Issues: Whether deduction under the first proviso to section 36(1)(viia)(a) of the Income-tax Act, 1961 is an alternative to deduction under the main clause and is unavailable once the main-clause deduction has been allowed.

Analysis: Section 36(1)(viia)(a) permits deduction for provisions for bad and doubtful debts within the prescribed ceiling, while the first proviso addresses provisions for assets classified under RBI guidelines as doubtful or loss assets. The expression "at its option" vests the choice of claiming the special statutory benefit in the assessee and cannot be treated as surplusage. Reading the proviso as an alternative mechanism controlled by the Assessing Officer would deprive that expression of operative effect. The proviso, enacted to address banking-sector provisioning for specified assets, must receive effect within its express factual requirements and statutory limits.

Conclusion: The first-proviso deduction is not automatically exhausted or barred merely because deduction under section 36(1)(viia)(a) has been allowed. The issue is answered in favour of the assessee, subject to satisfaction of the prescribed conditions, RBI classification requirement and statutory ceiling.

Issues: (i) Whether the bond and bank-guarantee requirements for provisional release of the seized consignment required modification; (ii) Whether demurrage and other charges on the detained consignment were liable to be waived.

Issue (i): Whether the bond and bank-guarantee requirements for provisional release of the seized consignment required modification.

Analysis: The tariff value justified securing the assessable value through a bond. However, fine and penalty would become recoverable only if the investigation established the Revenue's case and after the consequential litigation; their quantification at the provisional-release stage was premature. The previous final clearance of a consignment from the same exporter on the basis of a certificate of origin also supported recalibration of the security conditions.

Conclusion: The issue was determined partly in favour of the assessee. Provisional release was made subject to a bond of Rs.9,05,73,295 and a bank guarantee of Rs.1,00,00,000.

Issue (ii): Whether demurrage and other charges on the detained consignment were liable to be waived.

Analysis: Regulation 6(1)(l) prohibits a Customs Cargo Service Provider from charging rent or demurrage on goods that are seized, detained or confiscated, subject to any other applicable law.

Conclusion: The issue was determined in favour of the assessee. Complete waiver of demurrage and other charges for the detained consignment was directed.

Final Conclusion: The provisional-release safeguards were recalibrated to protect revenue without requiring security for unascertained penal liabilities, and the detained consignment was entitled to waiver of demurrage and related charges.

Ratio Decidendi: Security for provisional release must adequately protect revenue, but cannot be fixed by prematurely quantifying fine and penalty before investigation establishes the underlying liability.

Issues: (i) Whether the show-cause notice was invalid because it was issued by an Assistant Commissioner and later corrected by corrigendum, and for want of pre-notice consultation; (ii) Whether differential customs duty could be demanded under Section 28 without first challenging self-assessment; (iii) Whether the imported CKD e-bike components were classifiable as complete electrically operated motorcycles under CTH 87116020; (iv) Whether the goods qualified for concessional duty under Serial No. 531A(1), or alternatively Serial No. 531A(2), of Notification No. 50/2017-Customs dated 30.06.2017; (v) Whether confiscation and penalty were sustainable.

Issue (i): Whether the show-cause notice was invalid because it was issued by an Assistant Commissioner and later corrected by corrigendum, and for want of pre-notice consultation.

Analysis: An officer designated as an officer of customs under Section 2(34) of the Customs Act, 1962 is a proper officer for the assigned function. A corrigendum issued before adjudication that merely corrected the clause making the notice answerable to the Principal Commissioner caused no prejudice and related back to the notice. The record also showed receipt of the pre-consultative letter.

Conclusion: The show-cause notice and adjudication proceedings were valid, against the assessee.

Issue (ii): Whether differential customs duty could be demanded under Section 28 without first challenging self-assessment.

Analysis: Recovery proceedings for duty not levied or not paid under Section 28 of the Customs Act, 1962 are distinct from refund proceedings. The existence of self-assessment did not bar issuance of a notice for recovery of differential duty.

Conclusion: Differential duty could be demanded under Section 28 without prior challenge to self-assessment, against the assessee.

Issue (iii): Whether the imported CKD e-bike components were classifiable as complete electrically operated motorcycles under CTH 87116020.

Analysis: Rule 2(a) of the General Rules for the Interpretation of the First Schedule to the Customs Tariff Act, 1975 requires classification by the identity and essential character of goods as presented for assessment. An incomplete vehicle may retain the essential character of a complete vehicle despite absence of items such as a battery or charger. The imported goods were declared as e-bikes in CKD condition with pre-assembled essential parts and components.

