TERADATA INDIA PRIVATE LIMITED,HARYANA V. ASSESSMENT UNIT, INCOME TAX DEPARTMENT, ASSESSMENT UNIT, INCOME TAX DEPARTMENT

ITTPA 2/DEL/2024

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The case involves Teradata India Pvt. Ltd., which appealed against the final assessment order passed by the Income Tax Department, Gurugram, for the Assessment Year 2020-21. The primary issues in the appeal included transfer pricing adjustments, disallowance of deductions under section 80G, and the validity of the reference to the Transfer Pricing Officer (TPO) under the faceless assessment scheme. The Tribunal examined the procedural and substantive aspects of the assessment, including the selection of comparables for transfer pricing, the application of working capital adjustments, and the treatment of interest on overdue receivables. The Tribunal's decision addressed these issues by adjusting the comparables used in the transfer pricing analysis, allowing certain deductions, and clarifying the application of the faceless assessment scheme.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 783372 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 03-11-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: 2020-2021
• Appeal Filed On: 28-08-2024
• Other Referred Cases: National Thermal Power Corporation Limited vs. 229 ITR 383 (SC), Kusum Health Care Private Limited vs. ITA No. 705/2016, Mckinsey Knowledge Centre India Limited vs. ITA No. 217/2014, A.T. Kearney Limited vs. 161 taxmann.com 310 (Delhi), Corteva Agriscience Services India Pvt. Ltd. vs. ITA-TP No 78/Hyd./2022, Patni Computer Systems Ltd. vs. 33 Taxmann.com 3, Bechtel India Pvt. Ltd. vs. AY 2010-11 (ITA 379/2016), Hyundai Heavy Industries Co Ltd vs. [2017) 88 taxmann.com 537 (AAR-New Delhi), CIT vs. Adyar Gate Hotel Ltd [2017] 81 taxmann.com 397 (Mad), DCIT vs. Sabarmati Paper Udyog Ltd [2017] 85 taxmann.com 356 (Guj), B & B Infratech Ltd vs. ITO [2016] 76 taxmann.com 188 (Kar), UCWEB Mobile Pvt. Ltd. vs. ITA No. 3945/Del/2024, Sartorius Stedim India (P.) Ltd. vs. [2023] 146 taxmann.com 343 (Bang. Trib.), Mentor Graphics (Noida) P Ltd. vs. (2007) 109 ITD 101 (Delhi), Capgemini India Private Limited vs. ITA No.7861Mum/2011, Marubeni-Itochu Steel India (P.) Ltd. vs. ITA No. 1716/Del/2014
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DHARM VEER SINGH
• Assessee Lawyers: NAGESWAR RAO; PARTH; COMPARING
• Keywords: Set aside; Transfer pricing; International transaction; Business expenditure; Depreciation; Principle of natural justice; Notional interest; Related party transaction
• Section: 144; 143(3); 154; 90; 37; 15; 92; 80G

Judgement Text

" 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘I’: NEW DELHI BEFORE SHRI SUDHIR PAREEK, JUDICIAL MEMBER AND SHRI AVDHESH KUMAR MISHRA, ACCOUNTANT MEMBER IT(TP)A No.2/Del./2024, A.Y. 2020-21 Teradata India Pvt. Ltd. 2nd Floor, #203, Vipul Business Park Sohna Road, Sector 48, Gurgaon South City II, Gurgaon-122018, PAN: AACCT6715A Vs. Assessment Unit Income Tax Department, Income Tax Office, Ugyog Vihar, Gurugram (Appellant) (Respondent) Appellant by Shri Nageswar Rao, Advocate & Shri Parth, Advocate Respondent by Sh. Dharm Veer Singh, CIT (DR) Date of Hearing 06/08/2025 Date of Pronouncement 03/11/2025 ORDER PER AVDHESH KUMAR MISHRA, AM This appeal of the assessee for the Assessment Year (‘AY’) 2020-21 is directed against the order dated 29.07.2024 passed under section 143(3) r.w.s. 144C (13) read with section 144B of the Income Tax Act, 1961 (‘Act’) by the Assessment Unit, Income Tax Department, Gurugram (Henceforth ‘Assessing Officer’/’AO’) 2. The assessee has raised following grounds of appeal: - Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 2 “1. That on facts and in law, the order passed by the Deputy Commissioner of income-tax-Transfer Pricing -1(3)(2), New Delhi (\"the Ld. TPO\"), the draft assessment order and the final assessment order passed by the Assessment Unit, Income Tax Department (\"Ld. AO\") pursuant to the directions of Dispute Resolution Panel-1, New Delhi (\"Hon'ble DRP\"), are bad in law and contrary to provisions in law. 2. The Ld. AO following the order of the Ld. TPO and the Hon'ble DRP has erred in law and on the facts of the case in making an upward adjustment of INR 7,60,44,152, INR 8,70,81,907, INR 23,51,901, INR 1,85,55,593 and INR 54,66,400 on account of provision of Global Development Centre (\"GDC\") services, provision of software development services, Interest on delayed receivables, availing of professional services and disallowance of deduction u/s 80G of Income-tax Act, 1961 (\"the Act\"), respectively. Part I-Transfer Pricing Grounds 3. The Ld. DRP/AO/TPO have erred in law and in facts, in not discharging the statutory onus to establish that the Assessee's case is covered under any of (a) to (d) clause of Section 92C(3) of the Act. 4. That on facts and in law, the Ld. DRP/ AO/ TPO have erred by not accepting the economic analysis undertaken by the Assessee in accordance with the provisions of the Act read with the Income-tax Rules, 1962 (\"the Rules\"), and modified the economic analysis for the determination of the arm's length price (\"ALP\") of Impugned Transactions and holding that it is not at an arm's length. 5. That on facts and in the circumstances of the case and in law, the Ld. AO/TPO have erred in considering incorrect operating cost for the purpose of computing adjustment pertaining to provision of GDC services and provision of software development services and thereby erroneously leading to enhanced adjustment amounting to INR 5,33,97,889. 6. The Ld. AO/TPO erred in facts and in law, by not following the directions of the Hon'ble DRP to refrain from re-characterizing the provision of GDC services rendered by the Appellant as professional, consultancy and advisory services, and to pass a speaking order by Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 3 clearly identifying the services in addition to GDC services which are required to be categorized as professional services. 7. That on facts and in law, the Ld. DRP/AO/TPO have erred in considering loss/ gain on foreign exchange fluctuations and provision for unascertained liabilities as non-operating item for computation of margin of comparable companies and the Appellant. 8. That on facts and in law, the Ld. DRP/AO/TPO have erred by not making suitable adjustments to account for difference in the level of working capital of the Appellant vis-à-vis the comparable companies. 9. That on facts and in law, the Ld. DRP/ AO/ TPO have erred in rejecting certain comparable companies identified by the Appellant and performing a fresh comparability analysis by applying arbitrary filters without any rationale: 9.1. Rejection of companies having accounting year different than the Appellant companies having accounting year other than 31 March 2020 or data of the company did not fall within 12 month period i.e. 01 April 2019-31 March 2020 on an ad-hoc basis. 9.2 Rejection of companies having operating losses for any two years out of three years; 9.3. Rejection of companies having more than 25 percent related party transactions (\"RPT\") sales to total sales. 10. The Ld. DRP/ ΤΡΟ/ ΑO erred in law and in facts by selecting certain companies which are earning super normal profits, as being comparable to the Appellant. 11. The Ld. TPO/AO erred in facts and in law, by wrongfully rejecting certain companies and adding certain companies to the final set of comparables for the impugned transactions of the Appellant, on an adhoc basis thereby resorting to cherry picking of comparables to determine ALP for the impugned transaction. 