ZF COMMERCIAL VEHICLE CONTROL SYSTEMS INDIA LTD.,CHENNAI V. DCIT, CORPORATE CIRCLE-3(1), CHENNAI

ITTPA 50/CHNY/2024

AI Insights

The case involves ZF Commercial Vehicle Control Systems India Ltd., which appealed against the final assessment orders for the assessment years 2020-21 and 2021-22 passed by the Deputy Commissioner of Income Tax, Chennai. The appeals primarily contested the transfer pricing adjustments and various disallowances made by the TPO and upheld by the DRP. Key issues included the validity of the assessment proceedings, transfer pricing adjustments related to manufacturing and service segments, and disallowances under various sections of the Income Tax Act. The Tribunal's decision addressed these issues by adjusting the comparables used for TP margin calculations, recognizing certain incomes as operating, and allowing deductions for scientific research expenditures.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 397884 (ITAT-CHENNAI)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 06-06-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2020-2021
• Other Referred Cases: Hwashin Automotive India Private Limited vs. IT(TP)A 3/CHNY/2024, Genesys Telecom Labs India Pvt. Ltd. vs. IT(TP)A 38/CHNY/2024, Inteva Products India Automotive Pvt. Ltd. vs. IT(TP)A No.2843/Bang/2017, KBACE Technologies Pvt. Ltd. vs. ITA No.3189/Bang/2018, E Value Serve.Com vs. 75 taxmann.com 195, First Rain Software Centre (P.) Ltd. vs. ITA 4006/Del/2010, Hyundai Motor India Limited vs. ITA 3192/Chny/2017, Trimble Information Technologies India Pvt Ltd vs. ITTPA 28/CHNY/2024, Temenos India Private Limited vs. ITTPA 32/CHNY/2024, Ashok Leyland Ltd vs. ITA 554/CHNY/2023, Tube Investments of India Ltd vs. 125 taxmann.com 421, Apex Laboratories (P.) Ltd vs. 80 taxmann.com 236, MAHLE Behr India (P.) Ltd vs. 130 taxmann.com 7, United Glass Mfg. Co. Ltd vs. 28 taxmann.com 429, Kedarnath Jute Mfg. Co. Ltd vs. 82 ITR 363, Shoorji Vallabhdas & Co. vs. 46 ITR 144
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A. SASIKUMAR; C.I.T
• Assessee Lawyers: ASHIK SHAH
• Keywords: Additional evidence; Revenue expenditure; Transfer pricing; International transaction; Business expenditure; Depreciation; Commercial expediency; Capital expenditure; Rectification of order; Notional interest; Validity of assessment; FORM 26AS
• Section: 143(3); 32; 133(6); 234B; 10AA

Judgement Text

"आयकर अपीलीय अिधकरण, ‘डी’ Ɋायपीठ, चेɄई IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH, CHENNAI ŵी मनु क ुमार िगįर, Ɋाियक सद˟ एवं ŵी एस. आर. रघुनाथा, लेखा सद˟ क े समƗ BEFORE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRI S. R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./IT(TP)A Nos.: 50 & 132/Chny/2024 िनधाŊरण वषŊ / Assessment Years: 2020-21 & 2021-22 ZF Commercial Vehicle Control Systems India Ltd., Plot No.3 (SP), III Main Road, Ambattur Industrial Estate, Chennai – 600 058. vs. Deputy Commissioner of Income Tax, Corporate Circle – 3(1), Chennai – 600 034. [PAN:AAFCA-6421-P] (अपीलाथŎ/Appellant) (ŮȑथŎ/Respondent) अपीलाथŎ की ओर से/Appellant by : Shri. Ashik Shah, C.A. ŮȑथŎ की ओर से/Respondent by : Shri. A.Sasikumar, C.I.T. सुनवाई की तारीख/Date of Hearing : 13.03.2025 घोषणा की तारीख/Date of Pronouncement : 06.06.2025 आदेश /O R D E R PER S. R. RAGHUNATHA, ACCOUNTANT MEMBER: These appeals filed by the assessee are directed against the final assessment orders dated 23.07.2024 and dated 18.10.2024 passed by the DCIT, Corporate Circle 3(1), Chennai, u/s. 143(3) r.w.s. 144C (13) r.w.s. 144B of the Income Tax Act, 1961 (hereinafter the ‘Act’) for the assessment years 2020-21 & 2021-22 respectively in pursuant to the directions of the Dispute Resolution Panel-2, Bengaluru vide orders dated 21.06.2024 & 13.09.2024. :-2-: IT(TP)A. Nos.50 & 132/Chny/2024 2. The brief facts of the case are that the assessee M/s.ZF Commercial Vehicle Control Systems India Limited (“the assessee”) was incorporated on November 18, 2004, as a Public Limited Company which is listed and domiciled in India. The assessee is primarily engaged in manufacture and selling of automotive components being braking products, advanced braking products and other related air assisted products and systems for commercial vehicles. The Company also provides software development and other services to its group companies. The assessee filed its return of income (‘ROI’) for Assessment Years (‘AY’) 2020-21 and 2021-22, which was processed under Section 143(1) of the Income Tax Act, 1961 (‘the Act’) and was picked up for scrutiny assessment. 3. During the scrutiny assessment proceedings, the Transfer Pricing Officer (‘TPO’) and the Assessing Officer (‘AO’) made certain adjustments / disallowances to the assessee’s income. Against the draft assessment order of the AO, the assessee filed its objections before the Dispute Resolution Panel (‘DRP’) for AYs 2020-21 and 2021-22. The DRP provided certain directions in connection with the transfer pricing adjustments, providing partial relief and upheld the other adjustments and disallowances proposed by the AO. 4. Below is the summary of the adjustments made during the AYs 2020-21 and 2021-22: (Amount in Rs. crores) Nature of Adjustment AY 2020-21 AY 2021-22 Upward adjustment towards margin earned from manufacturing segment - 6.66 Upward adjustment towards margin earned from service segment - 9.56 Upward adjustment towards interest on overdue receivables 0.53 0.47 :-3-: IT(TP)A. Nos.50 & 132/Chny/2024 Nature of Adjustment AY 2020-21 AY 2021-22 Addition of unwinding of discount on financial assets carried at amortized cost 0.04 0.04 Disallowance under Section 35(1)(iv) of the Act 2.49 3.59 Disallowance of subscription charges paid to clubs and associations 0.13 -  The issues in the appeals are covered individually in the ensuing sections. 1. Validity of assessment proceedings barred by limitation AY 2020-21 - IT(TP)A 50/CHNY/2024: Ground 2.1 AY 2021-22 - IT(TP)A 132/CHNY/2024: Ground 3 4.1 The ld.AR submitted that said legal ground raised challenging the validity of the impugned final assessment orders passed beyond the statutory limitation prescribed under Section 153(1) read with Section 153(4) of the Act is not pressed. 4.2 Since the above grounds are not pressed by the assessee and hence the same are dismissed. 2. Transfer Pricing (‘TP’) margin adjustment in relation to manufacturing segment AY 2021-22 – IT(TP)A 132/CHNY/2024: Grounds 4 to 9 4.3 For the impugned AY, the assessee had undertaken manufacturing activities, in relation to which the assessee had entered into certain international transactions with its Associated Enterprises (‘AEs’), which were benchmarked under the Transactional Net Margin method (‘TNMM’) and by adopting Operating Margin on Cost (OP/TC) as the Profit Level indicator (‘PLI’). 5. The assessee had chosen 7 comparable companies for benchmarking the margin earned from the manufacturing segment and arrived at an arm’s length range :-4-: IT(TP)A. Nos.50 & 132/Chny/2024 of 4.47% to 6.05% (Page 144 of the paperbook). Since the assessee earned a margin of 6.54%, it was held to be at arm’s length. 6. The TPO, rejected one of the comparable companies selected by the assessee, i.e, Foundation Brakes Manufacturing Pvt. Ltd on the basis that the said comparable is making losses in continuous two FYs. 7. Further, the TPO also re-computed the margin earned by the assessee by treating the income from government grants, test track usage income and other income as non-operating in nature. The TPO adopted a fresh benchmarking study and arrived at a set of 6 comparable companies, which comprised of the existing comparable companies selected by the assessee. 8. Further, the TPO re-computed the margins of the comparable companies also by treating the miscellaneous expenses as ‘non-operating’ in nature. 9. Based on the above, the TPO arrived at an arm’s length range of 8.3% to 9.57%, thereby proposing an adjustment of Rs.13.49 crores. Against the said adjustment proposed by the TPO, the assessee had filed various objections before the DRP. The DRP directed the TPO to include ‘Admach Auto Industries India Private Limited’ in the final set of comparable companies and also directed to provide the detailed margin computation of the comparable companies to the assessee, while upholding the other contentions of the TPO. 10. Accordingly, an order giving effect was issued by the TPO dated 01.10.2024 (Refer Page 29 of Memorandum of Appeal) wherein the arm’s length range was re- computed by the TPO as 6.37% to 9.57% thereby, recomputing the TP adjustment as Rs.6.66 crores. :-5-: IT(TP)A. Nos.50 & 132/Chny/2024 A. Inclusion of Foundation Brake Manufacturing Pvt. Ltd. as a comparable company 11. The ld.AR submitted that the TPO had rejected the inclusion of Foundation Brake Manufacturing Pvt. Ltd. as a comparable company on the basis that the said company is making losses in 2 continuous financial years. 12. In this regard, the assessee prima facie submits that Foundation Brake Manufacturing Pvt. Ltd. is engaged in manufacturing of brakes and servo brakes and is functionally comparable to the business of the assessee and incurring of losses in 2 financial years cannot be the basis for rejection of a comparable company, which is otherwise functionally comparable to the assessee. 13. In this regard, the assessee relies upon the decision of this Tribunal in the case of Hwashin Automotive India Private Limited (IT(TP)A 3/CHNY/2024), wherein this Bench has held that an otherwise functionally comparable company cannot be rejected merely on the basis that the said company has incurred losses. (Page 19 and 20 of case law compilation) 14. The assessee further submits that Foundation Brakes Manufacturing Pvt. Ltd is not a persistent loss-making company as the said company had earned profits in 2 out of the 3 financial years selected for computing the weighted average operating margins, as may be evident from the updated margins submitted before the TPO vide Annexure III to Submissions dated 09.08.2023 (Page 244 and 249 of paperbook). In this regard, the assessee also encloses the statement of profit and loss of the FY 2018-19 of Foundation Brakes Manufacturing India Limited as Annexure 1, which evidences that the company had earned profits for the FY 2019- 20. :-6-: IT(TP)A. Nos.50 & 132/Chny/2024 15. The assessee further submits that it has been held by this Tribunal that only persistent loss-making companies, i.e., companies making losses for 3 continuous years only can be rejected and companies making losses in 2 out of 3 years cannot be excluded on the basis of persistent loss-making company filter. The relevant extracts of the decision of this Bench in the case of Genesys Telecom Labs India Pvt. Ltd. (IT(TP)A 38/CHNY/2024) is reproduced below: “Moreover the Bangalore Bench of ITAT in the case of Inteva Products India Automotive Pvt. Ltd., in IT(TP)A No.2843/Bang/2017 (order dated 23.12.2020) and KBACE Technologies Pvt. Ltd., in ITA No.3189/Bang/2018 (order dated 29.01.2020) had held that persistent loss filter can be applied only if there is successive losses in three years and if there is a profit in any one financial year out of three successive financial years, then that company cannot be excluded from the list of comparable on the basis of persistent loss making filter.” (Emphasis Supplied) 16. In view of the above, the ld.AR submitted that the Foundation Brake Manufacturing Pvt. Ltd. must be included as a comparable company for the manufacturing segment. 