TE CONNECTIVITY INDIA PRIVATE LIMITED,BANGALORE V. THE OFFICE OF THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 7(1)(1), BANGALORE

ITA 1789/BANG/2024

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TE Connectivity India Pvt. Ltd. appealed against the assessment order passed by the AO, which was based on the directions of the DRP. The main issues in the appeal included the treatment of remeasurement gains on defined employee benefit plans, the inclusion and exclusion of certain comparables in the transfer pricing analysis, and the application of the persistent loss filter. The Tribunal found that the remeasurement gains should be treated as operating items and not non-operating, contrary to the AO's treatment. The Tribunal also directed the exclusion of Sicame India Connectors Pvt. Ltd. from the comparables due to high related party transactions, while other issues regarding comparables were upheld.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 826787 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2026
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2020-2021
• Appeal Filed On: 17-09-2024
• Other Referred Cases: CIT vs. Patni Computer Systems, AMD India Pvt Ltd vs. DCIT, Hewlett Packard India Software Operations Pvt Ltd vs. DCIT, Samsung India Electronics Pvt Ltd vs. DCIT, Sulzer Tech India Pvt Ltd vs. DCIT, Bostik India Pvt Ltd vs. DCIT, M/s Supportsoft India Private Limited vs. DCIT, 24/7 Customer Dot Com Private Limited vs. DCIT, Cisco System (India) Private Limited vs. DCIT, Actis Advisers Private Limited vs. DCIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K J DHIVYA
• Assessee Lawyers: DARPAN KRIPLANI
• Keywords: Business income; Additional evidence; Transfer pricing; International transaction; Retrospective amendment; Question of law; Corroborative evidences; Onus to prove; Commercial expediency; TDS; Rectification of order; Notional interest; Wholly owned subsidiary; Related party transaction
• Section: 143(3); 234B; 92; 92B; 10B; 92C; 92F

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI SOUNDARARAJAN K, JUDICIAL MEMBER IT(TP)A No.1789/Bang/2024 Assessment Year: 2020-21 TE Connectivity India Pvt. Ltd., RMZ NXT Campus 2A Survey No.24/1, 24/2, 25/2, 3, 1st Floor, Sonnenahalli K.R Puram, Hobli, Bangalore. PAN – AABCT 7374 C Vs. The Dy. Commissioner of Income Tax, Circle – 7(1)(1), Bangalore. APPELLANT RESPONDENT Assessee by : Shri Darpan Kriplani, CA Revenue by : Dr. KJ Dhivya, CIT (DR) Date of hearing : 09.12.2025 Date of Pronouncement : 08.01.2026 O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: This is an appeal filed by the assessee against the assessment order passed by the AO vide order date 26.07.2024 having DIN ITBA/AST/S143(3)/2024-25/1067079032(1) for the AY 2020-21 pursuant to DRP-2, Bengaluru order dt. 11.06.2024. 2. The Assessee before us has filed revised grounds of appeal vide letter dated 5th March 2025. Through the revised grounds of appeal, the Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 2 of 38 assessee has raised multiple grounds and sub-grounds under the main ground which are numbered as Ground Nos. 1 to 21. 3. The issues raised by the assessee vide Ground Nos. 1 & 2 are general in nature and the same does not require any separate adjudication. Hence, the same are hereby dismissed as infructuous. 4. The issue raised by the assessee through Ground No. 3 of its appeal is that the final assessment order passed by the AO in pursuance to the DRP direction is time barred and therefore liable to be quashed as not maintainable. 5. At the outset, we note that the learned AR before us submitted that the assessee does not wish to pursue the issue raised in the captioned ground of appeal. Hence, the impugned ground of appeal is hereby dismissed as not pressed. 6. The issue raised by the assessee through Ground No. 5 of its appeal is that the margins of the comparables companies viz-a-viz assessee company computed by the TPO/DRP are erroneous. 7. At the outset, we note that the learned AR before us submitted that the assessee does not wish to pursue the issue raised in the captioned ground. Hence, the impugned ground of appeal is hereby dismissed as not pressed. 8. The issue raised by the assessee through Ground No. 6 is that the lower authorities erred in treating the remeasurement gain on defined Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 3 of 38 employee benefit plan as non- operating and exchange gain loss as operating in nature. 9. The brief facts are that the assessee TE Connectivity India Private Limited (\"the assessee\" / \"TECIL\"), is a wholly owned subsidiary of Tyco Electronics Singapore Pte. Ltd., which is part of the global TE Connectivity group. The assessee is licensed manufacturer of electrical equipment such as connectors, relays, sensors, switches, terminals and cable interconnects. The products are sold to third parties' customers in India as well as exported to associated enterprises outside India. In addition, the assessee also imports/buy connectors from its AEs for the purpose of distribution of the same to third party customers in India. Furthermore, the assessee provides engineering design services being computer added, and non-computer added to its AEs. Accordingly, the assessee has divided its activities into following segments: - Trading segment - License manufacturing segment - Service segment 10. The international transactions under the different segments were benchmarked at entity level adopting TNMM as most appropriate method except for certain transactions such reimbursement of ESOP, recovery of expenses and interest expenses were benchmark using other methods and CUP method respectively. The assessee computed PLI for said 3 segments as OP/OC. In computation of PLI, the assessee treated remeasurement gain on defined employee benefit plan as operating item and foreign exchange loss as non-operating item. As such, the assessee reduced its operating cost under each segment on account of gain on remeasurement of defined benefit plan by the following amount: Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 4 of 38 Segment Amount Trading Rs. 1,31,95,215/- Manufacturing Rs. 5,31,37,110/- Service Rs. 2,36,67,675/- Total Rs. 9,00,00,000/- 11. The TPO disagreed with the treatment of the assessee and recomputed the assessee’s PLI by treating the remeasurement gain on defined benefit plan as non-operating item and included the foreign exchange loss as operating cost. 12. The aggrieved assessee preferred to file objection before the learned DRP. 13. Before the learned DRP, the assessee submitted that the Learned TPO has erred in treating the remeasurement of defined benefit plans as non-operating in nature. The remeasurement pertains to actuarial valuation of gratuity obligations, which arises directly out of the employment relationship and constitute an integral part of employee benefit expenses. Such expenses are inherently linked to the normal business operations of the assessee and cannot be considered extraordinary or non-operating. 13.1 It is submitted that as per Accounting Standard (AS) 15 / Ind AS 19, remeasurement of defined benefit obligations represents adjustments to employee benefit costs. While such remeasurement is presented under Other Comprehensive Income for accounting purposes, the same does not alter its intrinsic character as an operating cost/ Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 5 of 38 income for transfer pricing purposes. The nature of the item remains unchanged merely due to its presentation in financial statements. 13.2 The assessee further submits that the Learned TPO has not provided any cogent reasoning or justification for excluding such employee-related costs from operating expenses/ income. In the absence of any abnormality or extraordinary event, the remeasurement of defined benefit plans ought to be treated as operating in nature while computing operating margins. 13.3 Furthermore, the assessee also submitted objection with regarding the treatment of foreign exchange fluctuation loss as operating cost. 13.4 However, the learned DRP rejected the assessee’s objection and confirmed the TPO action by observing as under: The assessee has contended that the TPO has not considered the re- measurements of provision of gratuity i.e. defined benefit plans relates to actuarial related remeasurement of provision of Gratuity. The assessee has contended that there has been no change in the nature of expenses it is only the disclosure requirement which has been changed due to adoption of Ind AS. The assessee has contended that it should be treated as operating in nature. The Panel is of the view that such Actuarial expenses related to defined benefit plans should not be included in operating costs because they are non-operating in nature, treated separately in financial statements, and are highly volatile in nature due to changing economic conditions and actuarial assumptions. Operating Costs reflect costs that are incurred for the production of goods and services, while Actuarial losses are financial adjustments based on actuarial valuations rather than costs incurred through business operations. We note that the TPO has taken a uniform approach towards both the assessee and the comparables. Thus, we find no reason to interfere with position taken by the TPO in excluding actuarial losses. Accordingly, Ground rejected. 