12. While determining the arm's length price of availing of professional services from AE to be Nil, the Ld. DRP/AO/TPO have erred in law and in facts by: Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 4 12.1. not considering the contention of the Appellant that the services availed are closely linked to the distribution segment; 12.2. The Ld. AO/ Ld. TPO have erred in passing an order that is perverse in law ignoring the relevant submissions, information and documents provided by the Appellant to substantiate the receipt of the services; 12.3. upholding the determination of the ALP of the International transaction of availing of professional services using Comparable Uncontrolled Price (\"CUP\") method as the most appropriate method; 12.4. not following the manner of applying the CUP method prescribed under Rule 10B(1)(a) of the Rules; and 12.5. determining the arm's length price of the international transaction to be Nil on an ad-hoc basis. 13. The Ld. DRP/AO/ TPO have erred in law and in facts by charging interest on delayed /non-realized receipts of receivables from AE by: 13.1. not considering the reversal of invoices in the computation of interest on outstanding receivables for GDC segment, 13.2. ignoring the fact that accounts receivables arising from the international transaction are closely linked to the main transaction and should be benchmarked using a combined transaction approach, by making working capital adjustment; 13.3 charging interest on outstanding receivables due to its AE despite the fact that the Appellant has not borrowed any funds to support the working capital or other day-t day expenses of the Appellant and the question of receiving any interest on receivables does not arise; 13.4. disregarding the order passed by the Hon'ble ITAT in Appellant's own case by AY 2012 13. AY 2013-14, AY 2014-15 and AY 2015-16; Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 5 13.5 disregarding the fact that the Hon'ble ITAT had placed reliance on the order passed in the case of Kusum Health Care Private Limited (ITA No. 705/2016) by the Hon’ble High Court of Delhi; 13.6 by not allowing LIBOR plus 400 basis points as the interest rate on the outstanding receivables (basis the directions passed by the Hon’ble DRP for previous AYs) and instead applying interest at the rate of LIBOR plus 550 basis points. 14. The ld. DRP/TPO/AO have erred in law and in facts, by not making suitable adjustments to account for difference in the risk profile of the appellant vis-à-vis the comparable companies. 15. The Ld. DRP/AO/TPO have erred both on facts and in law and has vitiated the principles of natural justice by not giving due cognizance to the detailed analysis and technical arguments submitted by the Assessing during the time of assessment proceedings. Part II-Corporate Tax Grounds 16. Denial of deduction under Section 80G. 16.1. That on the facts and circumstances of the case and in law, the Ld. AO and Hon'ble DRP have erred in not considering favorable order passed by Hon'ble ITAT in Teradata's own case on the similar issue in AY 2017-18 and AY 2018-19 wherein the matter was decided in favor of the Appellant. 16.2. That on the facts and circumstances of the case and in law, the Ld. AO has erred in disallowing the deduction of INR 54,66,400/- claimed under section 80G of the Act towards donation to various eligible institutions by incorrectly holding that that any expenses incurred by the Appellant towards Corporate Social Responsibility (\"CSR\") cannot be allowed as deduction under section 80G of the Act. 16.3. That on the facts and circumstances of the case and in law, the Ld. AO has erred in denying deduction under section 80G of the Act without appreciating that the Appellant had suo-moto disallowed the corresponding CSR expense while computing Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 6 income chargeable to tax under 'Profits and gains of business or profession' for the year under consideration. 16.4. That on the facts and circumstances of the case and in law, the Ld. AO has erred in denying deduction under section 80G of the Act pertaining to eligible payments without appreciating that section 37 of the Act does not provide any restriction towards deduction under Chapter VI-A of the Act, which is otherwise eligible. 16.5. That on the facts and circumstances of the case and in law, the Ld. AO has erred in not appreciating the intent of the legislature that the disallowance of deduction under Section 80G of the Act by way of CSR contribution was limited to clauses (iiihk) and (iiihl) of section 80G(2) of the Act (i.e. Clean Ganga Fund and Swacch Bharath Kosh) and not to be extended to other donations to various trusts and institutions which are otherwise eligible under section 80G of the Act. 16.6. That on the facts and circumstances of the case and in law, the Ld. AO has erred in staling that the amount grouped under CSR contributions has not been paid by the Appellant on a voluntary basis and the same is not eligible to be claimed as deduction under section 800 of the Act. 16.7. That on the facts and circumstances of the case and in law, the Ld. AO has erred in disregarding the various judicial precedents relied upon by the Appellant which hold that donations satisfying the condition of section 80G of the Act shall be allowable as deduction even if the same are made pursuant to contribution by way of CSR. 17. The Ld. AO has erred in taking the income as per intimation u/s 143(1) of the Act instead of returned income without considering the fact that the matter is pending for disposal before the Commissioner of Income Tax (Appeals). 18. That on the facts and circumstances of the case and in law, the Ld. AO has grossly erred in computing the amount of demand and the consequential interest and fees under the Act. Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 7 19. The Ld. AO has erred in adjusting the tax refund amounting to INR 7,18,78,010 PRIV computation sheet (issued along with the order under section 143(3) of the Act) by incorrectly adding the said refund amount to the tax liability of the Appellant without appreciating that the Appellant has only received a refund of INR 88,33,044. Part III- Consequential grounds of appeal 20. The Ld. AO has erred on the facts and circumstances of the case and in law in proposing to initiate the penalty proceedings under section 274 read with 270A of the act against the Appellant.” 2.1 Later, the assessee has raised following additional grounds: 1A. Final assessment order dated 29.07.2024 is time barred as no valid reference appears to have been made to the Ld. Transfer Pricing Officer (‘TPO’), as prescribed under section 92CA of the Act. 1B. Final Assessment Order is bad in law as it is based in invalid and unlawful directions of Ld. DRP, contrary to section 144C(8).\" 2.2 These additional grounds are admitted keeping in view the decision of the Hon’ble Supreme Court in the case of National Thermal Power Corporation Limited 229 ITR 383 (SC) and the Rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963. 