17. Per contra the ld.DR supported the orders of the AO and DRP and prayed for confirming the same. 18. We have heard the rival contentions perused the material available on record and gone through the orders of the authorities along with the paper books filed and the case laws relied on by both the parties. The TPO in his order has excluded the comparable company Foundation Brake Manufacturing Pvt. Ltd. for the specific reason that the company had incurred losses in 2 continuous financial years. We find that this issue is already decided by the various courts and tribunals stating that companies making losses in 2 out of 3 years cannot be excluded on the basis of :-7-: IT(TP)A. Nos.50 & 132/Chny/2024 persistent loss-making company filter. Further, we concur with the reliance placed by the ld.AR in the case of Genesys Telecom Labs India Pvt. Ltd.(supra), wherein the Tribunal has held that companies making losses for 3 continuous years only can be rejected and companies making losses in 2 out of 3 years cannot be excluded on the basis of persistent loss-making company filter. 19. In the facts and circumstances of the case and following the judicial decisions supra, we are directing the TPO to include the Foundation Brake Manufacturing Pvt. Ltd. as a comparable company to determine the ALP of the assessee and ordered accordingly. Thus, the related grounds raised by the assessee are allowed. B. Miscellaneous expenses must be treated as an operating expenditure while computing the operating margins earned by the comparable companies: 20. For benchmarking the margins earned from the manufacturing segment, the assessee had arrived at an arm’s length margin range computed based on the margins earned by the comparable companies. While computing the margins of the comparable companies, the assessee had treated the miscellaneous expenses as per the financial statements as operating expenditure. It may be noted that the assessee while computing their own margin earned from the manufacturing segment has also treated the miscellaneous expenses as operating expenditure. 20.1 The ld.AR submitted that the TPO while computing the margins earned by the comparable companies had treated the miscellaneous expenses as appearing in the XBRL financial statements of the comparable companies as ‘non-operating’ in nature. 21. In this connection, the ld.AR made detailed submissions stating that the comparable companies have reported a high portion of its expenses as :-8-: IT(TP)A. Nos.50 & 132/Chny/2024 miscellaneous expenses in the XBRL financial statements by grouping various expenses, which do not fall under the available categories under the head ‘Miscellaneous expenses’ (Page 328 of the paperbook). 22. The ld.AR also submitted a copy of the audited financial statements for ABI Showatech India Pvt. Ltd. and highlighted that the miscellaneous expenditure reported in the XBRL financial statements do not match with the audited financial statements. Further, it was submitted that the audited financial statements of the other comparable companies were not available and hence, the assessee could not obtain the breakup of the miscellaneous expenses reported by the comparable companies. In this connection, the assessee also requested the TPO to obtain the same using the powers under Section 133(6) of the Act. 23. However, the TPO without considering that the miscellaneous expenses are incurred as an integral part of the business and without calling for the breakup of miscellaneous expenses reported in the XBRL financials concluded that the miscellaneous expenses are non-operating in nature and re-computed the PLI of certain comparable companies. 24. The ld.AR stated that the TPO had considered miscellaneous expenditure as operating expenditure while computing the operating margin of the assessee and that of the comparable companies for the service segment and has arbitrarily treated the same as non-operating for computing margins of the comparable companies of manufacturing segment alone. 25. Before the DRP, the assessee highlighted the above discrepancy by submitting the audited financial statements for the comparable company ‘Admach :-9-: IT(TP)A. Nos.50 & 132/Chny/2024 Auto Industries India Pvt. Ltd.’ of FY 2020-21, wherein the breakup of miscellaneous expenses for FY 2019-20 was available in the previous year column. 26. The ld.AR also highlighted that XBRL format of the statement of profit and loss has predetermined fields and the treatment of TPO in concluding that the entire miscellaneous expenditure is non-operating without appreciating the nature of expenses is erroneous. Further, it was also submitted that the detailed workings of margin of comparable companies as computed by the TPO was not provided to the assessee. 27. However, the DRP without appreciating the assessee’s contentions concluded that miscellaneous expenses are non-operating in nature. (Page 23 of DRP Directions – Page 58 of Memorandum of Appeal). Further, in connection with the margin computation of comparable companies by the TPO, the DRP directed the TPO to provide the detailed computation of the margins. Accordingly, the TPO after considering the audited financial statements of ABI Showatech India Pvt. Ltd (non- XBRL financials) recomputed the weighted average margin as 6.37% and retained the existing margins for the other comparable companies. A summary of the margins of comparable companies as per the assessee vis-à-vis as computed by the TPO is summarised below for your ready reference: Name of the Comparable company Margins as per the Assessee * Margins as per the TPO – TP Order ^ Margins as per the OGE to DRP Directions # ABI Showatech (India) Pvt. Ltd. 3.39% 8.3% 6.37% Aditya Auto Products & Engg (India ) Pvt. Ltd. 3.34% 10.19% 11.7% Brakes India Pvt. Ltd. 9.11% 11.55% 11.58% :-10-: IT(TP)A. Nos.50 & 132/Chny/2024 Admach Auto Industries Private Limited 5.11% - 7.75% * Computed by treating miscellaneous expenditure as operating expense (Page 357 to 359 and 393 of paperbook) ^ Computed as per XBRL financial statements and by treating miscellaneous expenses as reported in the financial statements as non-operating expense (Page 10 of TP Order – Page 172 of Memorandum of Appeal) # Computed as per non-XBRL financial statements for ABI Showatech India Pvt. Ltd., however, by treating miscellaneous expenses as non-operating expense (Page 2 of Order giving effect to DRP Directions – Page 30 of Memorandum of Appeal) 28. From the above table, the ld.AR stated that it would be evident that the margin of ABI Showatech India Pvt. Ltd. has reduced based on the non-XBRL financials available, which further evidence that there are discrepancies in the reporting made by the companies through the XBRL financial statements. 29. Since the data regarding the breakup of miscellaneous expenses of comparable companies are not available and further, considering that the miscellaneous expenses incurred by the company has been treated as operating in nature for computing the margin earned from the manufacturing segment, the ld.AR prayed that the miscellaneous expense shall be treated as operating in nature. 30. In this regard, the ld.AR relied upon the following decisions of the Coordinate Benches of this Tribunal wherein it has been categorically held that miscellaneous expenses are to be treated as operating expenses: - Delhi Tribunal in the case of E Value Serve.Com – 75 taxmann.com 195 – (Page 123 (Para 47) of Case Law Compilation) - Delhi Tribunal in the case of First Rain Software Centre (P.) Ltd. – ITA 4006/Del/2010 – (Page 129 (Para 6) of Case Law Compilation) :-11-: IT(TP)A. Nos.50 & 132/Chny/2024 31. In view of the above arguments, ld.AR submitted that the miscellaneous expenses incurred by comparable companies should be treated as operating in nature, while computing the PLI of comparable companies. 32. Alternatively, the ld.AR prayed that in the absence of breakup of miscellaneous expenses, it may be directed that such companies be excluded from the final set of comparable companies. 33. Per contra, the ld.DR submitted that the details of the expenditure have been taken only from the data provided by the assessee and hence the order of TPO needs to be upheld. 34. We have heard the rival contentions and gone through orders of the authorities along with the case laws and paper book. Admittedly The TPO has considered the details of the expenditure of comparable companies taking from the XBRL filed with the MCA by the respective companies. As the ld.AR pointed out in one of the comparable companies’ data in respect of the expenditure shown in the audited financials with the XBRL filed by that company is not matching. Hence, considering such data as comparable with the assessee’s financials does not provide proper result to arrive the margin to compute the ALP. 35. We find that the data regarding the breakup of miscellaneous expenses of comparable companies are not available in the XBRL. Therefore, the action of TPO in considering such incomplete information of miscellaneous expenses shown by the company in XBRL as non-operating in nature for computing the margin earned from the manufacturing segment, in our considered view is erroneous. Hence, the miscellaneous expense shown in XBRL has to be treated as operating in nature, :-12-: IT(TP)A. Nos.50 & 132/Chny/2024 unless the TPO identifies and proves a specific expenditure included in miscellaneous expenditure is of non-operative in nature. 