Conclusion: The goods possessed the essential character of complete electrically operated motorcycles and were correctly classified under CTH 87116020, against the assessee.

Issue (iv): Whether the goods qualified for concessional duty under Serial No. 531A(1), or alternatively Serial No. 531A(2), of Notification No. 50/2017-Customs dated 30.06.2017.

Analysis: The exemption under Serial No. 531A(1) required a knocked-down kit containing all necessary components for assembly of the complete vehicle. Battery packs, chargers and electric compressors were admittedly not imported. The alternative exemption had not been claimed in the Bills of Entry and could not be claimed subsequently.

Conclusion: The claimed concessional and alternative exemption benefits were unavailable, against the assessee.

Issue (v): Whether confiscation and penalty were sustainable.

Analysis: Confiscation under Section 111(m) of the Customs Act, 1962 and imposition of redemption fine are legally distinct. The absence of redemption fine did not invalidate confiscation or the penalty under Section 112(a)(ii) of the Customs Act, 1962.

Conclusion: The confiscation and penalty were sustainable, against the assessee.

Final Conclusion: The denial of the claimed exemption and the consequential customs liability were maintained.

Issues: Whether the impugned orders, being consequential implementation of prior binding appellate directions, warranted appellate interference.

Analysis: The order under challenge merely reiterated earlier appellate directions, already affirmed by the Supreme Court, and supplied no independent factual or legal finding affecting the merits of the company petition. The connected directions were consequential compliance measures. Entertaining the challenge would indirectly reopen the affirmed appellate directions.

Conclusion: The consequential orders did not warrant appellate interference and remain governed by the finality of the prior affirmed directions.

Issues: Whether cancellation, refund and no-show charges recovered by an airline from passengers constitute consideration for a distinct declared service of agreeing to tolerate an act.

Analysis: Section 66E(e) of the Finance Act, 1994 applies where an agreement is intended to tolerate an act for consideration. The passenger-airline contract is intended for carriage of the passenger in return for fare; cancellation charges operate only upon the passenger's failure to perform that contract. Such charges are liquidated damages compensating the airline for breach and do not arise from a separate agreement to tolerate cancellation or default. The absence of a service charge makes the question of abatement immaterial.

Conclusion: Cancellation, refund and no-show charges are compensation for breach of contract and are not taxable as consideration for tolerating an act under Section 66E(e) of the Finance Act, 1994.

Issues: Whether tender fee collected for supplying tender documents is consideration for a taxable service liable to service tax.

Analysis: Service tax under Section 65B(44) of the Finance Act, 1994 requires an identifiable service provided for consideration. The prescribed tender fee was the cost of supplying tender documents and constituted sale or supply of documents, rather than a service rendered to bidders. A tender is merely an invitation to offer and does not create a contractual service arrangement between the tendering authority and every purchaser of tender documents.

Conclusion: Tender fee collected towards supply of tender documents is not consideration for a taxable service and is not liable to service tax; decided in favour of the assessee.

Issues: Whether the extended period of limitation could be invoked for recovery of service tax from a subcontractor where conflicting decisions had created uncertainty about the subcontractor's tax liability after payment of tax by the main contractor.

Analysis: The substantive tax liability of a subcontractor stood settled by the Larger Bench decision. However, prior conflicting Tribunal decisions had generated genuine uncertainty on whether a subcontractor was independently liable where the main contractor had paid service tax. This acknowledged confusion supported the appellant's bona fide belief and precluded invocation of the extended limitation period under Section 73(1) of the Finance Act, 1994. The normal limitation period remained unaffected.

Conclusion: The extended-period demand and the penalty under Section 78 of the Finance Act, 1994, were set aside; the demand for the normal period and the penalty under Section 72 of the Finance Act, 1994, were sustained. The issue was decided partly in favour of the assessee.

Issues: (i) Whether the relevant date for limitation of refund of accumulated CENVAT credit attributable to export of services is the date of the export invoice or the last day of the quarter in which foreign exchange is received; and (ii) Whether refund of CENVAT credit can be denied solely because the invoices relate to unregistered premises.

Issue (i): Whether the relevant date for limitation of refund of accumulated CENVAT credit attributable to export of services is the date of the export invoice or the last day of the quarter in which foreign exchange is received.