3. The relevant facts giving rise to this appeal are that the assessee filed its Income Tax Return (‘ITR’) of the relevant year declaring income of Rs.54,89,40,260/-. The case was picked up for scrutiny and consequential assessment was completed at income of Rs.75,65,70,145/-. The Ld. AO made following additions in computing income over and above the income of Rs.56,10,46,730/- determined under section 143(1) of the Act: Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 8 i. Transfer Pricing Adjustment: Rs.18,40,33,553/- ii. Disallowance of Education Cess: Rs.52,51,317/- iii. Disallowance of depreciation: Rs.7,72,145/- iv. Disallowance of claim u/s 80G: Rs.54,66,400/- 3.1 Dissatisfied with the assessment order, the assessee filed this appeal challenging jurisdictional issues, transfer pricing adjustment, computation of income taking income determined under section 143(1) of the Act, disallowance of deduction under section 80G of the Act. Technical/Jurisdictional Issue: 4. This issue has been raised vide additional grounds read with Ground No. 1. The ground no.1 and additional grounds consist of two components (i) Invalid reference to the TPO and (ii) Invalid and unlawfulness directions of the Ld. DRP. 5. Mr. Nageswar Rao, Ld. Counsel of the assessee argued that the reference to the Ld. TPO was not in accordance with the law. The assessment in the presence case was required to be completed in accordance with the faceless scheme as the Ld. AO was of National Faceless Assessment Centre (NFAC). The Transfer Pricing (‘TP’) reference to the Technical Unit (‘TU’) was made by the Ld. AO, who in turn further transferred the TP reference to the Ld. TPO. Such reference by the TU to the Ld. TPO was neither as per law nor in accordance with the faceless Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 9 scheme. The proceedings before the Ld. TPO were in non-faceless manner and thereafter again by the Ld. AO in faceless manner. Such sifting of the assessment proceedings from Faceless to Non-Faceless to again Faceless was questioned by the Ld. Counsel by submitting that transfer pricing reference of the present case was invalid, which led the final assessment order passed after receipt of the directions of Ld. Dispute Resolution Panel ('DRP') barred by limitation as the Final Assessment Order was passed on 29.07.2024. 6. The Ld. Counsel of the assessee further contended that the Ld. DRP violated the provisions of section 144C(8) of the Act, which rendered the assessment null and void, without jurisdiction as there was no valid reference to the Ld. TPO as prescribed under section 92 CA of the Act. It was contended that the Ld. TPO's order dated 25.07.2023 stated that reference was received from AO-Technical Unit for determining the arm's length price ('ALP') under section 92CA(3) in respect of international transactions entered into by appellant assessee. It was submitted that the faceless assessment procedure had been narrated in section 144B of the Act. As per the section 144B1(i) of the Act, the case picked up for scrutiny was assigned to specific Assessment Unit ('AU') through an automated allocation system. It was submitted that Section 144B1(iv) provided AU to request through NFAC for seeking technical assistance in respect of determination of ALP by referring to Technical Unit ('TU'). Section Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 10 144B1(vi)(b) of the Act provided that where a request for reference to TU was received from AU, NFAC had to assign the same to TU through an automated allocation system for doing needful. As per section 144B1vii) of the Act, the NFAC should send the report received from TU to AU. 7. Mr. Nageswar Rao, Ld. Counsel of the assessee, drawing our attention to section 144B(3) to 144B(8) of the Act, contended that the TPO in this case was not a part of the TU. He argued that the Act, nowhere, provided that the TPO should be an independent person out of the notified TU carved out by the CBDT. The section 144B of the Act and Faceless assessment scheme did not specify any part of the assessment proceeding interchangeable between Non-Faceless and Faceless other than specified/provided under section 144B(8) of the Act. The Ld. Counsel argued that the TPO, a designated authority by the CBDT, worked under Non-Faceless Environment and not under section 144B of the Act. He further contended that the concept of TPO being part of the TU was not envisaged in Faceless assessment scheme. Hence, the reference made by the AO to TU for determining ALP delegated to the TPO was argued to be invalid being contrary to the provisions of section 144B of the Act, which would not provide further 12 months’ time under section 153(4) of the Act for completing the assessment. 8. The Ld. Counsel, drawing our attention to the provisions of section 144B(1)(vi)(b) read with explanation to section 92CA of the Act, submitted Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 11 that the TU under faceless assessment scheme had to perform the functions of the TPO in the present case and not empowered to further delegate the work assignment of determining ALP to the TPO. It was contended that such delegation did not confer valid jurisdiction to the TPO (under non-faceless procedure) and consequential further 12 months’ time under section 153(4) of the Act for completing the assessment. This defect was argued by the Ld. Counsel as incurable. He argued that the TU, in TP matter, could not be categorized as ‘pass-through’ to the TPO; otherwise, provisions of sections 144B(1)(iv)(c), 144B(1)(vi)(b) 144B(1)(vii), 144B(3)(ii), 144B(4) and 144B(8) of the Act would become reductant, which could not be the intent of the legislation. Only provisions of section144B(8) of the Act provided exit from Faceless assessment scheme. He prayed for quashing of the Final Assessment Order being void ab-initio. 9. The second sub-issue raised in the additional grounds is validity of directions of the Ld. DRP. It was argued that the directions of Ld. DRP were in violation of section 144C(8) of the Act. The Ld. Counsel, emphasizing on paras 6(i)(A) & 6(i)(B), 6(ii)(A) & 6(ii)(B), 7(i)(A) & 7(ii)(B), 7(ii)(A) & 7(ii)(B) and 7.20.1.5 of the Ld. DRP's directions, submitted that the Ld. DRP had violated the law in directing the Ld. TPO to verify (i) FAR profile of comparable companies, (ii) application of filters and (iii) to decide on inclusion/exclusion of comparable companies. In this way, both Ld. TPO and Ld. DRP had not performed their statutory function, submitted by Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 12 the Ld. Counsel. It was further submitted that the statutory time to complete the assessment could not be extended even by the Hon'ble Court; therefore, it would be unjust, illegal and unlawful to give one more chance to improve the case. He prayed for deletion of TP adjustment Rs.18,40,33,553/- and declaration of the final assessment order as null and void. 10. On the Other hand, Mr. Dharm Veer Singh, Ld. CIT-DR drew our attention to the additional ground; “Final assessment order dated 29.07.2024 is time barred as no valid reference appears to have been made to the Ld. Transfer Pricing Officer (‘TPO’), as prescribed under section 92CA of the Act.” He submitted that this additional Ground of Appeal No. 1A was based on apprehension, guess work and not definitive as evident from words used therein “appears to have been made”. Therefore, such ground of appeal deserved rejection out rightly. It was further submitted that the TP reference was made under section 92CA of the Act by the AO after due approval from the prescribed authority; i.e. Principal Commissioner of Income Tax/Commissioner of Income Tax. Drawing our attention to the ITBA case history noting of this case, the Ld. CIT-DR submitted that the proposal for TP reference was sent by the AO-Assessment Unit on 28.10.2021 and the same was approved by the PCIT/CIT-Assessment Unit on 29.10.2021. Thus, reference for determination of ALP in relation to the Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 13 international transactions was fully in accordance with provision of the section 92CA of the Act. 11. The Ld. CIT-DR submitted that the proceedings before the TPO under Chapter X of the Act had been kept out of the ambit of Faceless assessment scheme as envisaged under section 144B of the Act. Section 144B(1) of the Act reads as under: \"Faceless Assessment 144B. (1) Notwithstanding anything to the contrary contained in any other provisions of this Act, the assessment under sub-section (3) of section 143 or under section 144, in the cases referred to in sub-section (2), shall be made in a faceless manner as per the following procedure, namely: ……….