36. The following decisions of the Tribunal has been categorically held that miscellaneous expenses are to be treated as operating expenses, which are in support of our above view: - Delhi Tribunal in the case of E Value Serve.Com – 75 taxmann.com 195 – (Page 123 (Para 47) of Case Law Compilation) - Delhi Tribunal in the case of First Rain Software Centre (P.) Ltd. – ITA 4006/Del/2010 – (Page 129 (Para 6) of Case Law Compilation) 37. Therefore, in the present factual matrix, the issue is squarely covered by the decision of the Tribunal (supra), we direct the TPO to recompute the margin by considering the miscellaneous expenditure as operating in nature and ordered accordingly. Thus, we allow the related grounds of appeal raised by the assessee. C. Re-computation of assessee’s PLI by the TPO by treating income from government grants, test track usage income and other income as non- operating income: 38. The assessee had adopted OP/TC (Operating Profit on Total Cost) as PLI for benchmarking the margin earned from the manufacturing segment and had arrived at a margin of 6.54% (Page 170 of paperbook). 39. The TPO during the assessment proceedings, proposed to treat the income from government grants, test track usage income and other income as non-operating in nature, thereby recomputing the Appellant’s PLI as 5.46% (Page 11 of TP Order – Page 173 of Memorandum of Appeal). 40. The ld.AR submitted that before the TPO and the DRP the assessee had claimed that the income from government grants which pertains to export subsidy :-13-: IT(TP)A. Nos.50 & 132/Chny/2024 under the Merchandise Exports from India scheme (‘MEIS’), duty drawback, etc. relates to the primary business activity of the assessee and must be treated as operating income. 41. In this regard, the ld.AR submitted that it has been held by this Jurisdictional Tribunal in the case of Hyundai Motor India Limited (ITA 3192/Chny/2017) (Page 160 – Para 52 of Case Law Compilation) and in the case of Greenland Exports Pvt. Ltd. (ITA No. 514/Mds/2016) (Page 139 – Para 6 of Case Law Compilation) that incentives are to be considered as part of the operating income for computing the margin earned by the Company. 42. Thus, based on the above, the ld.AR submitted that the income from government grants must be treated as operating in nature. 43. The ld.DR relied on the orders of the AO and DRP. 44. We have heard the rival contentions, and we find that the issue of considering the incentives / grants as part of the operating income for computing the margin earned has already been decided by this tribunal in the case of Hyundai Motor India Limited (supra). Therefore, by following the decision of this tribunal we direct the TPO to consider government grants received by the assessee as operating income and accept the margin computation of the assessee and ordered accordingly. Thus, we allow the grounds of appeal filed by the assessee. D. TEST TRACK USAGE INCOME – TO BE TREATED AS OPERATING IN NATURE: 45. The assessee’s test track which is used to undertake stability testing on trucks, buses and heavy vehicles at high speed for customers has also been rented :-14-: IT(TP)A. Nos.50 & 132/Chny/2024 to third parties from which they earn test track usage income. It was submitted that the test track usage income is an integral part of the regular business operations of the assessee and accordingly, must be treated as operating income. 46. The TPO has also acknowledged the fact that the said income has been earned from renting the space used for undertaking stability testing and the said income is incidental in nature (Page 9 of TP order – Page 171 of Memorandum of Appeal). 47. The ld.AR submitted that the test track usage income is incidental to the operations of the assessee and must be included as a part of the operating income of the assessee. It is also submitted that the income from test track usage is similar to the scrap sales income earned by a company, which is incidental to the operations of the main business activity. It may be noted that it has been settled by the decisions of this Hon’ble Tribunal that income from scrap sales must be treated as operating. 48. Relying upon the said principle, the ld.AR submitted that the test track usage income must be treated as operating in nature. 49. The ld.DR relied on the orders of the AO and DRP. 50. We have heard the rival contentions and gone through the records and orders of the authorities. The assessee’s test track which is used to undertake stability testing on trucks, buses and heavy vehicles at high speed for customers is an important and essential nature of activity of the assessee. The facility has also been rented to third parties from which they earn test track usage income which is :-15-: IT(TP)A. Nos.50 & 132/Chny/2024 incidental to the nature of activities of the assessee, and we find that the TPO has accepted such revenue as incidental to the business of the assessee. Similarly 51. Therefore, considering the test track facility to undertake stability testing on trucks, buses and heavy vehicles at high speed for customers is incidental to the business, the income earned from such facilities from third parties are to be treated as part of the operating income for computing the margin. The numerous decisions have been delivered in support of treating the incidental income as operating in nature and hence by following the decision of the tribunal decisions we direct the TPO to consider ‘test track usage income’ received by the assessee as operating income and ordered accordingly. Thus, we allow the grounds of appeal filed by the assessee. E. OTHER INCOME – TO BE TREATED AS OPERATING IN NATURE: 52. Further, the Company had also earned other income towards development of tool based on specific request from its customers. The ld.AR submitted that the same has been earned as a part of the business activities of the assessee and accordingly, must be treated as operating income. 52.1 The ld.DR relied on the orders of the AO and DRP. 53. We have heard the rival contentions and gone through the records and orders of the authorities. The assessee has earned Income from development of tools based on the specific request from customers and classified as ‘Other income’. The design and development of tools to customers is incidental to the nature of activities of the assessee. :-16-: IT(TP)A. Nos.50 & 132/Chny/2024 54. Therefore, considering the facts of the case the income earned from such design and development of tools to customers are to be treated as part of the operating income for computing the margin. The numerous decisions have been delivered in support of treating the incidental income as operating in nature and hence by following the decision of the tribunal decisions we direct the TPO to consider ‘test track usage income’ received by the assessee as operating income and ordered accordingly. Thus, we allow the grounds of appeal filed by the assessee. 3. TP margin adjustment in relation to service segment AY 2021-22 – IT(TP)A 132/CHNY/2024: Grounds 10 to 13 55. For the impugned AY 2021-22, the assessee was engaged in providing software development services to its AEs, in relation to which the assessee had entered into certain international transactions with its AEs, which were reported under the service segment. The assessee was characterized as a captive service provider with limited risks with respect to the functions under the service segment. 55.1 The transactions under the service segment with the AEs were benchmarked under TNMM and by adopting Operating Margin on Cost (OP/TC) as the PLI. The assessee had chosen 11 comparable companies for benchmarking the margin earned from the service segment and arrived at an arm’s length range of 6.44% to 15.88% (Page 165 of the paperbook). Since the assessee earned a margin of 16.61%, it was held to be at arm’s length. 56. The TPO arrived at an arm’s length range of 17.08% to 23.51%, thereby proposing an adjustment of Rs.9.56 crores. Against the said adjustment proposed by the TPO, the assessee had filed various objections before the DRP, seeking for :-17-: IT(TP)A. Nos.50 & 132/Chny/2024 inclusion of certain comparable companies and exclusion of alleged comparable companies. The DRP rejected the objections filed by the assessee and upheld the order of the TPO. Exclusion of alleged comparable companies 57. The ld.AR submitted that the TPO had allegedly included certain comparable companies which are not functionally comparable to that of the assessee. In this regard, the ld.AR submitted below the reasons for exclusion of certain companies from the final set of comparable companies selected by the TPO. Exclusion of INFOSYS LIMITED 58. Infosys Ltd. is engaged in providing diversified services in the nature of sale of software services, consulting, technology, outsourcing, business IT services, engineering services, system integration services etc. Further, Infosys also earns revenue from sale of software products. 59. Further, there is no segmentation or bifurcation of income or expenses towards software products. It may also be noted that Infosys Ltd. has a huge brand value, which results in higher sales and premium pricing, thereby resulting in higher profits and are hence, not comparable with routine captive service providers like the assessee. 60. The ld.AR relied upon the following rulings, wherein it has been held that Infosys Ltd. is not a valid comparable in the absence of segmental information and further, held that a giant like Infosys Ltd, cannot be compared to a routine captive service provider like the assessee: - Decision of the Hon’ble Delhi High Court in the case of Global Logic India Ltd. (155 taxmann.com 483) – Page 180 of Case Law Compilation :-18-: IT(TP)A. Nos.50 & 132/Chny/2024 - Decision of the Hon’ble Bangalore Bench of the Tribunal in the case of Intuit India Product Development Centre (P.) Ltd. (163 taxmann.com 3) – Page 208 of Case Law Compilation - Decision of the Hon’ble Bangalore Bench of the Tribunal in the case of Intuit India Product Development Centre (P.) Ltd. (163 taxmann.com 3) – Page 239 and 247 of Case Law Compilation 61. Further the ld.AR relied upon the following rulings, wherein it has been held that companies owning significant IPR and involved in significant R&D cannot be comparable to routine captive service providers: - Decision of the Hon’ble Delhi High Court in the case of Agnity India Technologies (P.) Ltd. (262 CTR 291) – Page 182 of Case Law Compilation - Decision of the Hon’ble Bangalore Bench of the Tribunal in the case of Logica (P.) Ltd. (36 taxmann.com 374) – Page 195 and 196 of Case Law Compilation 62. In light of the above arguments, the ld.AR submitted that Infosys Ltd. must be excluded from the list of comparable companies. Exclusion of TATA ELXSI LIMITED 63. The ld.AR submitted that M/s.Tata Elxsi Ltd. is engaged in providing high-end services in the nature of embedded product designs, industrial designing and visualization. It is clear that niche services are provided by Tata Elxsi which are different from the routine software development services provided by the assessee and accordingly, Tata Elxsi ought to be excluded. 