TaxTMI 
TaxTMI 
2026 (9) TMI 685
X X X X Extracts X X X X
X X X X Extracts X X X X
....pute Resolution Panel dated 28 October 2025 for assessment year 2022-23. GROUDS OF APPEAL General Ground 1. The lower authorities' erred in finalizing an order of assessment which suffers from legal defects such as being passed in violation of principles of natural justice, contrary to the provisions of the Income Tax Act, 1961 (the Act"), barred by limitation, is devoid of merits, contrary to facts on record and applicable law and has been completed without adequate inquiries, therefore is liable to be quashed. 2 The lower authorities erred in rejecting the Transfer Pricing ("TP") documentation maintained by the Appellant, in good faith, as required under Section 92D of the Act read with Rule 10D of the Ru....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s only in 2 out of 3 consecutive years. Miscellaneous Grounds 8 The Ld. AO erred in levying interest and fees amounting to INR 0.03 crores for the Impugned A.Y. The Appellant prays that directions be given to grant all such relief arising from the grounds of appeal mentioned supra and all consequential relief thereto. The Appellant craves leave to add to and/or to alter, amend, rescind, modify the grounds herein above or produce further documents before or at the time of hearing of this Appeal. 2. The brief facts of the case are that the assessee, Tech Clarities Private Limited, formerly known as To Cheunglee Stationery Manufacturing Company Private Limited, is a private limited company engaged in the assembly ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....acturing segment. The controversy is twofold: first, whether export incentives, stated to be in the nature of MEIS/government export incentives, are to be treated as operating income while computing the assessee's PLI and secondly, whether Welspun Steel Limited and Ganesh Foundry & Castings Limited are to be excluded from the list of comparables merely on the ground that they incurred losses in 2 out of 3 years selected for computing the weighted average margins. 6. The assessee for the relevant year had benchmarked its international transactions under the Transactional Net Margin Method by selecting itself as the tested party and by adopting operating profit to total cost as the profit level indicator. The assessee selected nine com....
X X X X Extracts X X X X
X X X X Extracts X X X X
....omparables may not have such incentives or may operate mainly in domestic markets. 9. The Ld. Authorised Representative further placed reliance on the decision of the Hon'ble Bombay High Court in CIT v. Welspun Zucchi Textiles Ltd., held that export incentives are to be included as operating income while computing operating margins. The Ld. Authorised Representative consequently submitted that the assessee's margin ought to be recomputed by treating export incentives as operating income. The Ld. Authorised Representative also submitted that once, the export incentives are treated as operating income and the PLI of the assessee is recomputed, the other grounds shall be academic. 10. The Ld. Departmental Representative, on the o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f export incentives from operating income where the incentive is linked to the export activity and forms part of the operating results of the tested transaction. The comparability exercise under TNMM requires a commercial and operating comparison of margins. If export incentive is directly connected with the operating activity of the assessee, exclusion thereof would distort the operating margin of the tested party. Further, it may also be noted that the incentives received by comparable companies have been treated as operating income while computing the margins of comparable companies. 13. We therefore hold that the export incentives received by the assessee are to be treated as operating income for the purpose of computing the assessee....