\" 12. It was further contended by the Ld. CIT-DR that the faceless assessment under section 144B of the Act applied only to the assessment under section 143(3) or section 144 of the Act. Chapter X of the Act is self- contained code in itself. Reliance was placed on the decision of the Hon’ble Supreme Court in the cases of PR Metrani vs CIT [2006] 157 Taxman 325, Inamati Mallappa Basappa vs Desal Basavaraj Ayyappa AIR 1958 SC 698, Upadhyaya Hargovind Devshanker vs Dhirendrasinh Virbhadrasinhji Solanki (1988) 2 SCC 1 SC and Fuerst Day Lawson Ltd v Jindal Exports Ltd (2011) 8 SCC 333. Further reliance was placed on decisions in the cases of Hyundai Heavy Industries Co Ltd, [2017) 88 taxmann.com 537 Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 14 (AAR-New Delhi), CIT v Adyar Gate Hotel Ltd [2017] 81 taxmann.com 397 (Mad), DCIT v Sabarmati Paper Udyog Ltd [2017] 85 taxmann.com 356 (Guj), B & B Infratech Ltd v ITO [2016] 76 taxmann.com 188 (Kar). Since the TPO was not required to work in faceless scheme of assessment; therefore, other provisions of the Act could not be imported in Chapter-X of the Act; therefore, the proceedings before the TPO did not fall in ambit of faceless assessment scheme under section 144B of the Act. Reliance was placed on decisions in the cases of Visuel Graphics Computing Services (India) (P.) Ltd. [2012] 21 taxmann.com 145 (Chen.-Trib.), DMG Mori Seiki India Machines & Services Ltd. [2018] 96 taxmann.com 513 (Bang.-Trib.), Van Oord (India) (P.) Ltd. [2019] 107 taxmann.com 303 (Mumb.-Trib), Eaton Technologies Pvt. Ltd. [2020] 115 taxmann.com 341 (Pune-Trib.), 13. The Ld. CIT-DR, placing emphasis on provisions of section 144B(1)(iv) of the Act, submitted that the communications between various units of Faceless Assessment; AU, VU and TU had to be routed through the NFAC only. Further, drawing our attention to section 144B(3)(iv) of the Act, the Ld. CIT-DR submitted that the role of TU defined in this section of the Act is to facilitate the conduct of faceless assessment and to provide technical assistance to AU on various matters. 14. The Ld. CIT-DR drew our attention to the Standard Operating Procedure (SOP) for Assessment Unit (AU), Verification Unit (VU), Technical Unit (TU) and Review Unit (RU) under the Faceless Assessment Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 15 provisions of Section 144B of the Income-tax Act issued by the National Faceless Assessment Centre (‘NaFAC’) vide its letter F. No. Pr.CCIT/ NaFAC/Delhi/CIT-1/2022-23/112/92 dated 03.08.2022 to submit that this SOP for Technical Unit (TU) under the Faceless Assessment provisions of Section 144B of the Act was issued under Section 144B(6)(xi) of the Act. The relevant part of the SOP provides/reads as under: “Subject: Standard Operating Procedure (SOP) for Technical Unit (TU) Under the Faceless Assessment provisions of Section 1448 of the Income-tax Act The Principal Chief Commissioner of Income Tax, National Faceless Assessment Centre, with the prior approval of the Central Board of Direct Taxes, New Delhi, lays down the following SOP for Technical Unit (TU) under the Faceless Assessment provisions of Section 144B of the Income-tax Act. This is issued under Section 144B(6)(xi) of the Income-tax Act. A. Scope of Technical Assistance: A.1 As per Section 144B (1)(iv)(c) -technical assistance sought by AU on matters related to: A.1.1 Determination of Arm’s Length Price A.1.2 Valuation of Property A.1.3 Withdrawal of Registration, Approval, Exemption A.1.4 Any other Technical Matter A.2 As per Section 144B (3)(iv)-providing technical assistance in: A.2.1 Legal Matters A.2.2 Accounting Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 16 A.2.3 Forensic A.2.4 Information Technology A.2.5 Valuation A.2.6 Transfer Pricing A.2.7 Data Analytics A.2.8 Management A.2.9 Agreement entered into under Sec 90 or 90A A.2.10 Any other Technical Matter B. Seeking clarification from AU B.1 TU may seek clarification from AU as per prescribed format. (Annexure TU-1) B.2 Clarification if required, must be sought within 2-3 days of receipt of reference. C. Tools for facilitating Technical Assistance C.1 TU may view case records through status Monitor; C.2 TU shall take assistance of all resources available including Knowledge Management Portal, Insight, Public domain, CMIE, MCA, other databases; C.3 TU must monitor developments pertaining to Legal Issues assigned to them. D. Procedure for Handling and Forwarding References by TU D.1 References are to be forwarded to the designated authority/expert in the following matters: D.1.1 Transfer Pricing; D.1.2 Valuation of Property; Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 17 D.1.3 Withdrawal of Registration, Approval, Exemption; D.1.4 Agreement entered into under Sec 90 or 90A; D.1.5 Any other Technical Matter. D.2 Care may be taken that all references, made in the prescribed format by AU, are complete in all respects. D.3 Reference in case of Para D.1.1 (Transfer Pricing) must be forwarded, using only the ‘TP reference’ button (not through ‘Issue letter functionality’) on Technical Reference work-item on ITBA, to enable creation of work-item for the TPO. D.4 Reference in cases of paras D.1.2 to D.1.5 (Other than Transfer Pricing) must be made through ‘Issue letter functionality’ on Technical Reference work-item on ITBA. D.5 All references must be made to the designated authority in the prescribed formats on ITBA. D.6 All References must be made within 7 days of receipt of reference. D.7 References made must be followed up periodically considering the time limit available to the designated authority/ expert and the time limit for limitation. ………….” [Emphasis supplied] 15. The Ld. CIT-DR, highlighting the above-mentioned SOP, submitted that there were no illegality and irregularity in reference to the TPO by the TU as the AU and TU followed all the due process for reference to the TPO as per the SOP issued under Section 144B(6)(xi) of the Act. Further, he drew our attention to the decision of the Tribunal in the case of UCWEB Mobile Pvt. Ltd. in ITA No. 3945/Del/2024 wherein similar issue had been Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 18 decided in favour of the Revenue. He, therefore, prayed for dismissal of the additional ground no. 1A accordingly. 16. With respect to second limb of jurisdictional/technical issue, the Ld. CIT-DR, drawing our attention to the provisions of section 144C(5) of the Act, submitted that the Ld. DRP can issue any direction as it thinks fit including any guidance to the Ld. TPO/AO to enable him to complete the assessment as envisaged in this section. Therefore, there was no irregularity and illegality in the Ld. DRP’s directions as the said directions were for enabling the Ld. AO to complete the assessment and it did not tantamount any adjudication on the matter/issue and that was why the law provides for issuance of the directions by the Ld. DRP before the finalization of assessment. 