64. Further, the ld.AR stated that Tata Elxsi Ltd. is engaged in significant Research and development activities and has developed product and industrial designs. The Company has also developed products which has been sold. However, the segmental revenue in respect of product sale vis-a-vis software services is not :-19-: IT(TP)A. Nos.50 & 132/Chny/2024 available. Accordingly, the ld.AR submitted that Tata Elxsi Ltd. cannot be treated as a comparable company. 65. The ld.AR relies upon the ruling of the Bangalore Tribunal in the case of Intuit India Product Development Centre (P.) Ltd. (163 taxmann.com 3) (Page 210 of Case Law Compilation), wherein it has been held that Tata Elxsi Ltd. is not a valid comparable in the absence of segmental information and after noting that they are engaged in providing high end services and cannot be compared to a routine captive service provider like the assessee. 66. The ld.AR further relied upon the ruling of the Bangalore Tribunal in the case of Logica (P.) Ltd. (36 taxmann.com 374) (Page 197 of Case Law Compilation), wherein it has been held that companies owning significant IPR and involved in significant R&D cannot be comparable to routine captive service providers: 67. In light of the above arguments, the ld.AR submitted that Elxsi Ltd. must be excluded from the list of comparable companies. Exclusion of LTIMINDTREE LIMITED 68. The ld.AR submitted that M/s.LTIMindtree Ltd., formed by merging of ‘L&T Infotech and Mindtree’ primarily derives its revenue from IT enabled services i.e., Banking, Financial services & Insurance. Further, the Company is engaged in the provision of high-end IT services and delivering transformational industry-specific solutions to clients in diverse industries. 69. Further, ld.AR stated that M/s.LTIMindtree Ltd. is engaged in significant Research and development activities and does not maintain segmental details in :-20-: IT(TP)A. Nos.50 & 132/Chny/2024 respect of business activities from diverse functions. Further, ld.AR submitted that the company is also engaged in providing IT and IT enabled services. 70. The Ld.AR relied upon the ruling of the Bangalore Tribunal in the case of Intuit India Product Development Centre (P.) Ltd. (163 taxmann.com 3), wherein it has been held that L&T Infotech Ltd. (Page 207 and 209 of Case Law Compilation) and Mindtree Ltd. (Page 211 and 215 of Case Law Compilation)are not comparable in the absence of segmental information and after noting that they are engaged in providing diversified services and is a market leader owning intangibles, and thus, cannot be compared to a routine captive service provider like the assessee. 71. In light of the above arguments, the ld.AR submitted that LTIMindtree Ltd. must be excluded from the list of comparable companies. Exclusion of IDS INFOTECH LIMITED 72. The ld.AR submitted that M/s.IDS Infotech Ltd. primarily derives revenue from IT and IT enabled Services (‘ITeS’) in diversified fields like Publishing and content, Legal and IP, Healthcare and software research, whereas the assessee is engaged in routine software development services to group company and is in the field of auto component manufacturing. 73. In this regard, the ld.AR submitted that companies engaged in provision of IT and ITeS cannot be taken as a comparable for a company engaged in software development services. It is also pertinent to note that the DRP vide their directions against the assessee’s objection regarding inclusion of M/s.Yudiz Solutions Pvt. Ltd. in the service segment had rejected the assessee’s claim on the basis that the said company was primarily engaged in providing IT related services and hence, is not an :-21-: IT(TP)A. Nos.50 & 132/Chny/2024 appropriate comparable company (Para 2.3 in Page 10 of the DRP Directions – Page 45 of Memorandum of Appeal). 74. In line with the above stand of the DRP, the ld.AR prayed that IDS Infotech Ltd., which is engaged in providing IT and IT enabled services ought not to have been considered as comparable companies and accordingly, must be excluded from the list of comparable companies. 75. Alternatively, in case IDS Infotech Ltd. engaged in providing IT and IT enabled services is considered as a comparable company, the ld.AR prayed that M/s.Yudiz Solutions Pvt. Ltd, also must be included in the final set of comparable companies, considering that Yudiz Solutions passed all the filters of the TPO and is engaged in IT related services. Exclusion of GREAT SOFTWARE LABORATORY PRIVATE LIMITED 76. The ld.AR submitted that M/s.Great Software Laboratory Pvt. Ltd. is engaged in diverse operations including software development, with expertise into cloud applications, communication, identity management and system technologies, provision of professional services and resale of products. 77. Further, the company does not maintain segmental information in respect of profitability reported from business activities in the nature of software services and software products and hence cannot be treated as a comparable company. 78. The ld.AR relied upon the ruling of the Bangalore ITAT in the case of Intuit India Product Development Centre (P.) Ltd. (163 taxmann.com 3), wherein it has been held that Great Software Laboratory Pvt. Ltd. (Page 215 of Case Law Compilation) is not comparable to a captive software development service provider :-22-: IT(TP)A. Nos.50 & 132/Chny/2024 in the absence of segmental information and after noting that the said company is into diverse areas of expertise and owns huge intangibles, it cannot be compared to a routine captive service provider like the assessee. 79. Considering the above arguments, the ld.AR submitted that Great Software Laboratory Pvt. Ltd. must be excluded from the list of comparable companies. 80. Per contra the ld.DR strongly supported the orders of the TPO / DRP in including all the above comparable companies and prayed for confirming the same. 81. We have heard the rival contentions and gone through the orders of the authorities along with the paper and book and decided case laws relied on by the parties. Admittedly the TPO has included certain comparable companies rejecting the objections filed by the assessee. We find that the comparable companies included like - Infosys ltd, - Tata Elaxi Ltd, - LTIMindtree Ltd, - IDS Infotech Ltd and - Great Software Laboratory Pvt. Ltd. are engaged in providing high-end services by providing diversified services in the nature of sale of software services, consulting, technology, outsourcing, business IT services, engineering services, system integration services etc. along with sale of software products. Further, on perusal of the submission of the assessee these comparable companies have not published the segmental revenue in respect of product sale vis-a-vis software services. 82. Further, we also find that these companies included as comparable by the TPO are having brand value, and also owning significant IPR and involved in :-23-: IT(TP)A. Nos.50 & 132/Chny/2024 significant R&D. Therefore, the said companies cannot be comparable to routine captive service providers like the assessee. 83. Our above view is supported by the following decision of the Hon’ble courts: - Hon’ble Delhi High Court in the case of Global Logic India Ltd. - Bangalore ITAT - Intuit India Product Development Centre (P.) Ltd. 84. The following rulings, wherein it has been held that companies owning significant IPR and involved in significant R&D cannot be comparable to routine captive service providers: - Hon’ble Delhi High Court - Agnity India Technologies (P.) Ltd. (262 CTR 291) - Bangalore ITAT - Logica (P.) Ltd. (36 taxmann.com 374) 85. In view of the facts and circumstances of the present case, and respectfully relying upon the judicial precedents cited hereinabove, we are of the considered opinion that Infosys Ltd., Tata Elxsi Ltd., LTIMindtree Ltd., IDS Infotech Ltd., and Great Software Laboratory Pvt. Ltd. are not comparable to the assessee. This conclusion is drawn on the grounds that the assessee does not possess a turnover of a similar magnitude, nor does it own significant intangible assets such as intellectual property rights, brand value, or engage in substantial research and development activities as those companies do. Accordingly, we direct that the aforementioned entities be excluded from the final list of comparable, as they are not functionally similar to the service profile of the assessee. Ordered accordingly. 4. TP adjustment towards notional interest on overdue receivables: AY 2020-21 – IT(TP)A 50/CHNY/2024 – Grounds 3.1 to 3.5 AY 2021-22 – IT(TP)A 132/CHNY/2024: Grounds 14 to 19 :-24-: IT(TP)A. Nos.50 & 132/Chny/2024 86. For the AY 2020-21, the TPO vide his order dated 26.07.2023 proposed an upward adjustment towards notional interest on outstanding receivables to the extent of Rs.6.67 crores (Page 158 of Memorandum of Appeal for AY 20-21). 87. Subsequently, a rectification order dated 26.02.2024 reducing the interest to Rs.1.16 crores. (Page 231 of paperbook dated 21.01.2025). 88. Against the draft assessment order, the assessee filed its objections before the DRP, who after considering the assessee’s submissions, additional evidence (Page 191 of paperbook dated 21.01.2025), and rectification order had issued certain directions to the TPO vide its directions dated 21.06.2024 (Page 64 of Memorandum of Appeal for AY 2020-21). 89. The TPO pursuant to the directions of the DRP, passed an order giving effect dated 07.07.2024, thereby revising the adjustment to Rs.0.52 crores i.e., Rs.0.20 Crores for outstanding receivables of Rs.97.59 Crores and Rs.0.32 Crores for outstanding receivables of Rs.36.59 Crores (Page 58 of Memorandum of Appeal for AY 20-21). 