TaxTMI 
TaxTMI 
2026 (7) TMI 737
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....has manufacturing plant in Pulivalam Village, Vellore district, Tamil Nadu with the facility to manufacture a wide range of turbo chargers for engine applications in passenger car and commercial vehicles off-highway vehicles and industrial engines. The Company is also having a fully automated plant at Payyanur near Chennai and an assembly plant at Baroda. 3. The assessee filed its return of income for AY 2021-22, which was processed u/s. 143(1) of the Act and was picked up for scrutiny assessment under CASS. During the scrutiny assessment proceedings, the Transfer Pricing Officer ('TPO') and the Assessing Officer ('AO') made certain adjustments / disallowances to the assessee's declared income. Against the draft assessment order of the AO, the assessee filed its objections before the Dispute Resolution Panel ('DRP') for AY 2021-22. The DRP upheld the transfer pricing adjustments. 4. Below is the summary of the adjustments made during the AY 2021-22: Sr.no. Head of Adjustment Amount (in Rs.) 1 Upward adjustment towards margin earned from manufacturing segment Rs.11,72,92,000/- 2 Upward adjustment towards interest on overdue receivables Rs.39,26,981/-....
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....transaction would be at arms length. The next contention of the assessee in relation to the PLI is that even with TPS exclusion of miscellaneous expenditures for the comparable and the assessee, the margins of the assessee will be at arms length as the margins of the assessee will be at 12.31% which is higher than the mean value of the comparable companies [refer page 8 and Annexure 1 of paper book]. The last contention in relation to the PLI computation is that the TPO erred in treating the export incentive as non-operating. In this regard, the Ld. AR has relied on 3 decisions: 1. The Chennai Tribunal in ZF Rane Automobile India Private Limited v. DCIT in IT(TP)A No.53/Chny/2024 dated 04.08.2025 2. The Chennai Tribunal in M/s. Greenland Exports Private Limited v. DCIT ITA No.514/Mds/2016 dated 21.09.2016 3. The Hon'ble High Court of Bombay in CIT V. Welspun Zucchi Textiles Limited (2017) 292 CTR (Bom) 1 5.3 Per contra, the Ld. DR relied on the orders of the DRP and TPO and prayed that the PLI computation undertaken is reasonable and on the basis of the information available in public domain and therefore the same need be interfered with at this stage.....
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....ions filed by the Assessee that all 4 companies pass the 25% RPT filter applied by TPO, the ld.DRP called for a remand report from the TPO. In the remand report, the TPO has accepted that 2 comparable companies were passing the RPT filter and the balance 2 comparable companies i.e. Tata Toyo Radiator and Federal Moghal failed the RPT filter. The ld.DRP based on the remand report has excluded 2 comparable companies and included 2 comparable companies of the Assessee. The contention of the Assessee is that the TPO has not provided the basis of computation of 25% of RPT filter. As per the financials available, both 'Tata Toyo Radiator' and 'Federal Moghul' pass the 25% RPT filter test applied by the TPO. Therefore, the Ld.AR prayed that appropriate directions may be given to the TPO to reverify the RPT filter on the basis of the financials and then come to a conclusion whether these companies should be retained or not. 6.2 The Ld.DR objected to remand since the ld.DRP has already obtained remand report from TPO and as such there is no requirement to once again remit back the matter to the file of the TPO. 6.3 After considering the submissions of both the parties, we feel that th....
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....eld herein above at Para 5.5 that 'Miscellaneous Expenses' ought to be treated as operating expenses and as such the TPO is directed to recompute the margins of 'Agrasen' after considering the 'Miscellaneous Expenses' as operating in nature. Accordingly, this ground of appeal of the assessee is partly allowed. 8. Ground No.5: No basis for Interest on outstanding receivables charged by the TPO: 8.1 The TPO proposed an upward adjustment towards notional interest on outstanding receivables to the extent of Rs.39,26,981/-. Against the draft assessment order, the assessee filed its objections before the ld.DRP and the ld.DRP had issued directions confirming the adjustment proposed by TPO. Subsequently, the AO passed the final assessment order against which the assessee has filed this appeal before us. 8.2 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 b....