Analysis: Rule 5 of the CENVAT Credit Rules, 2004, read with Notification No. 27/2012-C.E. (N.T.) dated 18.06.2012, governed the refund. Although Section 11B of the Central Excise Act, 1944 applied to such refund claims, it did not prescribe a specific relevant date for export of services. The applicable principle fixed the relevant date as the last day of the quarter in which the export proceeds were received in foreign exchange. The date of the export invoice could not invariably be adopted, and the prospective character of the subsequent notification did not displace that principle.

Conclusion: The one-year limitation is to be reckoned from the last day of the quarter in which foreign exchange is received, and not from the date of the export invoice. The issue is decided in favour of the assessee.

Issue (ii): Whether refund of CENVAT credit can be denied solely because the invoices relate to unregistered premises.

Analysis: Rule 5 of the CENVAT Credit Rules, 2004, did not make registration of the premises a prerequisite for refund of unutilised CENVAT credit attributable to exported services. The requirement concerning the jurisdictional authority for filing the refund application could not operate as a prohibition on refund merely because the premises from which services were exported were unregistered. The jurisdictional High Court ruling on this point was binding.

Conclusion: Refund cannot be denied merely because the invoices pertain to unregistered premises. The issue is decided in favour of the assessee.

Final Conclusion: The limitation objection based on the export-invoice date and the objection based solely on non-registration of premises cannot defeat the refund claim.

Issues: (i) Whether service tax on construction of the residential complex was sustainable under Construction of Residential Complex Service; (ii) Whether receipts accounted for as sub-contract and petty job receipts were liable to service tax under the same category; and (iii) Whether the demand under Renting of Immovable Property Service was sustainable.

Issue (i): Whether service tax on construction of the residential complex was sustainable under Construction of Residential Complex Service.

Analysis: The statutory definition of a residential complex required proof that the prescribed conditions, including the number of dwelling units, were satisfied. The material did not establish that the additional units were constructed by, or attributable to, the appellant. Further, the Explanation inserted in Section 65(105)(zzzh) with effect from 01.07.2010 could not be retrospectively applied to construction undertaken before that date. The contracts were composite contracts involving goods and services; such contracts could not be taxed under the construction-service categories, which applied to services simpliciter.

Conclusion: The construction-service demand was unsustainable, in favour of the assessee.

Issue (ii): Whether receipts accounted for as sub-contract and petty job receipts were liable to service tax under the same category.

Analysis: The receipts were treated as consideration for construction services without establishing their precise nature or that they represented independently taxable services simpliciter. The absence of documents from the appellant did not displace the Department's obligation to prove the taxable service and its legal basis. The reasoning applicable to composite works contracts also precluded their taxation under the construction-service category.

Conclusion: The demand on sub-contract and petty job receipts was unsustainable, in favour of the assessee.

Issue (iii): Whether the demand under Renting of Immovable Property Service was sustainable.

Analysis: Commercial letting alone did not establish the amount of tax payable. The eligibility for small service provider exemption, year-wise rental receipts, and the asserted tax payment on later receipts required verification. The allegations were not supported by sufficient evidence or cogent rebuttal of these matters; consequently, the evidentiary benefit enured to the appellant.

Conclusion: The demand under Renting of Immovable Property Service was unsustainable, in favour of the assessee.

Final Conclusion: The construction-related and rental demands lacked a sustainable legal and evidentiary basis, and the associated penalties could not survive.

Issues: (i) Whether sewage and drainage pumps were eligible for the concessional duty rate under Entry No. 235 of Notification No. 12/2012-C.E. dated 17.03.2012; (ii) Whether the earlier audit objection or the principle of res judicata precluded Revenue from denying the concessional rate; (iii) Whether the penalty imposed for availing the concessional rate was sustainable.

Issue (i): Whether sewage and drainage pumps were eligible for the concessional duty rate under Entry No. 235 of Notification No. 12/2012-C.E. dated 17.03.2012.

Analysis: Entry No. 235 grants the concessional rate only to power-driven pumps primarily designed for handling water. As the expression "water" is undefined, it was construed in its common and commercial sense as clean water, and not as sewage or drainage water. A claimant for a concessional notification must establish clear compliance with its conditions. The material showed that sewage and drainage pumps had a different design and manufacturing process from pumps for handling water; the engineer's certificate only stated that the pumps could also handle clean water and did not establish design similarity.