90. Subsequently, the AO passed the final assessment order dated 23.07.2024 adopting the revised adjustment value (Page 14 of Memorandum of Appeal for AY 20-21), against which the assessee has filed this appeal before us. 91. Similarly for the AY 2021-22, the TPO vide his order dated 29.09.2023 proposed an upward adjustment towards notional interest on outstanding receivables to the extent of Rs.0.47 crores (Page 158 of Memorandum of Appeal for AY 21-22). :-25-: IT(TP)A. Nos.50 & 132/Chny/2024 92. Against the above adjustment proposed by the TPO, the assessee filed its objections before the DRP, which were rejected by the DRP, thereby, upholding the order of the TPO. No adjustment is warranted when the company is a debt free company 93. The ld.AR submitted that no adjustment in respect of the interest on overdue receivables shall be warranted in case of a debt free company, on the basis that the assessee does not incur any significant interest cost. 94. The ld.AR Stated that, the above principle has been upheld by the Jurisdictional Tribunal in the case of Temenos India Private Limited (ITTPA 32/CHNY/2024) [Pg.7 of Case Law Compilation for AY 20-21 in IT(TP)A 50/CHNY/2024 – hereinafter referred to as ‘Case Law Compilation II’], wherein it was held as follows: 12. Most importantly, we find that the assessee is a debt free company. In other words, outstanding receivables will not impact the profitability of the company because the assessee is having largely its own funds and there is no debt secured by assessee on which interest is to be paid by the assessee. Hence, the delayed receivables will not impact in any way. 15. After taking note of above judicial pronouncements, the ITAT had deviated from its earlier order for AY 2012-13 and followed the judgment of Hon’ble Delhi High Court and Hon’ble Supreme Court concerning AY 2010-11. The Delhi Bench of the Tribunal in Bechtel India Pvt. Ltd., for the assessment year 2013-14 had categorically held that there need not be any transfer pricing adjustment for imputing interest cost for the outstanding trade receivables from AEs when the assessee in the said case is a debt free company. Therefore, the DRP’s reliance on the order of Delhi Bench of the Tribunal in Bechtel India Pvt. Ltd., concerning assessment year 2012-13 (which according to us has not laid down a correct proposition of law) is legally not tenable. In light of the above discussion, we delete the transfer pricing adjustment imputing interest income on the outstanding trade receivable.” (Emphasis Supplied) :-26-: IT(TP)A. Nos.50 & 132/Chny/2024 95. Based on the above, notwithstanding the other contentions, the ld.AR submitted that, since the assessee is a debt free company and does not pay any interest cost, the impugned adjustment proposed by the TPO is not warranted and should be deleted. 96. The Ld. Departmental Representative in this regard, contended that the assessee’s argument against imputing interest towards a debt free company is not tenable on the basis that even though there is no finance cost incurred, there is an imputed interest cost that is foregone due to outstanding receivables pending collection and that the said argument can only be made in the case of domestic transactions and not in the case of international transactions. In this connection, it is humbly submitted that this Jurisdictional Tribunal after considering the above argument in the case of Trimble information Technologies India Pvt Ltd - (ITTPA 28/CHNY/2024) had deleted the adjustment towards notional interest on overdue receivables (Para 4.0 and Para 6.0 of the decision). 97. The ld.AR relied on the doctrine of stare decisis, which states that when a point of law has been decided, it takes the form of a precedent which is to be followed subsequently and should not normally be departed from. In the subject issue, the question of whether interest can be adduced towards overdue receivables in a case of a debt free company has been decided by the Jurisdictional Tribunal in the case of Temenos India (supra) and certain other rulings as listed above and is hence, binding on the Hon’ble Bench. Therefore, the said principle should be followed in the absence of any change in facts or overturned by a higher forum. Non observance of this doctrine would, in turn lead to chaos. :-27-: IT(TP)A. Nos.50 & 132/Chny/2024 98. The ld.AR in this regard, further submitted that one Bench of the Tribunal is bound to follow the view expressed by another Bench of the Tribunal unless the earlier view is per incurium. This principle has been upheld by the Hon’ble Jurisdictional High Court in the case of L.G. Ramamurthi (110 ITR 453 Mad) and S. Devaraj (73 ITR 1 Mad). 99. Accordingly, the ld.AR submitted that the adjustment ought to be deleted in the assessee’s case on the basis of the settled principle that an adjustment towards overdue receivables is not warranted in the case of a debt free company. Credit period of 90 days agreed upon between the Appellant and AEs and 3rd parties – not considered by lower authorities 100. The ld.AR submitted that the TPO proposed the upward adjustment towards notional interest on outstanding receivables on the basis that trade receivables due from the foreign AE have been delayed beyond the credit period allowed, for which appropriate compensation has not been received, thus concluding that the receivables have resulted in an interest free loan being provided by the assessee to the foreign AEs. 101. The TPO accordingly, imputed an interest adjustment based on the ageing details provided charging an interest at the rate of 6 months LIBOR plus 350 bps (5.818%) after allowing 30 days credit period. However, the TPO while undertaking this exercise failed to note the actual credit period agreed between the assessee and its AEs and even third parties is 90 days, and no interest is charged to third parties in case of delay in collection beyond 90 days. :-28-: IT(TP)A. Nos.50 & 132/Chny/2024 102. The ld.AR submitted that the TPO had arbitrarily adopted the credit period allowable as 30 days without considering the actual credit period of 90 days agreed upon with AEs as per contractual terms entered into between the assessee and its AEs. (Sample Invoices in Page 183, 185, 187 and 189 of paperbook dated 21.01.2025 for AY 2020-21; Page 268 to 271 of paperbook dated 11.03.2025 for AY 2021-22). 103. It may also be noted that the lead time for the goods to reach the AEs itself is above 40 days (sample GRN in Page 195-197 of paperbook dated 21.01.2025 for AY 2020-21; Page 360 of paperbook dated 11.03.2025 and weighted average receivable workings in Page 198-208 and 218-222 of paperbook dated 21.01.2025 for AY 2020-21; Page 272-294 of paperbook dated March 11.03.2025 for AY 2021- 22). 104. Accordingly, the ld.AR submitted that the invoices become due for payment by the AEs only upon actual receipt of goods and not from the date of invoice. 105. In this regard, the ld.AR submitted that the TPO has disregarded the credit period agreed upon between the assessee and its AEs and the re-determination of credit period goes against the basic tenet of transfer pricing regulations. It is also submitted that the TPO can only determine or verify the computation of ALP and is not empowered to decide or direct the way businesses should determine credit terms for valid commercial transactions. 106. In connection with the above, the ld.AR relied upon the decision of the Jurisdictional Tribunal in the case of Trimble Information Technologies India Private Limited (ITTPA No.28/CHNY/2024), the relevant extract of which are as follows: :-29-: IT(TP)A. Nos.50 & 132/Chny/2024 “5.0 We have heard rival submissions in the light of material available on records. We have noted that the action of the Ld. AO in making the upward adjustment by disturbing the credit period contracted between the assessee and its foreign AEs is not correct. It is a settled principle of law that the Revenue cannot decide as to how business shall be done by a taxpayer. To this extent the arguments of the Ld. DR that the Ld. TPO has powers to question the commercial expediency are incorrect. The decisions of a business are fundamentally guided with the objective of maximizing the profits and cannot be guided by the taxman.” 107. Notwithstanding the above, since average collection period for receivables computed by the TPO is 43 days for Rs.97.59 Crores and 56 days for Rs.35.69 Crores in AY 2020-21 and 48.81 days in AY 2021-22, given that the agreed credit period between the respective AEs is 90 days, the ld.AR submitted that no adjustment is warranted. 108. Per contra the ld.DR supported the orders of the TPO and DRP and prayed for confirming the same. 109. We have heard the rival contentions and gone through the orders of the authorities along with the paper and book and decided case laws relied on by the parties. The issue of TP adjustment on account of interest on overdue receivables from AE is covered by the decision of this Tribunal in the case of Temenos India Private Limited (ITTPA No.32/CHNY/2024). Since the assessee is a debt free company and the assessee does not incur any significant interest cost, the TP adjustment of notional interest on overdue receivable is not warranted. The above principle has also been followed in the recent decision of this Tribunal in the case of Trimble Information Technologies India Private Limited (ITTPA No.28/CHNY/2024). 110. In light of the factual matrix of the present case, and in consonance with the judicial precedents of this Hon’ble Tribunal, we are of the considered view that the :-30-: IT(TP)A. Nos.50 & 132/Chny/2024 transfer pricing adjustment on account of notional interest pertaining to overdue receivables is unwarranted. Accordingly, we direct the Transfer Pricing Officer (TPO) to delete the said adjustment and to recompute the Arm’s Length Price (ALP) in accordance with the above observations. In view thereof, the grounds of appeal raised by the assessee are allowed. 