivam Autotech which manufactures transmission shafts, spline shafts, plunger, brakes, gear boxes etc., Since, Auto International has been accepted as comparable comp Shivam Autotech also as a comparable company. Therefore, we direct the TPO to include the same in the final set of comparable companies.” As this issue has already been adjudicated in IT(TP)A No.53/Chny/2024 for Assessment Year 2020 IT(TP)A No.111 M/s. ZF Rane Automotive India Pvt. Ltd. 23 On the other hand, the Ld.DR relied upon the orders of the lower authorities, which excluded Shivam Autotech on the ground of functional We have considered the rival submissions and examined the material on record. We note that the coordinate bench of this Tribunal has already dealt with this issue in the Assessee’s own case for Assessment Year 2020 21, where it was held that the Assessee, Shivam Autotech, and Auto ngaged in the same line of manufacturing auto components, and Shivam Autotech was directed to be included in the final list of comparable companies. The relevant findings of the Tribunal in the earlier decision are reproduced below: “11.6 We have heard both the parties and considered relevant material available on record. We find that the Assessee has chosen Auto International as comparable company, and the said company has bene accepted by the TPO. Auto International is engaged in manufacture of suspension absorbers, radiators, silencers, exhaust pipes and it is on the same line that of Shivam Autotech which manufactures transmission shafts, spline shafts, plunger, brakes, gear boxes etc., Since, Auto International has been accepted as comparable company, TPO ought to have also included Shivam Autotech also as a comparable company. Therefore, we direct the TPO to include the same in the final set of comparable companies.” As this issue has already been adjudicated in IT(TP)A No.53/Chny/2024 Assessment Year 2020-21, we follow the same decision and direct the IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. On the other hand, the Ld.DR relied upon the orders of the lower authorities, which excluded Shivam Autotech on the ground of functional examined the material on record. We note that the coordinate bench of this Tribunal has already dealt with this issue in the Assessee’s own case for Assessment Year 2020- 21, where it was held that the Assessee, Shivam Autotech, and Auto ngaged in the same line of manufacturing auto components, and Shivam Autotech was directed to be included in the final list of comparable companies. The relevant findings of the Tribunal in the h the parties and considered relevant material available on record. We find that the Assessee has chosen Auto International as comparable company, and the said company has bene accepted by the TPO. Auto International is engaged in manufacture of suspension shock absorbers, radiators, silencers, exhaust pipes and it is on the same line that of Shivam Autotech which manufactures transmission shafts, spline shafts, plunger, brakes, gear boxes etc., Since, Auto International has been accepted as any, TPO ought to have also included Shivam Autotech also as a comparable company. Therefore, we direct the TPO to include the same in the final set of As this issue has already been adjudicated in IT(TP)A No.53/Chny/2024 21, we follow the same decision and direct the Printed from counselvise.com Assessing Officer to include Shivam Autotech in the final list of comparable companies. 24. Omax Autos Limited (“Omax Auto”) Functional dissimilar The Ld.AR submitted that Omax of auto components for the automotive industry, including steering shafts, axle shafts, pistons, and Gear Shifter Shaft Assemblies, which is similar to the Assessee’s business of manufacturing pinion steering gears and steering gear systems. The Ld. AR further noted that the products manufactured by Omax Auto are comparable to those of Talbros Automotive Components Ltd (“Talbros Automotive”), which has been accepted as a comparable company by the TPO. Therefore, Omax Auto should not be excluded from the final list of comparable companies. The Ld.AR also submitted that this issue is covered by the Tribunal’s decision in the Assessee’s own case for Assessment Year 2020 No.53/Chny/2024, where the Tribunal ruled in favour of the Assessee and directed inclusion of Omax Auto in the final list of comparables. 25. On the other hand, the learned Departmental Representative (Ld. DR) relied on the orders of the lower authorities, which ex Auto on the ground of functional dissimilarity. 