Conclusion: Sewage and drainage pumps were not eligible for the concessional rate under Entry No. 235; the differential duty and applicable interest were rightly sustained, against the assessee.

Issue (ii): Whether the earlier audit objection or the principle of res judicata precluded Revenue from denying the concessional rate.

Analysis: The audit objection was neither implemented through adjudication nor accepted by the assessee, which continued to pay duty at the full rate until March 2016. It therefore did not constitute a concluded determination capable of binding Revenue. Further, res judicata does not apply to distinct tax periods in the manner asserted, and a different position may be adopted where the prior view is not a binding final decision.

Conclusion: The earlier audit objection did not bar Revenue from denying the concessional rate, against the assessee.

Issue (iii): Whether the penalty imposed for availing the concessional rate was sustainable.

Analysis: The assessee had initially paid duty at the full rate and began claiming the concession after the audit objection. Revenue subsequently reversed its position and demanded differential duty. These circumstances did not disclose evidence warranting the penalty retained by the appellate authority.

Conclusion: The penalty was unsustainable and was set aside, in favour of the assessee.

Final Conclusion: The differential duty together with interest remains enforceable, while no penalty is exigible.

Ratio Decidendi: A claimant for a concessional excise notification must establish strict satisfaction of its conditions, and an undefined product expression is to be understood in its common-parlance meaning.

Issues: (i) Whether the claimed transitional input tax credit attributable to input services, exceeding the closing balance reflected in the ER-1 and ST-3 returns, required verification. (ii) Whether the notice under section 74(1) could be sustained on the alleged wilful misstatement or suppression of facts.

Issue (i): Whether the claimed transitional input tax credit attributable to input services, exceeding the closing balance reflected in the ER-1 and ST-3 returns, required verification.

Analysis: Section 140(1) permits carry-forward of eligible credit under the existing law. The difference between the credit declared in TRAN-1 and the balance reported in the pre-GST returns required verification against the relevant records before entitlement could be determined.

Conclusion: The transitional credit claim is to be verified by the Proper Officer/Adjudicating Authority through a reasoned order.

Issue (ii): Whether the notice under section 74(1) could be sustained on the alleged wilful misstatement or suppression of facts.

Analysis: Invocation of section 74(1) requires material establishing fraud, wilful misstatement, or suppression of facts with a deliberate intent to evade tax. Mere incorrect information or an ordinary non-declaration does not by itself establish those elements. No investigation or evidence establishing such deliberate intent was on record.

Conclusion: The notice issued under section 74(1) was not sustainable, in favour of the assessee.

Final Conclusion: The transitional-credit claim remains subject to factual verification, but the fraud-based notice cannot be maintained.

Ratio Decidendi: An incorrect declaration, without material evidence of a deliberate intent to evade tax, does not establish wilful misstatement or suppression of facts for invoking section 74(1).

Issues: Whether the extended period of limitation could be invoked on an allegation of suppression of facts.

Analysis: The differential demand arose from an audit-based verification of the assessee's books of account and invoices, with a prior departmental communication quantifying the liability. The record disclosed no material establishing deliberate suppression of facts or an intent to evade tax. Mere delayed payment and detection upon scrutiny of accounts were insufficient to invoke the extended period of limitation. A show-cause notice issued beyond the normal limitation period raises a jurisdictional challenge and cannot sustain the demand.

Conclusion: The extended period of limitation was not invocable; the show-cause notice and consequential demand were time-barred, in favour of the assessee.

Issues: (i) Whether the assessee's available pre-GST ITC must be adjusted against GVAT and CST liabilities before determining the balance eligible for transition; (ii) Whether VAT authorities may deny that set-off by reference to ITC declared in FORM GST TRAN-1, or whether excess transitional credit must be addressed by GST authorities.

Issue (i): Whether the assessee's available pre-GST ITC must be adjusted against GVAT and CST liabilities before determining the balance eligible for transition.

Analysis: The admitted surplus ITC under the pre-GST regime was available for adjustment against the outstanding liabilities under the GVAT Act and the CST Act. The adjustment had to be made before calculating the balance ITC capable of being carried forward into the GST regime. The direction for fresh determination on that basis was therefore consistent with the applicable set-off principle.

Conclusion: The available pre-GST ITC must first be set off against GVAT and CST liabilities; the finding is in favour of the assessee.

Issue (ii): Whether VAT authorities may deny that set-off by reference to ITC declared in FORM GST TRAN-1, or whether excess transitional credit must be addressed by GST authorities.