13.5 The learned DRP also rejected the assessee objection regarding the foreign exchange fluctuations loss. Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 6 of 38 13.6 Based on the direction of the learned DRP, the AO finalised the assessment under section 143(3) r.w.s. 144(13) of the Act. 14. Being aggrieved by the direction of the learned DRP and consequent final assessment order, the assessee is in appeal before us. 15. The Ld. AR before us filed a paper book running from pages 1 to 857, written submissions, a chart and compilation of case laws. Firstly, the learned AR before us submitted that the assessee does not wish to press the issue of treatment of foreign exchange loss as operating cost by the TPO while computing the PLI. 15.1 Regarding the gain on remeasurement of defined employee benefit plan, the learned AR argued that the impugned benefit has direct Nexus with the employee cost which has been treated as operating in nature and therefore the same treatment should be given for the remeasurement of defined benefit plan of the employees. 16. On the contrary, the learned DR contended that the remeasurement of defined employee benefit is a separate item which is non-operating and therefore the assessee should not be given the benefit by holding it as operating in nature. The ld. DR vehemently supported the order of the authorities below. 17. We have heard the rival submissions of both the parties and carefully perused the materials placed on record. The issue before us is limited to the treatment of remeasurement gain on defined employee benefit plan while computing the operating margin under TNMM. Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 7 of 38 17.1 It is an undisputed fact that the remeasurement gain arises from actuarial valuation of gratuity and other defined employee benefit obligations. These obligations emanate directly from the employer– employee relationship and are intrinsically linked to the assessee’s regular business operations. The liability towards gratuity is a statutory and contractual obligation incurred in the ordinary course of business and forms part of the employee cost structure of the assessee. 17.2 The learned DRP has rejected the assessee’s contention mainly on the ground that actuarial gains or losses are volatile in nature, depend on actuarial assumptions and are disclosed separately in the financial statements under Ind AS. In our considered view, such reasoning is not sustainable for transfer pricing purposes. The accounting presentation of an item, whether under the profit and loss account or under other comprehensive income, does not determine its operating or non- operating character for the purpose of computing operating margins under TNMM. What is relevant is the nature and nexus of the item with the business operations. 17.3 Remeasurement of defined benefit plans represents adjustment to employee benefit costs and reflects refinement in estimation of an existing operating liability. It does not arise from any financing activity, extraordinary event or investment decision. Merely because the amount is determined on the basis of actuarial valuation or economic assumptions, it cannot be said to be disconnected from business operations. Employee costs, including gratuity, are inseparable from manufacturing, trading and service activities carried on by the assessee. Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 8 of 38 We also find merit in the contention of the assessee that volatility or variability of an item cannot be the sole basis to treat it as non- operating. Several operating items such as raw material prices, foreign currency exposure on revenue transactions and employee costs themselves are subject to fluctuations. Therefore, volatility by itself does not change the operating character of an expense or income. 17.4 The ld. DRP has further observed that the TPO has adopted a uniform approach for both the assessee and the comparables. However, a uniform approach cannot justify an incorrect classification. If an item is operating in nature, it must be treated as such, irrespective of whether similar adjustment is made in the case of comparables or not. Transfer pricing analysis seeks to arrive at a true operating margin, and exclusion of an operating employee-related item distorts such margin. 17.5 In view of the above facts and circumstances, we hold that remeasurement gain on defined employee benefit plan is operating in nature and ought to be considered while computing operating profit and operating cost under TNMM. Accordingly, we direct the AO/TPO to treat the remeasurement gain on defined employee benefit plan as an operating item and recompute the PLI of the assessee for the relevant segments. The ground raised by the assessee on this issue is allowed 17.6 The interconnected issue raised by the assessee through Ground Nos. 4, 7, 8 & 9 of the appeal are interconnected and pertains to inclusion of certain comparable companies by the assessee and exclusion of certain comparable companies of the TPO under the manufacturing segment. Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 9 of 38 17.7 The necessary facts are that the assessee, to benchmark its international transaction under the manufacturing segment, has selected 8 comparables. However, the TPO applied own search matrix for comparable selection and found that some of the assessee’s comparable are not part of search matrix, some are functionally distinct and one of the assessee’s comparable is persistent loss making. Hence, the TPO rejected the assessee’s comparables. Thereafter, the TPO applied own search matrix, and filters and thereby proposes selecting 12 comparable companies which are detailed below: 1. Hindustan Switch Pvt. Ltd. 2. Brimer Electronics Pvt. Ltd. 3. Kaycee Industries Ltd. 4. U.K.B. Electronics Pvt. Ltd. 5. Salzar Electronics Ltd. 6. Sicame India Connectors Pvt. Ltd. 7. Kolors India Pvt. Ltd. 8. FCI Oen Connectors Ltd. 9. Panicker Switchgear Pvt. Ltd. 10. Billets Electro Werke Pvt. Ltd. 11. Fourfront Pvt Ltd 12. Amphenol Interconnect India Pvt Ltd 17.8 The assessee filed objection with respect to comparable companies rejected by the TPO and against the new comparable set selected by the TPO. However, the TPO rejected the objection of the assessee and finalised the proposed comparable set of 12 companies as discussed above. Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 10 of 38 18. The aggrieved assessee preferred to file objection before the learned DRP against the exclusion of original set of comparable companies selected by the assessee and against the selection of new set of comparables by the TPO. However, the learned DRP rejected the assessee’s objection and confirmed the action of the TPO. 19. Being aggrieved by direction of learned DRP and TPO/AO’s order, the assessee is in appeal before us. 20. The assessee through relevant grounds of appeal No. 7 pleaded to include 4 companies as comparables originally selected by the assessee but rejected by the TPO & learned DRP contending that these companies are functionally comparable. The companies pleaded to be included in the comparable set are detailed as under: 1. Circuit System India Pvt Ltd 2. Fine Line Circuits Ltd 3. HPL Electric & Power Ltd-cable segment 4. Delta Manufacturing Ltd 20.1 The assessee also pleaded to exclude certain companies out of 12 companies selected by the TPO as comparables contending that these companies are functionally dissimilar. The companies pleaded to be excluded are detailed below. 1. Fourfront Pvt Ltd 2. Salzar Electronics Ltd. 3. Kolors India Pvt. Ltd. 4. Panicker Switchgear Pvt. Ltd. 5. Billets Electro Werke Pvt. Ltd. 6. Sicame India Connectors Pvt. Ltd. Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 11 of 38 20.2 The assessee through the relevant ground No. 8, pleaded that the TPO and ld. DRP also erred in applying the persistent loss filter and thereby excluding one of the assessee’s comparable namely “Autoneum Nittoku Sound Proof Products India Pvt Ltd”. Likewise, the assessee also contended to exclude the selection of M/s Sicame India Connectors Pvt. Ltd as comparable by the TPO on account of related party transaction. 