5. Addition on account of unwinding of discount on financial assets carried at amortized cost: AY 2020-21 – IT(TP)A 50/CHNY/2024 – Grounds 4.1 and 4.2 AY 2021-22 – IT(TP)A 132/CHNY/2024: Ground 20 111. During the impugned AYs, the assessee has credited an amount of Rs.4,41,500/- towards unwinding of discount on financial assets which represents a notional adjustment made to the financial statements in compliance with the Indian Accounting Standard (Ind AS) as notified under section 133 of the Companies Act, 2013. The said item is a notional income which was recognized as per IND AS 116 (Note 19 of the financials on Page 30 of the paperbook dated January 21.01.2025 and Page 34 of paperbook dated 11.03.2025). The adjustment being notional in nature was reduced from the profits in the computation of total income by the assessee. (S.No. 24 of the Computation of Total Income on Page 49 of the paperbook dated 21.01.2025 and Page 58 of paperbook dated 11.03.2025). 112. The ld.AR submitted that the above treatment of notional income has been consistently applied by the assessee over the years which is as per the accounting requirements prescribed under IND AS 116. IND AS 116 requires the lessee to initially recognise the Right of use asset at cost (Note 3.2 in Page 23 of paperbook dated 21.01.2025 and Page 25 of paperbook dated 11.03.2025) and lease liability at the present value of lease payments that are not paid at that date (Note 16 in :-31-: IT(TP)A. Nos.50 & 132/Chny/2024 Page 29 of paperbook dated 21.01.2025 and Page 33 of paperbook dated 11.03.2025). 113. The ld.AR also submitted that notional expenses debited in the financial statements on account of IND AS 109 have also been accordingly disallowed (added back) in the computation of income to arrive at the taxable income and accordingly, similar treatment was adopted towards notional income. 114. The AO and the DRP however, denied the claim of assessee stating that no supporting documents were furnished in relation to the same. 115. The ld.AR submitted that it is a well settled principle that income tax is leviable on real income. Real income can be ascertained by earning real income. The income of Rs.4,41,500/- towards unwinding of discount on financial assets is a book entry made under the prescribed Ind As 116. 116. Further, the ld.AR stated that the above adjustment is notional in nature and is not a real income earned by the assessee during the subject assessment year. The claim of the assessee is founded on the above factual matrix and following two legal principles - accounting entries are not determinative for tax liability and only real income can be taxed. 117. The ld.AR placed a reliance in this respect on the decision of the Hon’ble Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd - 82 ITR 363 (Refer Page 50 of Case Law Compilation II) wherein it was held that, the way in which entries are made by an assessee in his books of account is not determinative of the question whether the assessee has earned any profit or suffered any loss. Further reliance is also placed on the following decisions: :-32-: IT(TP)A. Nos.50 & 132/Chny/2024 118. In this regard, the ld.AR placed a reliance on the decision of the Hon’ble Supreme Court in the case of Shoorji Vallabhdas & Co. – 46 ITR 144 (Refer Page 47 of Case Law Compilation II) wherein the Hon’ble Court held that if income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a hypothetical income, which does not materialise. 119. Furthermore, only because the assessee adopted IND AS which is mandated by the Government of India, the fact remains that entries in the books of accounts are purely notional in nature and does not give raise to any income therefore the assessment based on IND-AS compliance and disclosure is not tenable and only real income is taxable – this is decided by the Jurisdictional Tribunal in the case of Shriram Properties Ltd – ITA 431/CHNY/2022 (Page 96 to 107 of Case Law Compilation II) relevant extracts of which are as follows – “27. In this case, the assessee has rightly followed IND-AS standards for the purpose of disclosure of financial assets and liabilities whereas computed income for the purpose of income tax in compliance with ICDS standards which is clearly evident from the entries passed in the books and negated in the statement of total income. Further, the entry in the books which was made on a hypothetical income which did not materialized and the entry was reversed in the next year, then it could not be brought to tax as income because only real income can be brought to tax as held by the Hon’ble Supreme Court in the case of CIT vs Bokaro Steel Ltd [1999] 236 ITR 315 (SC).” 120. In the light of the above judicial precedent, it is evident that irrespective of accounting entries, real income has to be ascertained which in-turn depends on real gross earnings and real expenditure. Hence, the addition of the impugned adjustment proposed by the AO is not warranted and should be deleted as it is in compliance with the provisions of Indian Accounting Standards and does not represent income earned by the assessee. 121. Per contra the ld.DR relied on the orders of AO / DRP. :-33-: IT(TP)A. Nos.50 & 132/Chny/2024 122. We have heard the rival contentions and gone through the orders of the authorities along with the paper and book and decided case laws relied on by the parties. Admittedly the assessee has credited an amount of Rs.4,41,500/- towards unwinding of discount on financial assets which represents a notional adjustment made to the financial statements in compliance with the Indian Accounting Standard (Ind AS) as notified under section 133 of the Companies Act, 2013. We note that the said item is a notional income which was recognized as per IND AS 116. On perusal of the records, the adjustment being notional in nature was reduced from the profits in the computation of total income by the assessee. 123. We find that the AO and the DRP have denied the claim of assessee stating that no supporting documents were furnished in relation to the same. As argued by ld.AR the above adjustment is notional in nature, since it is not a real income earned by the assessee during the subject assessment year. The claim of the assessee is founded on the above factual matrix and following two legal principles - accounting entries are not determinative for tax liability and only real income can be taxed. 124. We find that the decision of the Hon’ble Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd - 82 ITR 363 and Hon’ble Supreme Court in the case of Shoorji Vallabhdas & Co. – 46 ITR 144 wherein the Hon’ble Court held that if income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a hypothetical income, which does not materialise. The above ratio has been followed and decided that the assessment based on IND-AS compliance and disclosure is not tenable and only real income is taxable in the Jurisdictional Tribunal in the case of Shriram Properties Ltd – ITA 431/CHNY/2022. :-34-: IT(TP)A. Nos.50 & 132/Chny/2024 125. In view of the facts and circumstances of the present case, and respectfully following the judicial precedents cited supra, we are of the considered opinion that the amount of ₹4,41,500/-, credited to the profit and loss account on account of unwinding of discount on financial assets in accordance with the Indian Accounting Standards (IND AS), does not constitute real income. Accordingly, we direct the Assessing Officer to delete the disallowance made in this regard. Consequently, the grounds of appeal raised by the assessee are allowed. 6. Disallowance of deduction claimed under Section 35(1)(iv) of the Act AY 2020-21 – IT(TP)A 50/CHNY/2024 – Grounds 6.1 to 6.3 AY 2021-22 – IT(TP)A 132/CHNY/2024: Grounds 21 to 24 126. The assessee has an engineering facility (Research and Development facility- R&D) at Ambattur, Chennai - 600053 which focuses on design and development of environment friendly automotive components in a proactive manner conforming to global standards and development of competencies and technologies to bring advanced safety systems for protecting the environment and to save lives in the domain of vehicle control systems. 127. The assessee has received recognition from Department of Scientific and Industrial Research (DSIR) for the said R&D unit in Form 3CM to prove that the assessee is carrying on R&D activities (Pg. 123 of paperbook dated 21.01.2025). Furthermore, the assessee had incurred capital expenditure on scientific research related to its business amounting to Rs.2.49 crores in AY 2020-21 and Rs.3.59 crores in AY 2021-22 and had accordingly, claimed deduction u/s.35(1)(iv) as 100% deduction is available in respect of capital expenditure incurred towards scientific research related to the business. :-35-: IT(TP)A. Nos.50 & 132/Chny/2024 128. The Ld.AR submitted that the deduction u/s.35(2AB) of the Act could not have been claimed by the assessee since the assessee had adopted for concessional tax regime and paid taxes as per Section 115BAA of the Act for the subject AYs. Further, it may also be noted that the assessee had not claimed depreciation u/s.32 of the Act and weighted deduction u/s.35(2AB) of the Act on the aforesaid expenditure. 129. The AO during the assessment proceedings for AY 2020-21, rejected the claim of the assessee stating that Form 3CM submitted by the assessee is for the purpose of approval to do in house R&D under section 35(2AB), and thereby allegedly stating that there is lack of evidence to support the claim of the assessee, rejected the deduction claimed u/s.35(1)(iv) of the Act (Page 36 of Final Assessment Order – Page 49 of Memorandum of Appeal for AY 2020-21). 130. The DRP disregarding the copy of Form 3CM submitted and submissions made by the assessee including the breakup of capital expenditure incurred during the year, upheld the contentions of the AO by stating that the Form 3CM does not quantify the expenses claimed by the assessee without appreciating that the claim made by the assessee was not u/s.35(2AB) of the Act. (Page 24 of DRP Directions – Page 87 of Memorandum of Appeal for AY 2020-21) 131. The AO during the assessment proceedings for AY 2021-22, rejected the claim of the assessee stating that Form 3CM submitted by the assessee is valid only till 31.03.2020 and allegedly denied the claim u/s.35(1)(iv) of the Act in the absence of Form 3CM (Page 8 of Final Assessment Order – Page 22 of Memorandum of Appeal for AY 2021-22). 