Analysis: Rule 117(3) of the GST Rules, 2017 permits credit declared in FORM GST TRAN-1 to be credited to the electronic credit ledger. Rule 121 of the GST Rules, 2017 provides the GST mechanism for verification and action concerning wrongly availed credit through Sections 73 or 74 of the GST Act. The VAT authorities could inform the competent GST officer of any excess credit transitioned, but could not use the TRAN-1 declaration to deny adjustment of ITC against liabilities arising under the pre-GST enactments.

Conclusion: Any wrongly transitioned ITC is to be dealt with under the GST framework, and cannot defeat the assessee's pre-GST ITC set-off; the finding is in favour of the assessee.

Final Conclusion: Pre-GST tax liabilities must be adjusted from available pre-GST ITC, and only the resulting balance is eligible for transition; the legality of any excess transitional credit falls for action by the GST authorities.

Ratio Decidendi: A VAT authority cannot deny statutory set-off of available pre-GST input tax credit by relying on credit transitioned through FORM GST TRAN-1, since verification and recovery of wrongly availed transitional credit lie within the GST statutory mechanism.

Issues: Whether dumpers and tippers deployed for transportation integral to composite mining contracts qualify for higher depreciation as vehicles used in the business of running them on hire.

Analysis: Section 32(1) of the Income-tax Act, 1961 and sub-item 2(ii) of Item III of Appendix I to the Income-tax Rules, 1962 allow higher depreciation for motor lorries used in the business of running them on hire. CBDT Circulars No. 609 and No. 652 clarify that the benefit extends to motor lorries used in the assessee's own business of transporting goods on hire, but not in a non-hiring business. The contractual terms established that excavation, loading, transportation, dumping and related operations formed an integrated composite mining contract; the minerals and overburden belonged to the mine owners, and the assessee's dumpers and tippers were deployed to transport those materials under the contractual obligations. These facts brought the case within the applicable principle governing equipment and vehicles supplied on hire for mining and transportation operations, and were materially distinct from cases involving merely occasional hiring or vehicles used ancillary to a different principal business.

Conclusion: Dumpers and tippers used for transportation under the composite mining contracts were used in the business of running them on hire and qualified for depreciation at the higher rate of 30%.

Issues: Whether the 89-day delay in filing the statutory appeal against the assessment order should be condoned and the appellate rejection set aside.

Analysis: The appeal was rejected because it was filed beyond the condonable period. The explanation that the petitioner's accountant was seriously ill and therefore failed to access the portal and communicate the assessment order was accepted as genuine. The admitted recovery of 24.36% of the disputed tax was also taken into account while prescribing the deposit required for restoration of the appellate remedy.

Conclusion: The delay of 89 days was condoned and the appellate rejection was set aside, subject to payment of the balance required to make up 25% of the disputed tax after adjusting the amount already recovered. The appellate authority must take the appeal on record and decide it on merits after affording personal hearing.

Outcome: The appeal was allowed, the impugned order was set aside, and the writ petition was restored for consideration.

Issues: (i) Whether a cost-free corporate guarantee to a foreign associated enterprise constitutes an international transaction; (ii) What arm's-length commission rate applies to the guarantee; (iii) Whether the sales commission paid to the foreign associated enterprise was disallowable for non-deduction of tax at source.

Issue (i): Whether a cost-free corporate guarantee to a foreign associated enterprise constitutes an international transaction.

Analysis: The Explanation to section 92B, introduced by the Finance Act, 2012, addresses guarantees. Binding precedent identified inherent risk and enhanced creditworthiness for the associated enterprise notwithstanding the absence of an immediate cost.

Conclusion: The corporate guarantee is an international transaction. The issue is against the assessee.

Issue (ii): What arm's-length commission rate applies to the guarantee.

Analysis: The arm's-length rate was benchmarked by reference to a High Court decision and other tribunal decisions concerning corporate guarantees.

Conclusion: The guarantee commission is to be computed at 0.5% instead of 1%. The issue is in favour of the assessee.

Issue (iii): Whether the sales commission paid to the foreign associated enterprise was disallowable for non-deduction of tax at source.

Analysis: Section 195 requires withholding only where the payment is chargeable to tax in India. An adopted earlier decision on the same agreement treated the marketing commission as outside the treaty's fees-for-included-services category; no change in facts or law was identified.