26. We have considered the rival submissions and examined the material on record. We note that the coordinate bench of this Tribunal has already IT(TP)A No.111 M/s. ZF Rane Automotive India Pvt. Ltd. 24 Assessing Officer to include Shivam Autotech in the final list of comparable Omax Autos Limited (“Omax Auto”) Functional dissimilar The Ld.AR submitted that Omax Auto is engaged in the manufacture of auto components for the automotive industry, including steering shafts, axle shafts, pistons, and Gear Shifter Shaft Assemblies, which is similar to the Assessee’s business of manufacturing pinion steering gears and teering gear systems. The Ld. AR further noted that the products manufactured by Omax Auto are comparable to those of Talbros Automotive Components Ltd (“Talbros Automotive”), which has been accepted as a comparable company by the TPO. Therefore, Omax Auto should not be excluded from the final list of comparable companies. The Ld.AR also submitted that this issue is covered by the Tribunal’s decision in the Assessee’s own case for Assessment Year 2020 /2024, where the Tribunal ruled in favour of the Assessee and directed inclusion of Omax Auto in the final list of comparables. On the other hand, the learned Departmental Representative (Ld. DR) relied on the orders of the lower authorities, which ex Auto on the ground of functional dissimilarity. We have considered the rival submissions and examined the material on record. We note that the coordinate bench of this Tribunal has already IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. Assessing Officer to include Shivam Autotech in the final list of comparable Omax Autos Limited (“Omax Auto”) Functional dissimilar Auto is engaged in the manufacture of auto components for the automotive industry, including steering shafts, axle shafts, pistons, and Gear Shifter Shaft Assemblies, which is similar to the Assessee’s business of manufacturing pinion steering gears and teering gear systems. The Ld. AR further noted that the products manufactured by Omax Auto are comparable to those of Talbros Automotive Components Ltd (“Talbros Automotive”), which has been accepted as a comparable company by the TPO. Therefore, Omax Auto should not be excluded from the final list of comparable companies. The Ld.AR also submitted that this issue is covered by the Tribunal’s decision in the Assessee’s own case for Assessment Year 2020-21 in IT(TP)A /2024, where the Tribunal ruled in favour of the Assessee and directed inclusion of Omax Auto in the final list of comparables. On the other hand, the learned Departmental Representative (Ld. DR) relied on the orders of the lower authorities, which excluded Omax We have considered the rival submissions and examined the material on record. We note that the coordinate bench of this Tribunal has already Printed from counselvise.com dealt with this issue in the Assessee’s own case f 21, wherein it was held that the Assessee and Omax Auto are engaged in the same line of manufacturing auto components, and Omax Auto was directed to be included in the final list of comparable companies. The relevant findings of the below: “11.9 We have heard both the parties and considered relevant material available on record. We find that the Assessee has chosen Talbros Automotive as comparable company, and the said company has been Automotive is engaged in manufacture of chassis systems, suspension systems gaskets, heat shields, forgings, anti vibration components and it is on the same line that of Omax Autos which manufactures steering shafts, axle shaft Gear Shifter Shaft Assembly etc., Since, Talbros Automotive has been accepted as comparable company, TPO ought to have also included Omax Autos as a comparable company. Therefore, we direct the TPO to include the same in final comparable matrix. rework the Arm’s Length Price of the international transactions based on our direction in paras supra.” As this issue has already been adjudicated in IT(TP)A No.53/Chny/2024 for Assessment Year 2020 Assessing Officer to include Omax Auto Ltd. in the final list of comparable companies. We further direct the Assessing Officer to recompute the Arm’s Length Price of the international transactions in accordanc directions given in the preceding paras. IT(TP)A No.111 M/s. ZF Rane Automotive India Pvt. Ltd. 25 dealt with this issue in the Assessee’s own case for Assessment Year 2020 21, wherein it was held that the Assessee and Omax Auto are engaged in the same line of manufacturing auto components, and Omax Auto was directed to be included in the final list of comparable