17. The Ld. CIT-DR further submitted that the word “shall” used in section 144C(5) of the Act defined the scope of power and function of the Ld. DRP. The Ld. CIT-DR further submitted that sub-sections 144C(5) and 144C(8) of the Act had to be read harmoniously and these sub-sections did not interfere with powers and functions mentioned therein as these were not overriding provisions. He argued that the Ld. DRP had not remitted any issue/matter with direction to the Ld. AO to investigate/verify by calling any information/details/documents, etc. either from the assessee or anyone else. The Ld. DRP had directed the Ld. AO to verify …x, y, z from the material available on the record. This could not be construed with the Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 19 remanded proceedings/matters. The Ld. CIT-DR, alternatively, prayed for remanding the matter, if considered necessary, to the Ld. DRP as it would not cause any prejudice to the assessee as it would get another opportunity before the Ld. DRP. It was further submitted that the remitted proceedings would not extend the time of passing the final assessment order as it had already passed and the Tribunal had powers to do so. The Ld. CIT-DR prayed for dismissal of the additional ground no. 1B accordingly. 18. We have heard both parties and have perused the material available on the record. We have perused the SOP issued by the National Faceless Assessment Centre (‘NaFAC’) vide its letter F. No. Pr.CCIT/ NaFAC/Delhi/ CIT-1/2022-23/112/92 dated 03.08.2022 issued under section 144B(6)(xi) of the Act. In view of this SOP and provisions of section 144B(3), 144B(4), 144B(5) and 144B(6)(xi) of the Act, we do find merit in the submissions/ arguments/contentions of the Ld. CIT-DR that reference to the Ld. TPO through TU is justified. Since the Ld. TPO works in non-faceless manner and reference had been made as per the above-mentioned SOP; we therefore, do not see any irregularity and illegality in the entire process of reference and determination of the ALP by the Ld. TPO in non-faceless manner. Accordingly, keeping in view the above-mentioned facts, details, discussion & NFAC-SOP issued under section 144B(6)(xi) of the Act and the decision of the coordinate bench in the case of UCWEB Mobile Pvt. Ltd. Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 20 in ITA No. 3945/Del/2024, we hold that the reference to the Ld. TPO for determination of ALP of international transactions is valid in the eyes of law and in accordance with the procedures for faceless assessment; hence, we dismiss the additional ground no. 1A raised by the appellant assessee. 19. The next jurisdictional/technical issue is in respect of the directions of the Ld. DRP. The DRP has the following powers: i. Power to issue directions: The DRP can issue directions to the AO to guide the completion of assessment after considering the draft order, objections, and evidence. ii. Power to conduct further inquiry: The DRP may conduct additional inquiries itself or cause inquiries to be made by any income tax authority and consider the report from such inquiry. iii. Power to confirm, reduce, or enhance variations: The DRP can confirm, reduce, or enhance the variations proposed by the AO in the draft assessment order. iv. Powers of a civil court: The DRP has powers similar to a civil court under the Code of Civil Procedure, 1908. 20. The DRP also has certain limitations: i. No power to remand, ii. Restricted to variations in draft order, Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 21 iii. No power to set aside variations: Section 144C(8) of the Act explicitly states that the DRP “shall not set aside any proposed variations or issue any direction under sub-section (5) for further enquiry and passing of the assessment order. 21. As per section 144C(5) of the Act, the Ld. DRP shall, in a case where any objection is received under section 144C(2), issue such directions, as it thinks fit, for the guidance of the Ld. AO to enable him to complete the assessment. The statute contemplates that the DRP should give categorical direction to the Ld. AO/TPO for passing the assessment order, but it cannot delegate its authority back to the Ld. AO/TPO. As per section 144C(5) of the Act, the Ld. DRP may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order. The word ‘shall’ and ‘may’ used above is taken from the concerned sub-section of section 144C of the Act; hence, this should be interpreted in the context they have been used in the concerned sub-sections of section 144C of the Act. 22. We have perused paras 6(i)(A) & 6(i)(B), 6(ii)(A) & 6(ii)(B), 7(i)(A) & 7(ii)(B), 7(ii)(A) & 7(ii)(B) and 7.20.1.5 of the Ld. DRP's directions. We find that the Ld. DRP has directed the Ld. TPO to verify (i) FAR profile of comparable companies, (ii) application of filters and (iii) to decide on inclusion/exclusion of comparable companies. We further note that the Ld. Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 22 DRP has not directed to investigate/enquire. It has directed to do certain verification. According to us, an inquiry is distinct from verification, which is the act of confirming that something is true or correct through checks or tests. Verification can be a step within an inquiry or investigation, but it is focused on confirming facts rather than making a formal legal determination by calling/gathering further facts/details/documents, etc. Here, we find that the Ld. DRP has neither set-aside any issue raised before it nor it has delegated its power to the Ld. AO/TPO. Further, we have also taken note of the fact that the Ld. AO has not carried out any investigation/enquiry and called any details, etc. from the assessee/third parties after receipt of the directions of the Ld. DRP. Even accepting the submission of Ld. Counsel for the sake of discussion, then according to us, at most, it can be termed as irregular but not illegal. Thus, there is no violation of provisions of section 144C(8) of the Act. Hence, we dismiss the additional ground no. 1B raised by the appellant assessee. 23. Now we will decide the appeal on the merit. Grounds 1 to 15 are on merits of TP adjustment. In the final assessment order, TP adjustment have been made towards Global Development Services ('GDC'), Software Development Services (‘SDS’), outstanding receivables and availing of Professional Services. Global Development Service (‘GDC’) segment: Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 23 24. On merit, the Ld. Counsel submitted that the adjustment of INR 3,88,62,673/- under GDC segment had been made by the Ld. TPO. The Ld. Counsel, drawing our attention to pages 357, 380, 386 and 387 of Paper Book (‘PB’) Vol.-I, wherein the nature of services and economic analysis undertaken by the appellant assessee by comparing with 19 comparables done, submitted that the international transactions in the SDC segment was at arm’s length. Whereas the Ld. TPO, vide para-3 of his order, did not agree with the categorization of services and appellant assessee’s comparables and chose 21 new comparables and worked out the adjustment of INR 3,88,62,673/- under GDC segment. 25. The Ld. Counsel was inclined to argue most of the new comparables substituted by the Ld. TPO. However; to assist the bench, he agreed to argue only two in both segments as the appellant assessee would be at home in case if succeeded. 26. It was submitted by the Ld. Counsel that the Ld. TPO rejected ISN Global Solutions Pvt. Ltd. as a comparable (page 514 of Appeal Set) citing functional dissimilarity and failure of persistent loss fitter. The Ld. Counsel drew our attention to page 273 and 277 of the Appeal set to submit that there was no change in the nature of services since years. Further, our attention was drawn to page 1303 to 1316 of Paper Book Vol.-II to show the observations of Tribunal/Ld. DRP in this regard with reference to the earlier years. He, emphasizing on page 300 of the Appeal Set, submitted Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 24 that ISN Global Solutions Pvt. Ltd. was engaged in BPO services and had derived profits in 2 out of 3 years and it was not a case of consistent loss over the years. Our attention was also drawn to the Ld. DRP’s noting in its direction that nature of services of ISN Global Solutions Pvt. Ltd. could not be differently classified from the one adopted in MAP. However, the Ld. ТРО (page 55 and 56 of appeal set) disagreed to the same and proceeded with 16 comparables (page 60 and 61 of appeal set). The Ld. Counsel, emphasizing on pages 1317, 1318 and 1048 to 1052, 5082 to 5166 of the of Paper Book Vol.