20.3 The learned AR before us submitted that the assessee does not wish to press the issue of inclusion of following assessee’s comparable in the final list of comparables: 1. Circuit System India Pvt Ltd 2. Delta Manufacturing Ltd 20.4 Likewise, the learned AR submitted that the assessee does not wish to press the issue of exclusion of following TPO’s from the final list of comparables: 1. Fourfront Pvt Ltd 2. Salzar Electronics Ltd. 3. Kolors India Pvt. Ltd. 4. Panicker Switchgear Pvt. Ltd. 5. Billets Electro Werke Pvt. Ltd. 20.5 Thus effectively, out of assessee’s list of comparable only 3 companies namely “Fine Line Circuits Ltd”, “HPL Electric & Power Ltd- cables segment” and “Autoneum Nittoku Soundproof Products India Pvt Ltd” remain in dispute. Likewise, out of TPO’s comparables only 1 company namely Sicame India Connectors Pvt. Ltd remains in dispute before us. Hence, we proceed to adjudicate the issue of inclusion of 3 assessee’s comparable and exclusion of 1 TPO’s comparable one by one. Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 12 of 38 “Fine Line Circuits Ltd” (a comparable, assessee seeking inclusion) 20.6 We note that the TPO rejected this assessee’s comparable company on the grounds that it is functionally different. 20.7 Before the learned DRP, the assessee submitted that the TPO has rejected Fine Line Circuits Ltd. as a comparable merely stating that it is functionally dissimilar, without providing any specific or cogent reasons. This rejection is arbitrary and not supported by facts on record. 20.8 It is submitted that Fine Line Circuits Ltd. is engaged in the manufacture of printed circuit boards (PCBs), which are core electronic components used in electrical and electronic products. The assessee is engaged in the manufacture of connectors, relays, sensors, switches, terminals and cable interconnects. Both PCBs and connectors serve the same fundamental purposes, namely, establishing electrical connections between electronic components and forming part of an integrated electronic circuit. Hence, from a functional perspective, Fine Line is comparable to the manufacturing segment of the assessee. 20.9 The annual report of Fine Line Circuits Ltd. clearly demonstrates that it operates under a single primary segment, i.e., manufacturing of printed circuit boards, with no diversified activities. Therefore, there is no segmental ambiguity or functional distortion. Further, the industry description in the annual report confirms that Fine Line operates in the electronics manufacturing space, which is comparable to the assessee’s business. Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 13 of 38 20.10 It is further submitted that Fine Line Circuits Ltd passes all the quantitative and qualitative filters applied by the learned TPO in the TP order. The assessee has also provided a consistent mark-up computation for multiple years, which shows stable and normal operating margins, thereby reinforcing its suitability as a comparable. Therefore, in the given facts, the rejection of Fine Line Circuits Ltd. is unjustified and contrary to the principles of comparability under transfer pricing. Hence, AO/TPO is directed to include impugned company in the final set of comparables. However, the learned DRP rejected the assessee objection by observing as under: 4.5.3 Fine Line Circuits Ltd ➢ Functionally comparable ➢ Mark-up computation Having considered the submission of the assessee we note that the company is into the manufacturing of the printed circuit boards. It is our considered opinion that the company is functionally different from the assessee as the assessee is into the manufacturing of connectors. Accordingly, the ground raised by the assessee to include this company is rejected. 20.11 Before us, the learned AR argued that the TPO excluded the company Fine Line Circuit Ltd from comparable without providing cogent reason. The learned AR claimed that the impugned company deserves inclusion in the final set of comparables for the reason that it is a functionally comparable company. It is engaged in the same line of business as that of assessee i.e. manufacturers of printed circuits boards. 21. On the contrary, learned Departmental Representative vehemently supported the orders passed by the authorities below. He submitted that the TPO/AO after conducting a detailed and exhaustive analysis of the assessee’s international transactions, had rightly determined the arm’s length price by applying the most appropriate Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 14 of 38 method and selecting proper comparables. It was further contended that the Dispute Resolution Panel (DRP), after duly considering the objections raised by the assessee, examined the factual matrix as well as the legal position and found no infirmity in the findings of the TPO. Accordingly, the DRP rightly upheld the transfer pricing adjustments, and therefore, no interference by the Tribunal is called for. 22. We have carefully considered the rival submissions and perused the materials placed on record. The dispute before us is with regard to exclusion of Fine Line Circuits Ltd. from the final set of comparables. It is an admitted fact that Fine Line Circuits Ltd. is engaged in the manufacture of printed circuit boards (PCBs). The assessee is engaged in the manufacturing of connectors and other electronic components. Both PCBs and connectors are essential electronic components used for establishing electrical connections in electronic circuits. Thus, in our considered opinion they operate in the same broad field of electronic manufacturing and cater to similar industry requirements. 22.1 We note that Fine Line Circuits Ltd. operates under a single primary segment of PCB manufacturing and there is no diversification into unrelated activities. The annual report clearly brings out the nature of its business and there is no segmental complexity or ambiguity. Further, the assessee has demonstrated that the impugned company passes all the quantitative and qualitative filters applied by the TPO. The margin computation placed on record also shows stable and normal operating margins. Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 15 of 38 22.2 The ld. DRP rejected the assessee’s objection mainly on the ground that PCB manufacturing is different from connector manufacturing. In our considered view, such a narrow approach to functional comparison is not justified. Transfer pricing analysis requires comparison at a broad functional level and not a product-to-product identity. Minor differences in product profile do not render a company incomparable when the core activity, assets employed and risks assumed are broadly similar. 22.3 We also find force in the submission of the learned AR that in the assessee’s own case for earlier assessment years, PCB manufacturing companies have been considered as functionally comparable. No distinguishing facts have been brought on record by the Revenue for taking a different view in the year under consideration. 22.4 In view of the above facts and circumstances, we hold that the rejection of Fine Line Circuits Ltd. merely on the ground of functional difference is not sustainable. Accordingly, we direct the AO/TPO to include Fine Line Circuits Ltd. in the final set of comparables for benchmarking the international transactions of the assessee “HPL Electric & Power Ltd- cables segment” (a comparable assessee seeking inclusion) 22.5 We note that the TPO rejected this assessee’s comparable company on the reasoning that it is not part of search matrix. 22.6 Before the learned DRP, the assessee argued that TPO has rejected HPL Electric & Power Ltd. (Cable segment) on the ground that it Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 16 of 38 does not form part of the search strategy and is functionally different. The assessee submits that such rejection is unsustainable under both on facts and in law. 22.7 At the outset, it is submitted that the annual reports and financial information of HPL Electric & Power Ltd. are available in the public domain, being a listed company. The relevant data has been sourced from the company’s official website as well as the MCA portal. Therefore, rejection on the ground of non-availability of data is factually incorrect. 22.8 It is further submitted that HPL Electric & Power Ltd. is engaged in the manufacture of wires and cables, which is one of its clearly identifiable operating segments. The assessee is also engaged in manufacturing activities involving electrical and electronic components. The wires and cables segment is functionally comparable to the assessee’s manufacturing segment, as both involve similar production processes, use of comparable assets, and exposure to similar market and industry risks. 22.9 Merely because HPL Electric & Power Ltd. has multiple product segments such as meters, lighting equipment and switchgears, the comparable cannot be rejected outrightly, particularly when segmental information for wires and cables is separately available in the annual report. The learned TPO himself has accepted other companies engaged in manufacturing of electrical products, and therefore, selective rejection of HPL Electric & Power Ltd. is inconsistent and arbitrary. Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 17 of 38 22.10 The assessee further submits that exclusion solely on the ground that a company does not appear in the TPO’s search process is impermissible under transfer pricing law. What is relevant is functional comparability and availability of reliable data, both of which are satisfied in the present case. It is also pertinent that HPL Electric & Power Ltd. was identified from the Capitaline Plus database used by the assessee for benchmarking, which is a recognised and reliable database. However, the learned DRP rejected the assessee objection by observing as under: 4.5.4 HPL Electric & Power Ltd – Cables ➢ Data is available in public domain ➢ Functionally comparable Having pursued the submissions of the Assessee and the TPO’s order, we note that this company was not forming part of the search matrix of the TPO. It is to be noted that we have already upheld the rejection of the TP document of the assessee which in turn means that a fresh search has to be conducted by the TPO. Based on the fresh search, the TPO has identified the comparables. The assessee can only ask those companies out of the TPO’s search matrix which have been wrongly rejected by the TPO. As this company does not figure in the TPO’s search matrix, we opine that the functionality is not required to be seen at all, as it amounts to cherry picking. Accordingly, the plea for inclusion of this company is rejected. 22.1 Before us, the learned AR argued that the “HPL Electric & Power Ltd. – Cables Segment” (the HEPL) is engaged into manufacturing of cables which is a similar business as of the assessee. The assessee also submitted that in TP order HEPL has been accepted as a comparable company in the final list of comparables for the AY 2021-22. 23. On the contrary, learned Departmental Representative vehemently supported the orders passed by the authorities below. He submitted that the TPO/AO/ ld. DRP after conducting a detailed and exhaustive analysis of the assessee’s international transactions, had rightly determined the arm’s length price by applying the most appropriate method and selecting proper comparables. Accordingly, the Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 18 of 38 DRP rightly upheld the transfer pricing adjustments, and therefore, no interference by the Tribunal is called for. 24. We have heard the rival contention of both the parties and perused the materials available on record. The issue before us is whether HPL Electric & Power Ltd. – Cables segment should be included in the final set of comparables. At the outset, we note that HPL Electric & Power Ltd. is a listed company and its annual reports and segmental financial information are available in the public domain. The assessee has placed on record the relevant details sourced from the company’s website and the MCA portal. Therefore, rejection of the company on the ground of lack of reliable data is factually incorrect. 24.1 We further observe that HPL Electric & Power Ltd. is engaged in multiple product segments, one of which is the wires and cables segment. The segmental information for wires and cables is separately available in the annual report. The assessee is also engaged in manufacturing electrical and electronic components. The wires and cables segment involves similar manufacturing activity, use of comparable assets and exposure to similar market risks. Hence, at a broad functional level, the cables segment of HPL Electric & Power Ltd. is functionally comparable to the assessee. 24.2 The ld. DRP rejected the assessee’s plea mainly on the reasoning that the company does not form part of the TPO’s search matrix and that considering such a company would amount to cherry-picking. In our considered view, this approach is not correct. Transfer pricing provisions do not prohibit the inclusion of an otherwise comparable company Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 19 of 38 merely because it was not originally picked up in the TPO’s search process. What is relevant is functional comparability and availability of reliable data. If these conditions are satisfied, exclusion solely on the basis of the search matrix is not justified. 24.3 We also note that the Revenue has not disputed the functional similarity of the cables segment with the assessee’s manufacturing activity. Further, the assessee has pointed out that the same company has been accepted as a comparable in the TP analysis for a subsequent assessment year, which lends support to the assessee’s contention. 24.4 In view of the above facts and circumstances, we hold that the rejection of HPL Electric & Power Ltd. – Cables Segment merely on the ground that it does not appear in the TPO’s search matrix is unsustainable. Accordingly, we direct the AO/TPO to include HPL Electric & Power Ltd. – Cables Segment in the final set of comparables while benchmarking the international transactions of the assessee. “Autoneum Nittoku Soundproof Products India Pvt Ltd” (assessee’s comparable assessee seeking inclusion) 24.5 This assessee’s comparable company was rejected by the TPO on the grounds that the company is persistent loss-making company. Before the learned DRP, the assessee submitted that the learned TPO has rejected Autoneum Nitoku SoundProof Products India Pvt. Ltd. on the ground that it fails the persistent loss filter, i.e., companies reporting loss for any 2 years out of the last 3 years are excluded. 24.6 The assessee submits that this rejection is incorrect. It is pertinent to note that Autoneum passes all the filters applied by the assessee. The margin computation placed on record shows that the Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 20 of 38 company has earned operating profits during the relevant years. The assessee’s contentions in this regard have been duly documented in section 2.6 of the submission. Accordingly, the assessee submits that Autoneum does not fail the persistent loss filter and therefore ought to be accepted as a comparable. 24.7 However, the learned DRP rejected the assessee’s objection by observing as under: This company was rejected by the TPO for failing the persistent loss filter. The assessee has objected the persistent loss filter of the TPO. The assessee has contended that the loss of the companies should be considered on operating margin and not on the PBT. In this regard we have discussed in detail in the preceding para 4.1.5. Since the company fails the persistent loss filter of the TPO we do not find infirmity in the action of the TPO in rejecting this company. Ground rejected. 24.8 The learned AR before us reiterated the submission made before the authorities below. On the other hand, the learned DR supported the order of the authorities below. 24.9 We have considered the rival submissions and perused the materials available on record. The issue before us is regarding the exclusion of Autoneum Nittoku Soundproof Products India Pvt. Ltd. from the list of comparables on the ground that it fails the persistent loss filter. 24.10. It is noted that the TPO rejected the said company by applying the persistent loss filter, under which companies reporting losses for two out of the last three years are excluded. Before the ld. DRP, the assessee contended that the persistent loss filter should be applied based on operating margins and not on profit before tax, and that the margin computation placed on record shows operating profits. These submissions of the assessee have been duly noted and are part of the record. Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 21 of 38 24.11 However, we find that the ld. DRP has already examined this issue in detail in the earlier part of its order and has upheld the application of the persistent loss filter as applied by the TPO. The ld. DRP has categorically held that since the company fails the persistent loss filter adopted by the TPO, there is no infirmity in the action of the TPO in rejecting this comparable. 