companies. The relevant findings of the Tribunal in the earlier decision are reproduced “11.9 We have heard both the parties and considered relevant material available on record. We find that the Assessee has chosen Talbros Automotive as comparable company, and the said company has been accepted by the TPO. Talbros Automotive is engaged in manufacture of chassis systems, suspension systems gaskets, heat shields, forgings, anti vibration components and it is on the same line that of Omax Autos which manufactures steering shafts, axle shaft Gear Shifter Shaft Assembly etc., Since, Talbros Automotive has been accepted as comparable company, TPO ought to have also included Omax Autos as a comparable company. Therefore, we direct the TPO to include the same in final comparable matrix. The Assessing Officer/TPO is directed to rework the Arm’s Length Price of the international transactions based on our direction in paras supra.” As this issue has already been adjudicated in IT(TP)A No.53/Chny/2024 for Assessment Year 2020-21, we follow the same decision and direct the Assessing Officer to include Omax Auto Ltd. in the final list of comparable companies. We further direct the Assessing Officer to recompute the Arm’s Length Price of the international transactions in accordanc directions given in the preceding paras. IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. or Assessment Year 2020- 21, wherein it was held that the Assessee and Omax Auto are engaged in the same line of manufacturing auto components, and Omax Auto was directed to be included in the final list of comparable companies. The Tribunal in the earlier decision are reproduced “11.9 We have heard both the parties and considered relevant material available on record. We find that the Assessee has chosen Talbros Automotive as comparable company, and the accepted by the TPO. Talbros Automotive is engaged in manufacture of chassis systems, suspension systems gaskets, heat shields, forgings, anti- vibration components and it is on the same line that of Omax Autos which manufactures steering shafts, axle shafts, piston, Gear Shifter Shaft Assembly etc., Since, Talbros Automotive has been accepted as comparable company, TPO ought to have also included Omax Autos as a comparable company. Therefore, we direct the TPO to include the same in final The Assessing Officer/TPO is directed to rework the Arm’s Length Price of the international transactions As this issue has already been adjudicated in IT(TP)A No.53/Chny/2024 21, we follow the same decision and direct the Assessing Officer to include Omax Auto Ltd. in the final list of comparable companies. We further direct the Assessing Officer to recompute the Arm’s Length Price of the international transactions in accordance with our Printed from counselvise.com 27. As noted earlier, the ld favor of the Assessee as above, the remaining grounds of appeal would become academic and, therefore, do not require adjudication. Accordingly, the Assessee’s appeal is treated as partly allowed for statistical purposes. 28. In the result, Appeal of the assessee is partly allowed. Order pronounced on Sd/- (एस. आर. रघुना था (S.R.RAGHUNATHA) लेखा सद य/ACCOUNTANT MEMBER चे\u000eनई/Chennai, -दनांक/Dated: 23rd December, 2025. EDN, Sr. PS आदेशक( &ितिल.पअ/े.षत 1. अपीलाथ%/Appellant 2. &'यथ%/Respondent 3. आयकरआयु0/CIT, Chennai / Madurai / Salem / Coimbatore. 4. .वभागीय&ितिनिध/DR 5. गाड\"फाईल/GF IT(TP)A No.111 M/s. ZF Rane Automotive India Pvt. Ltd. 26 As noted earlier, the ld. AR submitted that if the issues decided in favor of the Assessee as above, the remaining grounds of appeal would become academic and, therefore, do not require adjudication. Accordingly, the Assessee’s appeal is treated as partly allowed for statistical In the result, Appeal of the assessee is partly allowed. Order pronounced on 23rd day of December, 2025 at Chennai. रघुनाथा) (S.R.RAGHUNATHA) /ACCOUNTANT MEMBER Sd/ (मनु क ुमार (MANU KUMAR GIRI) \u000eयाियक सद य/JUDICIAL MEMBER December, 2025. CIT, Chennai / Madurai / Salem / Coimbatore. IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. AR submitted that if the issues decided in favor of the Assessee as above, the remaining grounds of appeal would become academic and, therefore, do not require adjudication. Accordingly, the Assessee’s appeal is treated as partly allowed for statistical In the result, Appeal of the assessee is partly allowed. 5 at Chennai. Sd/- क ुमार िग र) (MANU KUMAR GIRI) /JUDICIAL MEMBER CIT, Chennai / Madurai / Salem / Coimbatore. Printed from counselvise.com "