-II, justified the inclusion of this comparable; ISN Global Solutions Pvt. Ltd. 27. The second comparable is R Systems International Ltd. The Ld. Counsel submitted that R Systems International Ltd. was rejected by the Ld. TPO on the reasoning that data of this comparable was not available as it followed a different financial year (page 514 of appeal set); however, the assessee demonstrated before the Ld. DRP that all data were available (pages 5167 to 5904 of Annual Report Compilation Vol. 2 of the PB) and it passed all filters applied by the Ld. TPO. Our attention was drawn to all material filed before the Authorities below to demonstrate that the relevant financial data of R Systems International Ltd. were available before the Authorities below. Hence, its rejection was not justified. Further, it was submitted that R Systems was accepted by the Ld. DRP in AY 2013-14 and 2018-19. The Ld. Counsel submitted that the Hon'ble Delhi High Court in Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 25 the case of Mckinsey Knowledge Centre India Limited in ITA No. 217/2014 did not approve rejection of this comparable citing differential financial year as the reason (refer to para 14). He prayed inclusion of this company in final set of comparables. 28. On the other hand, the Ld. CIT-DR, emphasizing on the finding of the Ld. AO/TPO on these two comparables, defended the final assessment order. He submitted that the Ld. AO/TPO was justified in excluding these two companies from final set of comparables. 29. We have heard both parties and have perused the material available on the record. After careful consideration of material on the record and facts in entirety, we find force in the arguments/submissions/contentions of the Ld. Counsel that ISN Global Solutions Pvt. Ltd. and R Systems International Ltd. are suitable comparables. We do not find that ISN Global Solutions Pvt. Ltd. is functionally dissimilar and it has persistent loss. We have taken note of the Ld. DRP’s observation in its direction that nature of services of ISN Global Solutions Pvt. Ltd. could not be differently classified from the one adopted in MAP. Thus, prima-facie, ISN Global Solutions Pvt. Ltd. is found a suitable comparable. Further, we find that R Systems International Ltd. has been taken as a suitable comparable in the case of the assessee in AY 2013-14 and 2018-19 and there is no substantial difference in facts of AY 2013-14 and 2018-19 with the relevant year. We therefore, following the reasoning given by this Ld. DRP in the assessee’s Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 26 own case of AY 2013-14 and 2018-19, hold that R Systems International Ltd. is a suitable comparable. We therefore, direct the Ld. AO/TPO to include Global Solutions Pvt. Ltd. and R Systems International Ltd. in final set of comparables. The appellant assessee thus gets consequential relief accordingly. Software Development Services (‘SDS’) Segment: 30. At the outset, the Ld. Counsel submitted that the adjustment of INR 7,08,65,496 was now surviving under this segment after the Ld. AO’s order under section 154 of the Act. The Ld. Counsel further submitted that the nature of services and FAR were discussed in the TP study which was available at page 352 of Paper Book Vol 1. Economic analysis undertaken by Appellant was at page 372 of Paper Book Vol. I. The Ld. TPO discussed comparables (pages 520 to 523 and 542 to 551 of the PB Vol.I) and selected 19 comparables instead of the appellant assessee’s 15 comparables and made the above-mentioned adjustment to ALP (INR 7,08,65,496 after order u/s 154 of the Act). 31. The Ld. Counsel submitted that the Ld. TPO rejected Harbinger Systems Pvt. Ltd. on the reasoning that it failed RPT filter. However, the Ld. DRP found it otherwise. In order giving effect to the Ld. DRP’s directions, the Ld. AO/TPO held that it did not fail RPT filter but excluded this comparable noting that Harbinger Systems Pvt. Ltd. was operating in some sectors which could not be seen from audited financials. the Ld. Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 27 Counsel submitted that the financials of Harbinger Systems Pvt. Ltd. did not divulge that it was engaged in some other sector though it was a company engaged in SDS. The Ld. Counsel prayed for inclusion of this company in SDS segment. 32. The Ld. Counsel further submitted that the Ld. TPO included Tata Elxsi Ltd. claiming that TNMM allowed some degree of flexibility integration. Further, the Ld. TPO also held that product design and engineering services and system services done by Tata Elxsi Ltd. were comparable to those of the appellant's SDS. The Ld. Counsel further submitted that the nature of diversified activities and absence of segmental information itself would make this company unsuitable comparable (pages 6345 to 6706 of Annual Report Vol. 4.) The SDS segment of Tata Elxsi Ltd. consisted of multiple segments involving design and technology (page 6457 of Annual Report Compilation Vol. 4). The design and technology could not be compared segmentation, argued the Ld. Counsel. The FAR of Tata Elxsi Ltd. was quite different than that of the appellant assessee (page 352-353 of documentation Vol. I). It was submitted that business activities of Tata Elxsi Ltd. were not similar to those carried out by the appellant assessee (page 6420-6424 of Annual Report Compilation Vol. 4). Thus, Tata Elxsi Ltd. was not a suitable comparable. The Ld. Counsel prayed for exclusion of this company in SDS segment. Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 28 33. On the other hand, the Ld. CIT-DR, emphasizing on the finding of the Ld. AO/TPO on these two comparables, defended the final assessment order. He submitted that the Ld. AO/TPO was justified in excluding Harbinger Systems Pvt. Ltd. from final set of comparables as it was functionally dissimilar and including Tata Elxsi Ltd. in the final set of comparables. 34. We have heard both parties and have perused the material available on the record. After careful consideration of material on the record and facts in entirety, we find force in the arguments/submissions/contentions of the Ld. Counsel that Tata Elxsi Ltd. has carried out multiple activities including design and technology in SDS segment and FAR of Tata Elxsi Ltd. was quite different than that of the appellant assessee. Hence, we hold that Tata Elxsi Ltd. is not a suitable comparable. 35. As per Rule 10TA(m) in Income Tax Rules, 1962, software development services means: (i) business application software and information system development using known methods and existing software tools; (ii) support for existing systems; (iii) converting or translating computer languages; (iv) adding user functionality to application programmes; (v) debugging of systems; (vi) adaptation of existing software; or Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 29 (vii) preparation of user documentation, but does not include any research and development services whether or not in the nature of contract research and development services. 