132. The DRP for the subject year arbitrarily concluded that the claim u/s.35(1)(iv) of the Act cannot be claimed since the assessee had adopted for concessional tax :-36-: IT(TP)A. Nos.50 & 132/Chny/2024 regime under Section 115BAA of the Act without appreciating the provisions of the Act (Page 37 of DRP Directions – Page 73 of Memorandum of Appeal for AY 2021- 22). Further, the DRP had erroneously concluded that assessee had not submitted the details of capital expenditure without appreciating the detailed breakup of capital expenditure submitted along with sample invoice copies. Approval mandated u/s.35(2AB) not a prerequisite for claiming deduction u/s.35(1)(iv) of the Act: 133. The ld.AR submitted that as per section 35(1)(iv) of the Act, 100% deduction is available in respect of capital expenditure incurred towards scientific research related to the business carried on by the assessee. 134. The ld.AR further stated that approval of the authority prescribed u/s.35(2AB) of the Act is not an essential prerequisite for claiming deduction u/s.35(1)(iv) of the Act, as Section 35(1)(iv) of the Act does not envisage any specific approval requirement from any specified authority as mandated in Section 35(2AB) of the Act. 135. The ld.AR also stated that even if a part of the claim falls within the ambit of Section 35(1)(iv) of the Act, the mere fact that the claim having been found not admissible u/s.35(2AB) of the Act will not constitute a bar to allow the claim of such expenditure u/s.35(1)(iv) of the Act provided that expenditure is a capital expenditure and falls squarely within the ambit of Section 35(1)(iv) of the Act. 136. The above principles have been upheld by the Hon’ble Jurisdictional High Court in the case of Tube Investments of India Ltd – 125 taxmann.com 421 (Page 214 of Case Law Compilation II), the relevant extracts of which are reproduced below - :-37-: IT(TP)A. Nos.50 & 132/Chny/2024 “3. The benefit of section 35(1)(iv) can be availed by the assessee in respect of expenditure of a capital nature on scientific research if that research is related to the business carried on by the assessee. The approval of the authority prescribed under section 35(2B) is not an essential pre- requisite for claiming the allowance under section 35(1)(iv) if it is found that a part of the claim falls within the ambit of Section 35(1)(iv). The mere fact of a claim not having been found admissible under section 35(2B) will not constitute a bar to allowing an expenditure under section 35(1)(iv) if that expenditure is capital expenditure and falls squarely within the ambit of Section 35(1)(iv). (Emphasis Supplied) 137. Therefore, the ld.AR argued that the contention of lower authorities to deny the claim u/s.35(1)(iv) of the Act on the basis of failure to obtain Form 3CM or failure to quantify the expenses in Form 3CM is not tenable since it is not a mandate prescribed under the provisions of the Act for the claim of deduction u/s.35(1)(iv) of the Act and the same is only a requirement for the purpose of claiming deduction u/s.35(2AB) of the Act. 138. In this regard, the ld.AR relied upon the following rulings, wherein it has been held that capital expenditure incurred towards scientific research is allowable u/s.35(1)(iv) of the Act. - Apex Laboratories (P.) Ltd – 80 taxmann.com 236 (Page 221 (Para 4) of Case Law Compilation II) - MAHLE Behr India (P.) Ltd – 130 taxmann.com 7 (Page 231 (Para 16) of Case Law Compilation II) 139. Further, the ld.AR also stated that the denial of weighted deduction u/s.35(2AB) of the Act shall not disable the assessee from claiming normal deduction for research and development expenditure both revenue and capital, u/s.35(1)(iv) of the Act. The above principle has been upheld by the Jurisdictional Tribunal in the case of Ashok Leyland Ltd (ITA 554/CHNY/2023), the relevant extracts of which are reproduced below: :-38-: IT(TP)A. Nos.50 & 132/Chny/2024 “4.6 In our considered view therefore, an assessee is entitled for normal deduction i.e. 100% of the capital expenditure incurred at its R&D facility in terms of Section 35(1)(iv) read with Section 35(2)(ia) of the Act, irrespective whether such capital expenditure is eligible for weighted deduction u/s 35(2AB) of the Act or not. 4.8 In view of the above decision supra, the legal position which emerges is that the denial of weighted deduction u/s 35(2AB) will not disable the assessee from claiming normal deduction for the said R&D expenditure, both revenue & capital, u/s 35(1)(i) and 35(1)(iv) of the Act respectively.” 140. Therefore, the ld.AR submitted that the assessee is duly eligible for claim of capital expenditure incurred towards scientific research u/s.35(1) of the Act. Adoption of concessional tax regime u/s.115BAA of the Act not a bar for claiming deduction u/s.35(1)(iv) of the Act 141. The ld.AR submitted that the section 115BAA of the Act offers a concessional tax rate of 22% plus surcharge of 10% and cess of 4% for domestic companies subject to satisfaction of certain conditions. One of the conditions for adoption of this concessional tax regime is that such companies should not avail the exemptions or deductions listed under sub-section (2) to Section 115BAA of the Act. 142. In this connection, the ld.AR refers to clause (i) of sub-section (2) to Section 115BAA of the Act, which is reproduced below: “(2) For the purposes of sub-section (1), the total income of the company shall be computed,— (i) without any deduction under the provisions of section 10AA or clause (iia) of sub-section (1) of section 32 or section 32AD or section 33AB or section 33ABA or sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) or sub-section (2AB) of section 35 or section 35AD or section 35CCC or section 35CCD or under any provisions of Chapter VI-A other than the provisions of section 80JJAA or section 80M;” 143. From the above provisions, it is evident that the deduction u/s.35(1)(iv) of the Act is not covered under sub-section (2) to Section 115BAA of the Act. Therefore, the :-39-: IT(TP)A. Nos.50 & 132/Chny/2024 ld.AR submitted that the deduction claimed towards capital expenditure incurred towards scientific research cannot be denied merely on the basis that the assessee had opted for the concessional tax regime u/s.115BAA of the Act. 144. Based on the above submissions, the ld.AR submitted that the disallowance of capital expenditure u/s.35(1)(iv) of the Act should be deleted and the capital expenditure incurred during the year towards scientific research should be allowed. 145. Per contra the ld.DR supported the order of the AO / DRP and prayed that the disallowance of deduction of capital expenditure be confirmed. 146. We have heard the rival contentions and gone through the orders of the authorities along with the paper and book and decided case laws relied on by the parties. Admittedly the assessee has opted to section 115BAA of the Act for concessional tax rate of 22% plus surcharge of 10% and cess of 4% for domestic companies subject to satisfaction of certain conditions. 147. As per clause (i) of sub-section (2) to Section 115BAA of the Act, certain deductions are not allowed to claim the concessional rate of tax, which is reproduced below: “(2) For the purposes of sub-section (1), the total income of the company shall be computed,— (i) without any deduction under the provisions of section 10AA or clause (iia) of sub-section (1) of section 32 or section 32AD or section 33AB or section 33ABA or sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) or sub-section (2AB) of section 35 or section 35AD or section 35CCC or section 35CCD or under any provisions of Chapter VI-A other than the provisions of section 80JJAA or section 80M;” 148. On perusal of the provisions of section 115BAA, there is no restriction on claiming the deduction u/s.35(1)(iv) of the Act. However, the section prohibits claiming :-40-: IT(TP)A. Nos.50 & 132/Chny/2024 of deduction u/s.35(2AB) of the Act. Therefore, the AO has erred in denying the deduction claimed u/s.35(1)(iv) of the Act. 149. Further, we note that the assessee has received recognition from Department of Scientific and Industrial Research (DSIR) for the said R&D unit in Form 3CM to prove that the assessee is carrying on R&D activities (Pg. 123 of paper book). 150. Further, we note that the assessee has not claimed depreciation u/s.32 of the Act and weighted deduction u/s.35(2AB) of the Act on the aforesaid expenditure. 151. We observed that the AO/DRP during the assessment proceedings for AY 2020-21, rejected the claim of the assessee stating that Form 3CM submitted by the assessee is for the purpose of approval to do in house R&D under section 35(2AB), and thereby allegedly stating that there is lack of evidence to support the claim of the assessee, rejected the deduction claimed u/s.35(1)(iv) of the Act. 152. We also note that the AO during the assessment proceedings for AY 2021-22, rejected the claim of the assessee stating that Form 3CM submitted by the assessee is valid till 31.03.2020 only and allegedly denied the claim u/s.35(1)(iv) of the Act in the absence of Form 3CM. The contention of lower authorities to deny the claim u/s.35(1)(iv) of the Act on the basis of failure to obtain Form 3CM or failure to quantify the expenses in Form 3CM is not tenable since it is not a mandate prescribed under the provisions of the Act for the claim of deduction u/s.35(1)(iv) of the Act and the same is only a requirement for the purpose of claiming deduction u/s.35(2AB) of the Act. This proposition is upheld in the following decision, wherein it has been held that capital expenditure incurred towards scientific research is allowable u/s.35(1)(iv) of the Act. :-41-: IT(TP)A. Nos.50 & 132/Chny/2024 - Apex Laboratories (P.) Ltd – 80 taxmann.com 236 - MAHLE Behr India (P.) Ltd – 130 taxmann.com 7 153. In light of the foregoing facts and discussion, and respectfully relying upon the judicial precedents cited supra, we are of the considered view that the assessee is eligible for deduction under Section 35(1)(iv) of the Income-tax Act, 1961. The Assessing Officer and the Dispute Resolution Panel have erred in disallowing the said deduction. Accordingly, we direct the Assessing Officer to allow the deduction as claimed, and the grounds of appeal raised by the assessee are allowed. 7. Disallowance of subscription charges of associations and clubs: AY 2020-21 – IT(TP)A 50/CHNY/2024 – Grounds 5.1 and 5.2 154. During the AY 2020-21, the assessee has incurred expenditure towards subscription charges for association and clubs amounting to Rs.0.13 crores for business purposes of the assessee. The subscription towards membership of these associations were paid for the purpose of enjoying updates on business data, strategies and technical information which were vital to the business of the assessee and not for any individual membership or clubs. 