TaxTMI 
TaxTMI 
2026 (4) TMI 1293
X X X X Extracts X X X X
X X X X Extracts X X X X
.... raised various grounds of appeal which are disposed of together for convenience. 3. Facts of the Case are that the assessee, BorgwWarner Cooling Systems (India) Private Limited ("BCSIPL"), is a wholly-owned subsidiary of BorgWarner Thermal Systems Inc., USA and part of the BorgWarner global group. The assessee is engaged in the manufacture and sale of automotive viscous and visctronic fan drives and plastic fans from its facility at Sriperumbudur, Chennai. The AEs provide base product technology, proprietary designs, CAD models and validation documents to BCSIPL. Based on such technology, the assessee interacts with OEM customers and undertakes customer-specific customisation for finalising product design. Owing to ownership of the intellectual property, AEs necessarily review and validate the customised design, conduct testing and issue validation reports enabling BCSIPL to proceed with customer launch. The AEs also provide management services, including support in commodity strategy formulation, procurement support, supplier coordination, IT security enhancements, inventory planning and cash-flow optimisation. These services are claimed to be integral to the assessee's ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s (OEMs) to explain how they could partner on new vehicle launches. The customers evaluate the technology, based on their vehicle specifications such as load carrying conditions, cooling requirements etc. These requirements would be customer specific and will vary according to the engine room available and how customer would like to design their engine packaging. The major changes that would be required to make the product fit for purpose to local geographic conditions would include but not limited to, shaft design and fank disk mounting based on customer mounting concept, fluid viscosity etc. Based on customer specific requirements, the product design needs to be tweaked/updated. Since the AE owns the technology, it is imperative that they are involved in validating the product tweaked for customer requirements. Hence, the AEs test the tweaked design and either suggest further changes or validate the same. As a mark of completion of testing, the relevant results and reports are shared to the assessee's team to take it back to customer to launch the product and add top-lion growth. (Page 226 of the appeal paper book, internal page 6 of the TPO's order) Further, AEs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ting cost, whereas the comparable companies has earned an arithmetic mean margin of 11.27 Percent on operating cost. The same has been detailed in pages 131, 351 & 352 of the factual paper book dated 5 March 2025, submitted before your Honour's. c) Comparable data: Companies engaged in manufacturing of engine cooling systems in India. Grounds of Appeal iii) Judicial Precedents relied upon by the assessee A. TP adjustment in relation to disallowance of management and testing & validation charges Grounds of appeal Judicial Precedents Ground of Appeal 4 Rejection of the combined TNMM approach adopted by the Assessee in benchmarking the subject transactions * Bonfiglioli Transmissions Private Limited [TS-388-ITAT-2018(CHNY)-TP) (The relevant extract of the ruling is provided vide Para 10 at Page 12 of the Case law paper book) * Siemens Gamesa Renewable Power Pvt Ltd [ITA Nos., 1420 & 376/Mds/2017) (The relevant extract of the ruling is provided vide Para 20.2 at Page 114 of the Caselaw paper book) Ground of Appeal 5 Arbitrarily applying "Other method" under Rule 10AB Durr India Private Limited (ITA Nos. 754/Mds/2014, 972/Mds/2015, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... only after netting off receivables with outstanding payables to AEs/advances from AEs * Contitech India Pvt Ltd (ITA No 370/Del/2015) (The relevant ruling is provided vide Para 21, 22 at Page Nos. 389 and 390 of the Case law paper book) * Jewellmark India Pvt. Ltd (ITA No.432/M/2014) (The relevant extract of the ruling is provided vide Para 8 of Page No 395 of the Case law paper book) C. Rebuttal against contentions of the Ld. Department Representatives (Ld.DR) during dated 3rd July, 2025 Argument of Learned Department Representatives Contention of the assessee The Ld. Departmental Representative (DR) placed reliance on the judgment of the Hon'ble Supreme Court in the case of SAP Labs India Private Ltd., contending that the Assessee's reliance on various decisions rendered by Hon'ble Tribunals across India is misplaced, as each case must be adjudicated on its own facts and the cited orders do not constitute binding law of the land. The Assessee submits that the subject caselaw deals with absolute proposition of law and that in all cases where the Tribunal has determined the arm's length price (ALP) the same cannot be final and can be a su....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... real evidence of service receipt. 8. Assessee rebutted that this observation is incorrect and contrary to the material already filed (email evidence and annotated documents). 9. Our adjudication: 9.1 Rejection of Combined TNMM: We observe that the assessee's international transactions are highly integrated, forming part of a single value chain of product design -> validation -> manufacturing -> sales. Manufacturing cannot be separated from testing/validation or management support, which directly influences production efficiency and pricing. The comparable set accepted by the TPO for TNMM shows that the assessee's margin is substantially higher than industry comparables (42.98% vs 11.27%). In line with Bonfiglioli Transmissions Private Limited [TS-388-ITAT-2018(CHNY)-TP) (Para 10 at Page 12 of the Case law paper book) and Siemens Gamesa Renewable Power Pvt Ltd [ITA Nos., 1420 & 376/Mds/2017) (Para 20.2 at Page 114 of the Case law paper book), and several decisions of this Tribunal, when overall profitability demonstrates arm's length compliance, selective segregation is unwarranted. We accordingly hold that rejection of combined TNMM is unjustified. 9.2 ALP ....