24.12 In the absence of any new material or distinguishing facts brought before us to controvert the findings of the ld. DRP, we do not find any reason to interfere with the conclusion drawn by the DRP. The rejection of Autoneum Nittoku Soundproof Products India Pvt. Ltd. on the ground of persistent losses is in accordance with the filters consistently applied in the transfer pricing analysis. Sicame India Connectors Pvt. Ltd (TPO’s comparable, assessee seeking exclusion) 24.13 The captioned company selected by the TPO in the comparable set against the assessee. Before the learned DRP, the assessee filed objection and contended that Sicame India Connectors Private Limited should not be considered as a comparable as it fails the RPT filter of 25% applied by the assessee. On perusal of the annual report of Sicame, it is observed that the related party transactions exceed 25% of the total sales for FY 2019–20. The assessee has computed total related party transactions at ₹45.92 crores against total revenue from operations of ₹126.39 crores, resulting in an RPT ratio of 36.37%, which clearly breaches the prescribed threshold. Accordingly, Sicame fails the RPT filter as per the assessee’s TP study and Rule 10CA. 24.14 Further, the assessee submitted that the mark-up computation carried out by the Ld. TPO is erroneous. The assessee has provided a Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 22 of 38 revised and corrected mark-up computation based on operating margins of Sicame, which shows a margin of 10.11% as against 11.03% computed by the TPO. Therefore, even otherwise, the computation adopted by the TPO is incorrect. 24.15 In view of the above, the assessee submits that Sicame India Connectors Private Limited cannot be included in the final set of comparables and prays that the objection be accepted. However, the learned DRP rejected the assessee’s objection by observing as under: 4.1.4 RPT Filter: Having considered the submissions, in our view, the filter calculating the ratio of revenue transactions to total revenue or expenditure transactions to total expenses, applied by the TPO is appropriate. The application of 25% related party transaction filter finds support from the decision of the Hon’ble ITAT Bangalore in the case of M/s Supportsoft India Private Limited (IT(TP)A 1372/B/11 & 820/2012), 24/7 Customer Dot Com Private Limited (ITA No. 227/BANG/2010) and in the case of Cisco System (India) Private Limited [IT(TP)A No 271/Bang/2014] and also in the case of Curan Software vs. ITO (31 taxmann.com 141) wherein application of 25% related party transactions filter has been upheld, similar view has also been expressed by the Hon’ble ITAT Delhi in the case of Actis Advisers Private Limited (ITA No. 5277/DEL/2011). We also note that the TPO has given detailed reasons for adopting the RPT filter at 25%. We also note that a threshold limit of 25% is prescribed in the Act to define associated enterprise and therefore, the limit of 25% as a threshold limit to exclude related party transactions would be more appropriate and rational. Therefore, we do not find any infirmity in application of above filter, the objection is accordingly not found acceptable. ********************* 4.3.2 Sicame India Connectors Pvt. Ltd. ➢ Fails RPT filter ➢ Erroneous mark-up computation Having considered the submission of the assessee, we note that the assessee has computed the RPT as total RPT transaction/total sales and submitted that the company fails the RPT filter for FY 2019-20. In this regard, we note that the method adopted by the assessee is incorrect. In the preceding paragraph 4.1.4 we have discussed and uphold the RPT calculation method of the TPO. Since the company passes the RPT filter as computed by the TPO, we do not find merit in the objection of the assessee. Further with regards to the error in margin we direct the TPO to verify the margin and recompute the margin if found necessary. 24.16 The learned AR before us contended that the RPT of M/s Sicame India Connectors India Pvt Ltd for the year under consideration is of Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 23 of 38 36.33% which exceeds 25% RPT filter applied by the TPO. Hence, the impugned company cannot be included in the final set of comparable. 25. On the contrary the learned DR vehemently supported the orders passed by the authorities below. 26. We have heard the rival contentions of both parties and perused the materials available on record. The issue before us relates to the inclusion of Sicame India Connectors Pvt. Ltd. in the final set of comparables despite the assessee’s objection on account of failure of the RPT filter. 26.1 It is noted that the assessee has specifically contended that Sicame India Connectors Pvt. Ltd. fails 25% RPT filter. In support of this contention, the assessee has placed cogent material on record, namely, extracts from the financial statements of the said company. As per these financial statements, the total related party transactions amount to ₹45.92 crores against total revenue from operations of ₹126.39 crores for FY 2019-20, resulting in an RPT ratio of 36.33%, which is clearly in excess of the threshold of 25%. 26.2 We find that before the DRP, the assessee’s objection was supported by specific figures derived from the audited financial statements of the comparable company. However, the ld. DRP has not controverted or rebutted these figures by referring to any contrary material. Instead, the ld. DRP has merely observed that the TPO has verified the RPT filter and that the method adopted by the TPO for computing RPT is correct. There is no finding by the ld. DRP demonstrating how the RPT percentage computed by the assessee, based on the company’s own financials, is incorrect or unreliable. In our considered view, when an assessee brings on record concrete financial data showing that a comparable breach the RPT threshold, the same Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 24 of 38 cannot be brushed aside by a general observation that the TPO’s method is correct, without dealing with the specific figures and computations furnished by the assessee. The onus then shifts to the Revenue to show, with reference to the same financial statements, that the assessee’s computation is erroneous. This has not been done in the present case. Therefore, we hold that the assessee has successfully demonstrated, on the basis of cogent material, that Sicame India Connectors Pvt. Ltd. has related party transactions exceeding 25% for the relevant assessment year. In the absence of any effective rebuttal by the ld. DRP or the Revenue, the inclusion of this company as a comparable is not justified. Accordingly, we direct the AO/TPO to exclude Sicame India Connectors Pvt. Ltd. from the final set of comparables while benchmarking the international transactions of the assessee. In view of the above detailed discussion the Ground Nos. 7, 8, & 9 of the assessee are combinedly disposed-off partly in favour of the assessee. 27. The next issue raised by the assessee through Ground No. 10 is that the learned DRP and the TPO erred in not restricting the TP adjustment under manufacturing segment to the proportion of international transaction under the said segment. 28. The learned AR before us submitted that even assuming an adjustment is warranted under TNMM, the same cannot be applied to the entire turnover of the manufacturing segment. Transfer pricing provisions under section 92 apply only to international transactions with AEs. Therefore, any TP adjustment must be restricted proportionately to the value of international transactions under the manufacturing segment and not to non-AE domestic transactions. Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 25 of 38 29. On the contrary the learned DR vehemently supported the orders passed by the authorities below. 30. We have considered the submissions of both the parties and perused the materials available on record. The issue before us is whether the transfer pricing adjustment under the manufacturing segment can be applied to the entire segment turnover or should be restricted only to the proportion of international transactions. 30.1 At the outset, we note that section 92(1) of the Income-tax Act mandates computation of income arising from international transactions having regard to the arm’s length price. Thus, the statutory framework itself limits the scope of transfer pricing adjustments only to transactions entered with associated enterprises. Domestic transactions, even if they form part of the same segment, are outside the purview of transfer pricing provisions. 30.2 Under TNMM, benchmarking may be carried out at the segment level for the purpose of determining an arm’s length margin. However, once the margin differential is determined, the consequential adjustment, if any, must be confined only to the value of international transactions. Applying the arm’s length margin to the entire segment turnover would result in adjustment to non-AE transactions, which is impermissible in law. 30.3 We further observe that this principle has been consistently upheld by various judicial authorities, which have held that transfer pricing provisions cannot be used to re-compute profits from domestic transactions. Even where separate segmental margins for AE and non-AE Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 26 of 38 transactions are not available, the adjustment must be reasonably apportioned to the AE transactions on a proportionate basis. 30.4 In the present case, the TPO has applied the adjustment on the entire manufacturing segment turnover, without restricting it to the international transactions. Such an approach is contrary to the scheme of the Act and leads to taxation of income not arising from international transactions. 30.5 In view of the above, we hold that the TP adjustment, if any, under the manufacturing segment must be restricted only to the proportion of international transactions of that segment. Accordingly, we direct the AO/TPO to recompute the TP adjustment by limiting it to the value of international transactions under the manufacturing segment. Hence the ground of appeal raised by the assessee is allowed. 31. The issue raised by the assessee through Ground Nos. 11 to 14 of the appeal pertains to the TP adjustment on account of notional interest of Rs. 4,81,120/- on overdue receivables. 32. For the year under consideration, the TPO noted that the assessee had extended credit to its AEs beyond the agreed periods. Therefore, the TPO after invoking the provisions of sections 92CA(2A)/(2B) of the Act, examined the issue with respect to the ALP of interest to be received even though receivables were not reported as a separate international transaction. Relying on section 92B(1) read with Expln. (c) to section 92F and Rule 10B(2)(c) of the Income Tax Rules and applying the doctrine of “substance over form”, the TPO treated the delay in realisation of AEs invoices as a financing arrangement requiring Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 27 of 38 separate benchmarking under TP provision. The assessee’s plea that entity-level TNMM margins subsume the impact of receivables was rejected on the footing that ALP must be determined on a transaction/segment basis and cannot be masked by enterprise-level profits. In support, the TPO cited several coordinate bench rulings holding that receivables constitute a distinct international transaction to be benchmarked separately. The assessee’s further contention of a “natural set-off” (i.e., that any financing element was compensated by pricing or other cross-charges) was declined for want of cogent, contemporaneous evidence demonstrating and benchmarking both sides of such set-off. Accordingly, the TPO benchmarked interest at the average rate of SBI PLR i.e. 13.27% for invoices raised in INR and at LIBOR + 450 bps for foreign-currency invoices, treating the rates as the assessee’s opportunity cost. Interest was computed invoice-wise from the end of the contractual credit period to the actual date of receipt, with the charge restricted to the portion of delay falling within the year so as to avoid overlap with other years. On this basis, the TPO worked out a separate transfer-pricing adjustment towards notional interest for Rs. 4,81,120/- on delayed receivables from the AEs. 33. The aggrieved assessee preferred to file objection before the learned DRP. 34. The learned DRP in principle confirmed the view of the TPO by holding allowances of extended credit period is an international transaction and required to be separately benchmarked. The learned DRP also confirmed the rate of interest being SBI PLR for invoice raised in INR and LIBOR +450 BPS for invoice raised in foreign currency. Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 28 of 38 35. Being aggrieved by the action of the revenue authorities, the assessee is in appeal before us. 36. The learned AR before us submitted that justice will be served to the assessee if the impugned adjustment is limited to the extent of glamour +200 basis points. 37. On the other hand, the learned DR vehemently supported the orders passed by the authorities below. 38. We have heard the rival contentions of both the parties and perused the materials available on record. The first question before us arises as to whether or not the outstanding receivables from AEs are an international transaction. At the outset we note that identical issue has been decided by this tribunal in own case of the assessee for A.Y. 2021- 22 vide order dated 09th October 2025 bearing IT(TP)A No. 2346/Bang/2024, wherein the bench setting aside the issue to file of the AO/TPO directing to benchmark the interest on delayed receivable at LIBOR+200 basis point. The relevant finding of the Tribunal in own case of the assessee as mentioned above reads as under: 34. We have heard the rival contentions of both the parties and perused the materials available on record. The first question before us arises as to whether or not the outstanding receivables from AEs are an international transaction. This issue is no longer res integra. As per the amendment to section 92B of the Act by way of Finance Act, 2012 with retrospective effect from 01/04/2002 that, the interest on outstanding receivables is an international transaction, and it certainly requires separate benchmarking. Accordingly, the extended credit period or credit allowed over and above the agreed period shall be considered as separate international transaction required to be benchmarked. In holding so, we find support and guidance from the decision of Hon’ble Bombay High Court in the case of CIT v. Patni Computer Systems [2013] 33 taxmann.com 3/215 Taxman 108 (Bombay), wherein the bench took a view that on the amendment to section 92B of the Act by way of Finance Act, 2012 with retrospective effect from 01/04/2002 that, the interest on Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 29 of 38 outstanding receivables is an international transaction, and it certainly requires separate benchmarking. 34.1 We also refer the decision of this Tribunal in the case of AMD India Pvt Ltd vs. DCIT reported in 95 taxmann.com 531 wherein it was held as under: “10. In our considered opinion, to the extent of agreed credit period, the sale price to AE or non AE is inclusive of possible interest on such agreed debt and therefore, for such credit allowed to AE, it cannot be said that this is an independent international transaction. But when extra credit is allowed beyond the agreed credit period, the same is a subsequent independent event and interest for such extra credit period cannot be factored in the price agreed. Only because the agreed price without considering extra credit period is in excess of the ALP, it cannot be said and held that for such independent subsequent event of allowing extra credit also, the agreed prices takes care and this is not an independent international transaction requiring separate benchmarking. In transfer pricing analysis, the purpose is not to compare profit of the tested party with that of the comparables but the purpose is to compare the prices charged by the tested party with the prices charged by the comparables although when TNMM is adopted as MAM, the process of such price comparison is by comparing profits of tested party with that of the comparables and therefore, if the profit of the tested party is equal or above the profit of comparables, even after taking into account the effect of working capital adjustment and the ALP is less than the price charged by the tested party, it cannot be said that the extra credit allowed is not an independent international transaction and not required to be separately benchmarked. In our considered opinion, the first requirement is this that it has to be first decided that whether it is an independent international transaction or not and if it is found that it is not so, then obviously no separate benchmarking is required but if it is found that it is an independent international transaction then separate benchmarking has to be done and TP adjustment is to be made as per law irrespective of whether any TP adjustment is required to be made in respect of main transaction of sale.” 11. Hence, we first decide this aspect as to whether this is an independent international transaction or not. In our considered opinion, in respect of agreed credit period which is 30 days in the present case, there is no independent international transaction because the effect of the credit to that extent is factored in the agreed prices. But for extra credit, the effect of the credit to that extent cannot be factored in the agreed prices because it is not even known at the stage as to how extra credit will be allowed and therefore, that is an independent international transaction and hence, separate benchmarking has to be done and TP adjustment is to be made as per law. This is worth noting that by allowing extra credit in excess of agreed period of 30 days, profit shifting is there because if credit period is more, prices go up which is not done in the present case since, the prices are determined on the basis of 30 days credit period. Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 30 of 38 34.2 The above finding of the Tribunal was challenged by the revenue before the Hon’ble Jurisdictional High Court in the case of PCIT vs. AMD India Pvt Ltd reported in 98 taxmann.com 512 wherein the revenue appeal was dismissed by observing as under: “5. Having heard the learned counsel for the appellants-Revenue, we are therefore of the opinion that no substantial question of law arises in the present case also. The appeal filed by the Appellants-Revenue is liable to be dismissed and it is dismissed accordingly. No costs.” 35. Now, coming to the issue in respect of the rate of interest. The TPO has taken SBIL PLR at 12.27% for invoice raised in INR and LIBOR + 450 Bps for invoice raised in foreign currency. The assessee on the strength of case law argued that the rate of interest should be LIBOR + 200 basis point. In this regard we find pertinent to refer the order of this Tribunal in the case of DCIT Vs. Hewlett Packard India Software Operations Private Limited (2022) 149 taxmann.com 280 (Bang. Trib.) where it was held as under: “37. Once we have held that the transaction between the assessee and AE was in foreign currency with regard to receivables and transaction was international transaction, then transaction would have to be looked upon by applying the commercial principles with regard to international transactions and accordingly proceeded to take into account interest rate in terms of London Inter Bank Offer Rate [LIBOR] and it would be appropriate to take the LIBOR rate + 2%. For this purpose, we place reliance on the judgment of the Bombay High Court in the case of CIT v. Aurionpro Solutions Ltd., 99 CCH 0070 (Mum HC). It is ordered accordingly.” 35.1 The above finding was further followed by coordinate bench of this Tribunal in the case of M/s IHS Global Pvt Ltd vs. ACIT bearing IT(TP) No. 1424/Bang/2024. Thereby respectfully following the view taken by this Tribunal in aforementioned cases, we hold that the appropriate rate interest shall be LIBOR + 200 Basis point. 35.2 Before parting it also important to note the TPO originally calculated the interest at Rs. 58,83,783/- only. However, the TPO passes a rectification order dated 24th April 2024 where in the TPO found the interest was calculated on all the trade receivables without providing credit period. Hence, the TPO after providing the credit period of 30 days recomputed the interest on delayed receivable at the rate of LIBOR+450 Bps and reduced the interest amount at Rs. 3,68,918/- only. This rectification order passed by the AO was not given effect in the final assessment order. 35.3 Therefore, we in view of the above detailed discussion, direct the AO to compute the interest on delayed receivable as per rectified order of the TPO and taking the interest at LIBOR + 200 basis point. Hence, 38.1 Respectfully following the order of coordinate bench of the Tribunal in the own case of the assessee as discussed above, we direct the AO/TPO to recompute the ALP of the interest on delayed receivable Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 31 of 38 at LIBOR+ 200 basis point after providing credit period of 30 days. Hence, the ground of appeal of the assessee is partly allowed for statistical purposes. 39. The next issue raised by the assessee through Ground Nos. 15 to 19 of the appeal is that the revenue authorities erred in benchmarking the Concur expenses and Corporate Service charges at NIL. 40. The TPO observed that the assessee company has made payment towards IT Infrastructure and support charges of Rs. 31,76,69,891/-, Corporate Service Charges amounting to Rs. 6,7001298/- and Concur subscription expenses amounting to Rs. 18,18,346/- to it AEs as part of “information service charges/IGS. The TPO examined the Information Service Charges, Concur Expenses and Corporate Service Charges paid by the assessee to its AE and called upon the assessee to explain the nature of services, their quantification and the basis of allocation. Though the assessee furnished a bifurcation of expenses and copies of invoices, the TPO observed that these documents did not establish actual rendition of services or demonstrate how the services were quantified at arm’s length. 40.1 The TPO noted that, as per the inter-company agreement, only costs incurred for services actually rendered to the assessee were payable. However, in respect of consumption-based services (PTC and SSR), Concur expenses and corporate service charges, the assessee failed to furnish evidence such as usage details, number of users, hours consumed or linkage between costs incurred and benefits derived. Thus, the TPO held that the assessee did not substantiate that the services Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 32 of 38 resulted in commensurate benefits or that the costs represented actual expenditure attributable to the assessee. In the absence of proof of services rendered and proper cost allocation, the arm’s length nature of these payments was not established. 40.2 Relying on DRP directions and judicial precedents, the TPO concluded that where no evidence of actual services and arm’s length pricing is produced, the ALP can be determined at NIL. Accordingly, the ALP of Consumption-based services PTC (Rs. 14234785/-), SSR (21,67,204/-), Concur expenses (18,18,346/-) and Corporate service charges of Rs. 6,7001298/- was determined at NIL under the CUP method, resulting in a upward TP adjustment. 41. The aggrieved assessee preferred to file objection before the before the learned DRP. 42. The assessee, in the course of proceedings before the learned DRP, submitted that the Ld. TPO has accepted the nature of Information System (IS) services, the heads of services, and the allocation methodology as per the inter-company agreements and responses to the SCN. It is also an admitted position that the assessee has paid its AE only for actual direct and indirect costs incurred, without any mark-up or profit element. On the basis of documents furnished during TP proceedings, the Ld. TPO himself allowed subscription-based services and EMEA recharges, thereby acknowledging the genuineness and receipt of IS services. Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 33 of 38 42.1 The assessee contends that, contrary to the TPO’s conclusion, detailed documentation was furnished to substantiate the receipt of consumption-based services (PTC and SSR), Concur expenses, and corporate service charges. These included descriptions of services, agreements, invoices/debit notes, allocation keys, project-wise SSR details, break-up of pass-through costs, screenshots evidencing usage of software and IT infrastructure, and explanations of benefits derived. The services were provided on a need basis, were directly linked to business operations, and were recovered strictly on a cost-to-cost basis. 42.2 It is submitted that the TPO has erred in applying a “benefit test” and in determining the ALP at NIL merely on the ground that benefits were not quantified to his satisfaction. The assessee submits that the law does not permit the TPO to question commercial expediency or business necessity once the existence and receipt of services are demonstrated. The TPO’s approach effectively substitutes the assessee’s business judgment, which is impermissible under transfer pricing provisions and settled judicial principles. 42.3 With respect to corporate services, the assessee submits that TEL provides centralized operational services such as finance, treasury, tax, legal, HR, governance, operational excellence, and executive support, which are essential for day-to-day operations and governance of the assessee. Stewardship or shareholder activities, if any, are specifically excluded from charge. The allocation of costs is based on reasonable and scientific allocation keys consistently applied across the group. Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 34 of 38 42.4 The assessee further submits that Indian TP regulations do not prescribe a higher or exceptional burden of proof for intra-group services compared to third-party transactions. The assessee has discharged its onus by furnishing all primary documents ordinarily maintained in the course of business. In the absence of any comparable uncontrolled price identified by the TPO, determination of ALP at NIL is arbitrary and unsustainable. 42.5 Accordingly, the assessee prays that the adjustment made by determining the ALP of consumption-based services, concur expenses, and corporate service charges at NIL be deleted, as the services were actually received, were for business purposes, and were charged at arm’s length on a cost-to-cost basis. 42.6 The learned DRP after considering the facts in totality party allowed the objection of the assessee by observing as under: 5.2 With regards to the SSR and PTC- Since the TPO has accepted the submission of the assessee with regards to the SSR projects and the pass through cost, we direct the TPO to allow the claim of the assessee to the extent it was substantiated by the assessee during the remand proceedings. 5.3 With regards to the Corporate support charges: The copy of the remand report of the TPO was forwarded to the assessee. The assessee vide submission dated 29.05.2024 submitted that the CSS received from TEL was beneficial to the assessee for the day to day operations, the assessee emphasises that the CSS services enabled the TE group to focus on their core business functions while one of the entity of the group efficiently manages the ancillary tasks and helps to achieve the strategic goals. Assessee has further submitted that the proportion of CSS is 0.86% of the total operating expenses. 5.4 Having considered the submission of the assessee and the remand report of the TPO we are of the considered opinion that the assessee was not able to substantiate the need benefit test for availing those services, further no documentary evidence has been submitted by the assessee to prove that the services were actually received by the assessee for which the payment was made. In an independent market situation, whether the parties involved would have paid similar amount for these kinds of CSS charge is not manifested in taxpayer’s submission. The bifurcation of the cost is not substantiated by any evidences. Moreover, there is incomplete detail regarding the computation information like weightage given to the users in computing the apportionment Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 35 of 38 value. The additional submission provided by the taxpayer do not answer the arguments raised by the TPO in para 17.2 of the TP order u/s 92 CA substantially. Hence ALP of the payment made under the head CSS charge to AE is rightly held as NIL and taxpayers’ contentions are not acceptable on merit. The linkages of the services to the business operations of the assessee also could not be proved before the TPO. The assessee also could not establish that there is no duplication of the particular services under different heads. Further it could not be established by the assessee that in an uncontrolled situation, an independent party would charge similar price. Accordingly, the contentions raised in the additional evidence and rebuttal to remand report is not acceptable. Therefore, the objection raised by the assessee in this regard is rejected. 43. Being aggrieved by the direction and consequential assessment order, the assessee is in appeal before us. 44. The learned AR before us submitted that the issue on hand is covered in the own case of the assessee and accordingly prayed similar finding for the year in dispute. 45. Per contra, the learned DR vehemently supported the orders passed by the authorities below. 46. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that the issue on hand is covered by the order this tribunal in the own case of the assessee for A.Y. 2021-22 bearing IT(TP)A No. 2346/Bang/2024 wherein the coordinate bench vide order dated 09-10-2025 held as under: 45. We have heard the rival contentions of both the parties and perused the materials available on record. The issue before us is whether the TPO and the learned DRP were justified in determining the ALP of Concur expenses and Corporate Support Service (CSS) charges at NIL. 45.1 At the outset, section 92C of the Act, read with Rule 10B of the Income- tax Rules, prescribes that the ALP of an international transaction must be determined using one of the prescribed methods i.e. CUP, RPM, CPM, PSM, TNMM, or any other method notified. The statute does not permit the Revenue Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 36 of 38 to determine ALP on an ad hoc basis. In the present case, the assessee had benchmarked the impugned transactions under TNMM by aggregating them with other international transactions, and its margins were claimed to be at arm’s length. The lower authorities, however, disregarded this approach and applied CUP/Other Method without bringing on record any comparable uncontrolled transaction. Such an approach is contrary to Rule 10B(1)(a), which mandates the use of reliable comparable data. 45.2 It is also a settled law, as held by the Hon’ble Delhi High Court in CIT v. EKL Appliances Ltd. (345 ITR 241), that the TPO cannot question the commercial expediency of expenditure incurred by the assessee. The only requirement is to examine whether the transaction is genuine and whether the payment is supported by evidence. As such, by determining the ALP at NIL on the ground that no tangible benefit accrued, the TPO and DRP have travelled beyond their jurisdiction. 45.3 The assessee had furnished agreements, invoices, debit notes, and withholding tax details to substantiate that the services were actually rendered. Further, indirect tax in the form of GST/service tax has also been discharged on these payments, which establishes that the transactions were accepted as genuine by other wings of the Revenue. Denying the ALP in income-tax proceedings without disproving these evidences amounts to inconsistency and double taxation. 45.4 Judicial precedents also support the assessee’s case. The ITAT in Samsung India Electronics Pvt. Ltd. (ITA No. 9482/Del/2010) and Sulzer Tech India Pvt. Ltd. (ITA No. 633/Mum/2021) has held that once TNMM is accepted as the most appropriate method for benchmarking international transactions, it is not permissible for the TPO to cherry-pick certain expenses and benchmark them separately under CUP. Such action results in impermissible double adjustment. Likewise, in Bostik India Pvt. Ltd. (IT(TP)A No. 2472/Bang/2024), the Tribunal has held that application of a hypothetical CUP without comparable data is unsustainable and that TNMM should prevail when the transactions are interlinked. 45.5 It is also important to note that in the assessee’s own case for earlier assessment years, the TPO had sought to benchmark IS charges at NIL. However, in A.Y. 2009-10, the DRP categorically observed that the ALP of such charges cannot be NIL and directed the TPO to benchmark the transactions in accordance with the law. Despite this clear direction in earlier years, the TPO has repeated the same approach in the present year without bringing any fresh material. Consistency demands that where facts remain unchanged, a contrary view cannot be taken. 46. In view of the above, we find that the determination of ALP at NIL by the lower authorities is not in accordance with the Act and Rules. The assessee has demonstrated the receipt of services, placed supporting evidence, and benchmarked the same under TNMM which has already been accepted for other transactions. The adjustment made by the TPO and confirmed by the ld. DRP is therefore not justified. 46.1 Accordingly, we hold that the addition made towards Concur expenses and Corporate Support Service charges by adopting ALP at NIL is directed to be deleted. The grounds of appeal raised by the assessee are allowed. Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 37 of 38 46.1 Respectfully following the order of the coordinate bench in the own case of the assessee as discussed above, the ground of appeal raised by the assessee is hereby allowed. 47. The next issue raised through ground No. 20 by the assessee is that the lower authority erred in not allowing the credit of Advance Tax and Tax deducted at source for Rs. 17.5 crore 0.3 crores respectively. 48. We have considered the rival submissions and perused the materials available on record. The grievance of the assessee in Ground No. 20 relates to non-grant of credit for Advance Tax and Tax Deducted at Source as claimed in the return of income. It is a settled position that credit for advance tax paid and tax deducted at source is to be allowed in accordance with the provisions of the Act, subject to verification of the relevant challans, TDS certificates and records available with the Department. 48.1 In the interest of justice, we deem it appropriate to restore this issue to the file of the Assessing Officer. The Assessing Officer is directed to verify the claim of the assessee with respect to payment of advance tax and TDS and, if the same is found to be correct, to allow the due credit in accordance with law. Accordingly, Ground No. 20 raised by the assessee is allowed for statistical purposes. 49. The issue raised by the assessee through Ground No. 21 of the appeal pertains to levy of interest under section 234A, 234B and 234C of the Act, which is consequential in nature and does not require any separate adjudication. Hence, the same is hereby dismissed as infructuous. Printed from counselvise.com IT(TP)A No.1789/Bang/2024 Page 38 of 38 50. In the result, the appeal of the assessee is hereby partly allowed. Order pronounced in court on 8th day of January, 2026 Sd/- Sd/- (SOUNDARARAJAN K) (WASEEM AHMED) Judicial Member Accountant Member Bangalore Dated, 8th January, 2026 / vms / Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore Printed from counselvise.com "