155. The ld.AR submitted that the assessee had spent the said amount towards renewal of memberships in various professional associations like The American Chamber of Commerce in India, Confederation of Indian Industries, Madras Management Association and All India Management Association etc. The assessee had also submitted the complete details of expenses incurred for subscription charges along with invoice references and sample copies of invoices before the lower authorities (Page 143, 144, 150 to 160 of paper book dated 21.01.2025) to substantiate the claim. :-42-: IT(TP)A. Nos.50 & 132/Chny/2024 156. However, the AO disallowed the expenses u/s.37 of the Act on the basis that the subscription fees are towards individual membership. The DRP upheld the contentions of the AO. 157. The ld.AR submitted that the deduction for membership fee paid on behalf of the employees are allowable u/s.37 of the Act and accordingly, the subscription charges paid to various associations which in fact were directly incurred by the assessee in its own name and for the purpose of its business ought to be allowed as a business expenditure u/s.37 of the Act. The allowability of subscription fee u/s.37 of the Act has been settled by the decision of the Hon’ble Supreme Court in the case of United Glass Mfg. Co. Ltd - 28 taxmann.com 429 (Page 157 of Case Law Compilation II). 158. The ld.AR further submitted that the welfare of the employees gained out of such expenses goes towards efficiently running the business of the assessee and thereby resulting in commercial benefits. Accordingly, the ld.AR submitted that the subscription fees paid by the assessee for membership of club for its employees is a revenue expenditure, not personal in nature and has been incurred wholly, necessarily and exclusively for the purposes of business. 159. The ld.AR argued that the allowability of subscription fees paid for employees has also been upheld by the following decisions: Decision Forum Citation Pg.No Infosys Technologies Ltd HC - Karnataka 51 taxmann.com 407 159 Apollo Tyres Ltd HC - Kerala 119 taxmann.com 336 169 Hindalco Industries Ltd ITAT – Mumbai 165 taxmann.com 606 182 Thermax Ltd. ITAT – Pune 103 taxmann.com 471 196 :-43-: IT(TP)A. Nos.50 & 132/Chny/2024 160. In the light of the above judicial precedents, it is evident that the subscription charges for association and club membership fees incurred is an allowable revenue expenditure u/s.37 of the Act and the disallowance made by the AO is not tenable and prayed for deleting the same. 161. We have heard the rival contentions and gone through the orders of the authorities along with the paper and book and decided case laws relied on by the parties. Admittedly the assessee has claimed certain expenditure during the A.Y. 2020-21 under the head subscription charges to the clubs and associations. We note that these expenses are paid towards renewal of memberships in various professional associations like The American Chamber of Commerce in India, Confederation of Indian Industries, Madras Management Association and All India Management Association etc. The assessee had also submitted the complete details of expenses incurred for subscription charges along with invoice references and sample copies of invoices before the lower authorities. Further, we find that these expenditure has not been spent for the welfare of the employees. The allowability of subscription fee u/s.37 of the Act has been settled by the decision of the Hon’ble Supreme Court in the case of United Glass Mfg. Co. Ltd - 28 taxmann.com 429. 162. In view of the factual matrix of the present case, and respectfully following the decision of the Hon’ble Supreme Court, we are of the considered opinion that the expenditure incurred towards subscription charges paid to clubs and associations is allowable as a revenue expenditure under Section 37 of the Income-tax Act, 1961. Accordingly, we direct the Assessing Officer to delete the disallowance and recompute the income in accordance with the above observations. Thus, we allow the grounds of appeal of the assessee. :-44-: IT(TP)A. Nos.50 & 132/Chny/2024 8. Adjustments proposed vide intimation u/s.143(1) of the Act - Disallowance u/s.43B and Section 80JJAA of the Act: AY 2020-21 – IT(TP)A 50/CHNY/2024 – Grounds 7.1 and 8.1 163. For the AY 2020-21, the return of income was processed under Section 143(1) of the Act and an intimation dated 28.12.2021 was passed making certain adjustments to the returned income of the assessee. Against the said adjustments, a rectification request was filed before AO and an appeal has been filed before the Commissioner of Income Tax (Appeals). The CPC while processing the return of income, made certain adjustments u/s.43B of the Act and Section 80JJAA of the Act, which as per the directions of the DRP does not survive. 164. However, the AO in Page 37 of the Assessment Order dated 23.07.2024 (Page 50 of Memorandum of Appeal for AY 2020-21) had computed the assessed income by taking the income as per intimation u/s.143(1) of the Act as the starting point for computation of taxable income. 165. However, while computing the taxes on assessed income, the AO had considered the taxable income without taking into account the adjustments made u/s.143(1) of the Act. 166. Accordingly, the ld.AR prayed to direct the AO to recompute the assessed income based on the returned income position and delete the adjustments made vide intimation u/s.143(1) of the Act. 167. Upon careful examination of the submissions and the records before us, it is observed that the action taken by the AO has not resulted in any grievance to the assessee. Consequently, the ground raised by the assessee is rendered infructuous and is hereby dismissed. :-45-: IT(TP)A. Nos.50 & 132/Chny/2024 9. Erroneous levy of interest u/s.234A of the Act: AY 2021-22 – IT(TP)A 132/CHNY/2024 – Ground 25 168. For the AY 2021-22, the due date for filing return of income was extended to 15.03.2022 under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act read with Circular 01/2022 dated 11.01.2022. 169. However, the above referred Circular clarified that the extension of dates for filing of return of income shall not apply to Explanation 1 of Section 234A of the Act, in cases where the amount of tax on total income as reduced by the amounts specified in clauses (i) to (vi) of sub-section (1) of Section 234A of the Act exceeds rupees one lakh. 170. In this connection, the ld.AR submitted that even though the assessee for the AY 2021-22 had filed the return of income on 13.03.2022, had duly paid the self- assessment taxes (i.e., the taxes payable as reduced by the amounts specified in clauses (i) to (vi) of sub-section (1) of Section 234A of the Act) within the due date as per Section 139(1) of the Act, i.e, within 30.11.2021. (The relevant excerpts from the return of income as enclosed as Annexure 2). Considering that the tax dues have been duly paid within the due date for filing of return of income u/s.139(1) of the Act, the ld.AR prayed that no interest shall be chargeable u/s.234A of the Act. 171. The ld.AR also relied upon the ruling of the Hon’ble Supreme Court in the case of Pranoy Roy (309 ITR 231) wherein it was held that question of levy of interest u/s.234A of the Act shall not arise where the tax dues has been deposited prior to the due date for filing of return of income. :-46-: IT(TP)A. Nos.50 & 132/Chny/2024 172. Relying upon the above settled legal principle and considering that the taxes due on returned income were duly paid within the due date as per Section 139(1) of the Act, the ld.AR prayed that the interest u/s.234A of the Act is not warranted and ought to be deleted. 173. The ld.DR fairly agreed for the ld.AR’s prayer. 174. Upon due consideration of the submissions made by both parties and after reviewing the orders of the authorities, it is observed that the Circular issued by the CBDT specifies that the extension of dates for filing the return of income for the Assessment Year 2020-21 shall not apply to Explanation 1 of Section 234A of the Income-tax Act, 1961, in cases where the amount of tax on total income, as reduced by the amounts specified in clauses (i) to (vi) of sub-section (1) of Section 234A, exceeds rupees one lakh. 175. In the present case, as per the claim of the Ld. AR, the entire tax liability has been discharged within the original due date for filing the return of income, i.e., on or before 30.11.2021. 176. Therefore, in light of the above, we remit the matter back to the file of the AO for a limited purpose. The AO is directed to verify the taxes paid by the assessee and, upon satisfaction, delete the interest levied under Section 234A of the Income- tax Act, 1961, in accordance with the provisions of the law. 10. Levy of interest u/s.234B and 234C of the Act and short credit of TCS credit: AY 2021-22 – IT(TP)A 132/CHNY/2024 – Grounds 26 and 27 177. The ground relating to the levy of interest u/s.234B and 234C of the Act is consequential in nature. :-47-: IT(TP)A. Nos.50 & 132/Chny/2024 178. Regarding the short grant of TCS credit, the ld.AR prayed that a direction may be given to verify and allow the TCS credit as per the Form 26AS of the assessee. 179. Upon careful consideration of the submissions made by the Ld. AR, who has contended for the allowance of the entire credit of Tax Collected at Source (TCS) along with the consequential interest under sections 234B and 234C of the Act, for the Assessment Year 2021-22, we find merit in the plea. Consequently, we remit the matter back to the AO for an examination of the TCS claim made by the assessee. The AO is hereby directed to verify the TCS details and, upon satisfaction, grant the appropriate credit in accordance with the provisions of the Act. Furthermore, the AO shall compute consequential interest u/s.234B and 234C, as applicable, in accordance with the provisions. 180. In the result the appeals of the assessee for both A.Y. 2020-21 and 2021-22 are Partly Allowed. Order pronounced in the open court on 06th June, 2025 at Chennai. Sd/- Sd/- (मनु क ुमार िगįर) (MANU KUMAR GIRI) Ɋाियक सद˟/Judicial Member (एस. आर. रघुनाथा) (S. R. RAGHUNATHA) लेखासद˟/Accountant Member चेɄई/Chennai, िदनांक/Dated the 06th June, 2025 SP आदेश की Ůितिलिप अŤेिषत/Copy to: 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3.आयकर आयुƅ/CIT– Chennai/Coimbatore/Madurai/Salem 4. िवभागीय Ůितिनिध/DR 5. गाडŊ फाईल/GF "