Conclusion: The sales commission is not disallowable for non-deduction of tax at source. The issue is in favour of the assessee.

Final Conclusion: The guarantee remains within the transfer-pricing regime at a reduced commission rate, while the sales commission is not subject to disallowance for non-withholding.

Ratio Decidendi: A corporate guarantee furnished without charge to an associated enterprise is an international transaction subject to arm's-length pricing.

Issues: Whether a show-cause notice issued after omission of Rule 89(4B) of the Central Goods and Services Tax Rules, 2017, without a saving clause, had statutory validity.

Analysis: Rule 89(4B) had been omitted by notification dated 08.10.2024 without any saving clause. Omission of a rule without a provision preserving pending or subsequent proceedings renders the omitted rule unavailable as a statutory basis for action. The impugned notice, issued on 02.12.2025 after the omission, was therefore unsupported by any extant statutory authority.

Conclusion: The show-cause notice was non est in law and was quashed.

Issues: Whether the ITAT could reject a rectification application under Section 254(2) of the Income-tax Act, 1961 by introducing new grounds and reappreciating matters beyond a mistake apparent from the record.

Analysis: Section 254(2) confines rectification jurisdiction to correcting a mistake apparent from the record and does not permit a review on merits or reappreciation of the matter. The rejection relied on new considerations concerning distributor confirmations and patterns of cash receipts, which did not form the basis of the rectification grounds or the original appellate order.

Conclusion: The ITAT exceeded its rectification jurisdiction under Section 254(2) in rejecting the application on new grounds, in favour of the assessee.

Issues: (i) Whether the IT segment's AE and non-AE transactions could be separately benchmarked; (ii) Whether the transfer-pricing adjustment could be computed at entity level rather than confined to AE international transactions; (iii) Whether an upper turnover filter of Rs. 200 crore had to be applied in selecting IT comparables; and (iv) Whether the disallowance under section 14A read with rule 8D was correctly computed.

Issue (i): Whether the IT segment's AE and non-AE transactions could be separately benchmarked.

Analysis: Under the TNMM, rule 10B(1)(e)(i) requires comparison of the net profit margin from the international transaction with the AE, while rule 10B(2) requires consideration of functions, assets and risks. The segmental profit and loss account formed part of the transfer-pricing study and was subsequently certified. Audit of segmental accounts is not mandatory, and the absence of audit did not justify rejection of the segmentation. The AE and non-AE segments had materially different risk profiles and margins; a blended margin distorted the tested international transaction. The same segmentation had also been accepted for the ITeS segment and in other years without any identified change in facts.

Conclusion: Segmentation of the AE and non-AE IT transactions must be accepted for benchmarking purposes, in favour of the assessee.

Issue (ii): Whether the transfer-pricing adjustment could be computed at entity level rather than confined to AE international transactions.

Analysis: Arm's length price determination concerns income arising from international transactions with AEs. An entity-level margin and adjustment that include domestic and other non-AE transactions do not measure the margin of the controlled international transaction.

Conclusion: Any transfer-pricing adjustment must be confined to AE international transactions and cannot be computed at entity level, in favour of the assessee.

Issue (iii): Whether an upper turnover filter of Rs. 200 crore had to be applied in selecting IT comparables.

Analysis: Turnover materially affects assets, risks, scale and operating margins. Large enterprises with substantially higher turnover are not comparable to a smaller captive service provider merely because they operate in the same broad software-services field.

Conclusion: An upper turnover filter of Rs. 200 crore must be applied while selecting comparables and recomputing the arm's length price, in favour of the assessee.

Issue (iv): Whether the disallowance under section 14A read with rule 8D was correctly computed.

Analysis: The assessee's shareholder funds substantially exceeded its investments; therefore, interest expenditure was not liable to disallowance under rule 8D(2)(ii). For rule 8D(2)(iii), only investments capable of yielding exempt income may be included, rather than all investments indiscriminately.

Conclusion: The interest-component disallowance is not warranted, and the indirect-expense component must be recomputed using only exempt-income-yielding investments after verification, in favour of the assessee.

Final Conclusion: The arm's length price and the exempt-income expenditure disallowance require fresh computation on the stated segmental, comparability and investment bases.

Ratio Decidendi: Under the TNMM, benchmarking and any consequential transfer-pricing adjustment must be based on the AE international transaction, not on a blended entity-level margin that includes non-AE transactions having materially different functional and risk profiles.