36. From the above Rule, the SDS encompass a range of activities. These include the development of business application software and information systems, support for existing systems, converting or translating computer languages, adding user functionality to application programs, debugging, adaptation of existing software, and preparing user documentation. The definition also covers the study, analysis, design, programming, enhancement, and implementation of information technology software, as well as providing related advice, consultancy, and assistance. After thoughtful consideration, we are of the view that the design and technology is a different segmentation; hence, Tata Elxsi Ltd. is not a suitable comparable. We therefore, direct the Ld. AO/TPO to exclude it from final set of comparables in SDS segment. The appellant assessee thus gets consequential relief accordingly. 37. As far as inclusion of Harbinger Systems Pvt. Ltd. in SDS segment is concerned. The dispute is on functional similarity. There is no dispute on RPT filter as evident from the details mentioned on page 11 of the final assessment order. The dispute is that whether the service under the sub- heads Human resources, e-learning, digital publishing, education and high-tech sector falling in SDS segment is comparable with that of the Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 30 appellant’s services in SDS segment. Details furnished before us need afresh analysis. We therefore, remit this comparable to the file of the Ld. AO/TPO to re-examine it decide that whether Harbinger Systems Pvt. Ltd. is functionally comparable to the assessee in SDS segment. Ordered accordingly. Working Capital Adjustment: 38. The next issue is in respect of working capital adjustment. On the issue of working Capital adjustment and interest on receivables, the Ld. Counsel drew our attention to para 4 of the Tribunal's Order dated 06.05.2022 in ITA No. 772/Del/2021 relating to AY 2016-17 in assessee’s own case, wherein the issue of working Capital adjustment and interest on receivables was decided in favour of the appellant assessee. He further submitted that the Hon'ble Delhi High Court has held that once working capital adjustment had been made, interest on overdue receivables got subsumed in the same. It was further submitted that the Ld. TPO himself granted working capital adjustment in AY 2017-18. He prayed for similar relief for grant of working capital adjustment and deletion of adjustment made towards interest on outstanding receivables. 39. On the other hand, the Ld. TPO observing that the assessee was not able to explain satisfactorily the need for working capital adjustment rejected the said claim. Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 31 40. The Ld. CIT-DR defended the final assessment order. 41. We have heard both parties and have perused material on the record. We have perused the Tribunal order in the assessee’s case in ITA No. 772/Del/2021 relating to AY 2016-17. Further, we also perused following decisions:  Sartorius Stedim India (P.) Ltd. [2023] 146 taxmann.com 343 (Bang. Trib.)  Mentor Graphics (Noida) P Ltd. (2007) 109 ITD 101 (Delhi)  Capgemini India Private Limited (ITA No.7861Mum/2011)  Marubeni-Itochu Steel India (P.) Ltd. ITA No. 1716/Del/2014. After, thoughtful consideration, we are of the considered view that the working capital adjustment is mandated and is a prerequisite for determination of arm's length price in terms of Rule 10B(1)(e) and 10B(3) of the Income Tax Rules, 1962. We therefore, direct the AO to allow the working capital adjustment as done in the assessee’s own case of AY 2016- 17 (by the ITAT) and 2017-18 (by the Ld. TPO) in accordance with the Income Tax Rules and the Act. 42. The next issue is in respect of interest on overdue receivables. The Ld. TPO allowed credit period of 60 days and worked out interest on overdue receivables from AEs @ LIBOR + 550 bps. The Ld. Counsel contended that after the working capital adjustment which subsumed the Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 32 impact of interest cost, adjustment on account of interest on overdue receivables was not called for. Reliance was placed on the decision of the Hon’ble Delhi High Court in the case of Kusum Healthcare Pvt. Ltd. 398 ITR 66. Further, the Ld. Counsel contended that the appellant assessee had a policy of non-charging of interest from its customers; AE and Third Parties. Hence, he contended that no adjustment on account of overdue receivables was called for. Further, he challenged not only the applicability of 60 days of threshold time period for working out the interest on overdue receivables but also the mark-up of 550 bps on LIBOR. Reliance was placed on the decision of the Hon’ble Delhi High Court in the case of Cotton Naturals [2015] 55 taxmann.com 523 and the Tribunal decision in the case of Concur Technologies (I) Pvt. Ltd. 170 taxmann.com 299 (Bang.). The Ld. Counsel also argued that the interest on overdue receivables was not an international transaction. 43. On the other hand, the Ld. CIT-DR argued this issue vehemently and supported orders/directions of Authorities below. 44. We have heard both parties and have perused material on the record. The Hon'ble Delhi High Court, in the case of Kusum Health Care Pvt. Ltd. (supra), has held that the delay in collection of money may be due to different reasons require investigation on a case-to-case basis. What needs to be analysed is the pattern that may emerge from the receivables over a period of time which indicate that the arrangement of parking huge Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 33 receivables with the related parties reflects an international transaction with underlying intent to benefit the AE. Here, in the present case, facts highlighted by the Ld. TPO clearly show that the appellant assessee has benefitted its AE by not recovering its trade receivables in stipulated time. In the present case, since the assessee had not factored the impact of receivables on its profitability; therefore, further adjustment for outstanding receivables is held warranted. Thus, the reliance placed by the Ld. Counsel on the decision of the Hon'ble Delhi High Court in the case of Kusum Health Care Pvt. Ltd. (supra) is of no relevance in view of the facts and findings considered in totality. We do not find any merit in the argument of the Ld. Counsel that the interest should not be worked out on overdue receivables from AEs as it has not charged any interest on overdue receivables from third parties. 45. The Hyderabad ITAT, in the case of Corteva Agriscience Services India Pvt. Ltd. [ITA-TP No 78/Hyd./2022], accepted the stand of the Revenue in holding overdue receivables from associated enterprises ('AEs') as an international transaction and computed notional interest at the rate of 6 percent on the amount of such outstanding receivable invoices. In general, the ruling has relied upon the decision of Higher Courts, wherein it has been held that the delay in receipt of receivables beyond a reasonable credit period partakes the character of an advance and therefore results in an international transaction in view of explanation Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 34 to section 92B(2) of the Act, which can be then subjected to computing notional interest. 46. In view of the above and following the reasonings of decisions of the Hon'ble High Court of Bombay in the case of Patni Computer Systems Ltd. 33 Taxmann.com 3 , the Hon'ble Delhi High Court in the case of Bechtel India Pvt. Ltd. for AY 2010-11 (ITA 379/2016) (P.) and the Hyderabad ITAT in the case of Corteva Agriscience Services India Pvt. Ltd. (supra), we are of the considered view that the Ld. TPO is justified in holding overdue receivables from AE as international transactions and it has to be benchmarked separately for computing notional interest thereon. Accordingly, we order so. 47. The Chenai ITAT, in the case of Plintron Global Technology Solutions Pvt. Ltd. TS-238-ITAT-2018(CHNY)-TP, has held that the LIBOR is more appropriate for computing interest on outstanding receivables from AEs. In arriving at its decision, the ITAT relied on the ruling of the Mumbai Bench of the ITAT in the case of Tecnimont ICB House ITA No.487/Mum/2014. We have considered the facts and submission of both parties. The Ld. TPO; therefore, is directed to compute interest on outstanding receivable balances from the AE @ LIBOR + markup in accordance with the Rule 10CB of the Income Tax Rules. Accordingly, this issue is disposed of. The assessee gats consequential relief accordingly. Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 35 48. The next issue is in respect of foreign exchange fluctuation impact. The Ld. Counsel drew our attention to pages 365 to 375 of Appeal Set wherein the appellant assessee had justified that the foreign exchange loss/gain was operating in nature; hence, the effect of the same should be given while analyzing the financials of both the appellant assessee and comparables. It was submitted that the Ld. DRP’s direction (page 173 of the appeal set) to apply the Rule 10TA(J) of the Income Tax Rules was contrary to the law and precedent in this regard. It was argued that the Ld. DRP's reasoning was nothing but rewriting the law as it made definition of safe harbour rules notified compulsorily applicable contrary to choice/option available under the law. Further, the Ld. DRP did not assign any reason whatsoever for the applicability of Rule 10TA(J) of the Income Tax Rules. The Ld. Counsel prayed to consider foreign exchange loss/gain an as operating in nature. 49. On the other hand, the Ld. CIT-DR submitted that foreign exchange fluctuation loss had been taken as non-operating items in Rule 10TA(j) of the Income Tax Rules. No option to the assessee had been provided in the said Rule as contended by the Ld. Counsel. 50. We have heard both parties and have perused the material on record. The Rule 10TA(J) of the Income Tax Rules reads as under: \"operating expense\" means the costs incurred in the previous year by the assessee in relation to the international transaction during the Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 36 course of its normal operations including costs relating to Employee Stock Option Plan or similar stock-based compensation provided for by the associated enterprises of the assessee to the employees of the assessee, reimbursement to associated enterprises of expenses incurred by the associated enterprises on behalf of the assessee, amounts recovered from associated enterprises on account of expenses incurred by the assessee on behalf of those associated enterprises and which relate to normal operations of the assessee and] depreciation and amortisation expenses relating to the assets used by the assessee, but not including the following, namely:— (i) interest expense; (ii) provision for unascertained liabilities; (iii) pre-operating expenses; (iv) loss arising on account of foreign currency fluctuations; (v) extraordinary expenses; (vi) loss on transfer of assets or investments other than assets, on which depreciation is included in the operating expense; (vii) expense on account of income-tax; and (viii) other expenses not relating to normal operations of the assessee: [Provided that reimbursement to associated enterprises of expenses incurred by the associated enterprises on behalf of the assessee shall be at cost: Provided further that amounts recovered from associated enterprises on account of expenses incurred by the assessee on behalf of the associated enterprises and which relate to normal operations of the assessee shall be at cost;] 51. We find merit in the submission/contention of the Ld. CIT-DR that Rule 10TA(j) of the Income Tax Rules does not provide any option to the Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 37 assessee for not following the said Rule. Thus, in view of the Rule 10TA(j) of the Income Tax Rules, which is applicable in the relevant year, we do not find any infirmity in the final assessment order on this issue. This issue therefore, raised by the appellant assessee stands dismissed accordingly. 52. The next issue is in respect of the ALP of intra-group services. The Ld. Counsel submitted that the ALP of intra-group services could not be NIL. The Ld. Counsel, drawing our attention to para 6.7 of the Ld. TPO’s order (pages 558 to 566 of the Appeal Set), submitted that the Ld. TPO had summarily held the CUP as the Most Appropriate Method (MAP) and ALP at NIL. Further, it was submitted that the Ld. DRP, on detailed written objections of the appellant assessee (page 405 to 426 of the Appeal set), vide its directions in рaгa 7.19.1.3 (page 179 of Appeal Set) noted that the Ld. TPO did not consider all the aspects of the matter and had not passed a speaking order. Further, the Ld. DRP, under the heading summary and directions, observed that the Ld. TPO had not clearly brought out, which services fell in ambit of duplicative. The Ld. TPO was required to follow these guidelines while taking a final view on IGS services and pass speaking order, remarked the Ld. DRP. The Ld. Counsel argued that the Ld. AO/TPO did not follow such vague and perfunctory observations without any specific direction from the Ld. DRP. The Ld. Counsel vehemently opposed remitting of this matter to Authorities below for Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 38 deciding this issue afresh on the reasoning that the Authorities below would get additional time beyond the specified time provided statutorily. 53. We have heard both parties and have perused the material on record. The perusal of para 6.7.2 of the Ld. TPO’s order clearly reveals that there was no requisite compliance on the part of the appellant assessee. Further, no material has been brought on the record to contradict the findings of the Ld. TPO and to overcome short comings of the assessee. The Hon’ble Delhi High Court in the case of A.T. Kearney Limited [2024] 161 taxmann.com 310 (Delhi), has held that transfer pricing adjustments cannot be made for intra-group services (‘IGS’) related to legitimate business expenses, especially when a detailed break-up of costs is provided. Here, in this case, the legitimacy of the said expenses has not been demonstrated beyond doubt by the assessee before the Authorities below. We are refraining from commenting on merit of this issue. We have gone through para 6.7.1 to 6.7.8 of the Ld. TPO’s order. There are noticeable shortcomings on the part of appellant to make available requisite details, evidence/documents before the Ld. TPO. We are therefore, inclined to remit this matter/issue to the Ld. AO/TPO for deciding a fresh. We therefore, ordered so. 54. The last issue is in respect of deduction under section 80G of the Act on contribution made out of CSR fund. The Ld. AO has disallowed the claim of deduction under section 80G of the Act on the reasoning that the Printed from counselvise.com IT(TP)A No. 2/Del/2024 Teradata India Pvt. Ltd. 39 same is not voluntary and out of gross income. At outset, the Ld. Counsel, relying on the decision of Tribunal in the case of assessee in ITA 1248/DeL/2022 for AY 2018-19, submitted that it was covered issue. He prayed for relief. Respectfully, following the Tribunal order in the case of assessee in ITA 1248/DeL/2022, the Ld. AO is directed to allow the claim of deduction under section 80G of the Act. The assessee gats consequential relief accordingly. 55. In the result, the appeal of the assessee is partly allowed as above. Order pronounced in open Court on 3rd November, 2025 Sd/- Sd/- (SUDHIR PAREEK) (AVDHESH KUMAR MISHRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated:03/11/2025 Binita, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. PCIT/CIT 4. CIT(Appeals) 5. CIT (DR): ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "