TROUW NUTRITION INDIA PRIVATE LIMITED,POLEPALLY vs. ASSESSMENT UNIT, INCOME TAX DEPARTMENT

आयकर अपीलीय अधिकरण ’डी’ न्यायपीठ, चेन्नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH: CHENNAI माननीय श्री गगन गोयल लेखा सदस्य के समक्ष एवं श्री मनु कुमार धगरर, न्याययक सदस्य BEFORE HONOURABLE SHRI GAGAN GOYAL, ACCOUNTANT MEMBER AND SHRI MANU KUMAR GIRI, JUDICIAL MEMBER आयकर अपील सं./IT(TP)A No. 139/Chny/2024 यनिाारण वर्ा /Assessment Years: 2021-22 Trouw Nutrition India Private Limited, v. The Deputy Commissioner of Plot No. G 24, TSIIC Green Industrial Park Income Tax, Polepally Village, STN, Jadcherla H.O Corporate Circle-1(1) Polepally, Mahabub Nagar, Chennai. Telengana-509 301. [PAN: AADCH1311H] (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थी की ओर से/ Assessee by : None प्रत्यर्थी की ओर से /Revenue by : Mr. K. Jayaganesh, CIT Ld. DR सुनवाईकीतारीख/Date of Hearing : 30.07.2026 घोषणाकीतारीख /Date of Pronouncement : 18.09.2026 आदेश / O R D E R PER GAGAN GOYAL, AM: This appeal is filed by the assessee against the order bearing DIN & Order No. ITBA / AST / S / 143(3) / 2024-25 / 1068407662(1) dated 23.06.2022 of the Assessing Officer, for the assessment year 2021-22 passed in compliance to directions vide F.No.288/DRP-1/Bang/2023-24 dated 26.08.2024 of the Ld. DRP.

GROUDS OF APPEAL 1 That the DRP erred on facts and in law while disposing of the objections filed against the Draft Assessment Order dated 28 11 2023 which resulted in the impugned Assessment order issued by the AO u/s 143(3) r/w 144C (13) & 144B of the Income-tax Act (the Act) at a loss of Rs. 4, 66, 98,397/- as against the returned loss of Rs. 7, 32, 94,572/- 2 That the Ld. DRP/TPO erred on facts and in law in adjusting Rs 2,65,96,175/- to the income of the appellant on account of international transactions of imported goods and trade receivables by disregarding all the submissions made by the Appellant during the Transfer Pricing Assessment and more specifically submissions made during DRP proceedings 3 That the Ld. DRP/TPO erred on facts and in law in the choice of comparable companies made in disregard of the Appellant's claim that the companies chosen had high turnover and are functionally different and hence should not be considered as comparable with the Assessee a. The Ld. DRP/TPO erred on facts and in law in deciding that broad comparability in terms of the functions performed, is sufficient for comparability analysis It has been decided that in the case of the assessee, comparable are in a similar line of business such as companies engaged in the manufacture and trading of agro commodities, seafood products, poultry feed, dairy, etc. b. The Ld. DRP/TPO failed to take into note that the profit and risk analysis of the assessee with comparable companies providing dairy products and agro commodities are having material differences c. The Ld. DRP/TPO failed to follow the decision of High Court of Delhi in the case of Rampgreen Solutions Pvt Ltd Versus CIT (2015) 377 ITR 533 (Del) which held that while using TNMM, the search for comparables may be broadened by including comparables offering services/products which are not entirely similar to the controlled transaction/entity However, this can be done only if (a) the functions performed by the tested party and the selected comparable entity are similar including the assets used and the risks assumed, and (b) the difference in services/products offered has no material bearing on the profitability d. The Ld. DRP/TPO failed to decide on the fact that the comparable producing a diversified product range needs to be assessed based on the segmented financials, which is absent in many of the comparables e. The Ld. DRP/TPO erred in deciding that turnover does not materially affect the margins of the ALP, economies of scale are relevant only in capital-intensive companies, therefore when a company is functionally similar to that of the assessee, the same cannot be excluded merely because its turnover was at a higher level or lower level. The Ld. DRP/TPO failed to note that in the case of Galax E Solutions India Pvt Ltd vs DCIT, the ITAT Bangalore held that. 16 As we have already noticed the first decision on the issue of application of turnover filter was rendered by the ITAT Bangalore Bench in the case of Genesis Integrating Systems (India) Pvt Ltd. v No. 1231/Bang/2010, relying on Dun and Bradstreet's analysis held grouping of companies having turnover of Rs 1 crore to Rs 200 c comparable with each other was held to be proper The Tribunal hold that size matters in business. A big company would be in a position to bargain the price and also attract more customers. It would also have a broad base of skilled employees who are able to give better output. A small company may not have these benefits and therefore, the turnover also would come down reducing profit margin The Tribunal held for the purpose of classification of companies on the basis of net sales or turnover a reasonable classification has to be made and in this regard relied on classification by Dun & Bradstreet & Bradstreet and NASSCOM and approved the classification made by Dun & Bradstreet as more suitable and reasonable. Therefore, companies who fall within the group of Rs 1 crore to Rs. 200 Crores cannot be compared with companies whose turnover fall in the range of Rs.200 to Rs 500 Crores and above. It was also held in the case of Autodesk that the decisions rendered later on the point of turnover at 10 times that of the Assessee have to be regarded as per in cunum the law laid down in the case of Genisys Integrating Systems Therefore, the Assessing Officer shall not consider a company having a turnover difference of 90 crores to 700 crores, since such companies are in better bargaining power 4 That the Ld. DRP/TPO erred on facts and in law in not appreciating that the appellant has incurred losses because of huge fluctuation in the exchange rate of INR against foreign currency a. The Ld. DRP/TPO failed to consider the reliance placed by the appellant in the case of Honda Trading Corp India Pvt Ltd vs ACIT (2013 (6) TMI 184 ITAT DELHI), in which the Hon'ble Tribunal Delhi held that huge fluctuation in the foreign exchange favouring the foreign currency can be treated as a non-operating expense for the purpose of calculation of ALP b. The Ld. DRP erred in law by not considering the submissions of the appellant before the DRP. The Hon'ble DRP has merely reiterated the submissions of the Appellant in the Directions and the same has not been adjudicated by considering the submissions of the Appellant. 5 That the Ld. DRP erred on facts and in law, the DRP erred in upholding the levy of Interest on the average of the total trade receivables, between opening and closing, in disregard of the submissions of the appellant. a. Prima facie the levy of notional Interest on the receivables from AE without proving the comparable companies have levied/received itself, is incorrect, this is a settled legal position. b. Without prejudice to the above, the DRP erred in arriving average by adding OB and CB of the trade receivables, to levy interest instead of identifying the actual receivables pending from AE c. The Ld. DRP/TPO erred by disregarding the submission submissions were specifically discerning the receivables from the related party from the total recoverable d. The Ld. DRP/TPO failed to appreciate the fact that the total trade receivables of the appellant is only 28.40 crores and as per the international transaction made with the AE and non-AE in the financials and the ageing provided by the assessee, the receivables pending from the AE are only 147 crores thus the calculation of interest on the average of the total receivables is absolutely unsustainable in the eyes of the law e. The Ld. DRP/TPO erred in law by treating all the trade receivables of the Appellant in the purview of international transactions f. The Ld. DRP/TPO acted upon his own discretion arbitrarily to conclude that interest is chargeable for the entire trade receivables when the receivables from the AE transaction were limited to 1.47 Crores which is hardly 5% of the total g. The DRP failed to adjust/setoff the amount pending as payable to the AEs before calculating the interest deemed to have been earned from trade receivables h. The appellant submits that in the case of Microchip Technology (India) Private Ltd vs DCIT Hyderabad, it has been held by this Hon'ble Tribunal that 20. In so far as the prayer of the assessee in respect of set off of the trade receivables and payables and the deemed interest thereon, is concerned. learned AR placed reliance on the decision of the coordinate Bench in the case of Coim India Pvt Ltd Vs. DCIT in ITA No 495/Del/2021 We find it reasonable because when the assessee has both trade receivables and trade payables, it would be unreasonable to calculate interest only on trade receivables for the purpose of determining the ALP of the transaction t would be in the interest of justice to direct the learned Assessing Officer/learned TPO to consider both trade payables and trade receivables for the purpose of notional interest to be charged for determining the ALP value of the transaction. We hold and direct so i. The Assessing Officer/DRP erred in not appreciating that the Appellant Assessee has maintained complete uniformity and has not charged any interest from both related and unrelated parties and hence there is no differential treatment between the alleged AE and other parties Prayer In view of the above submissions, arguments advanced and cases cited, it is respectfully prayed to remand back the Impugned Assessment Order a. To Ld. TPO/AO directing to consider the submission concerning the ageing of receivables, data submitted regarding receivables pending from AE and non-AE, and to allow us to submit any other documents/certificates to demonstrate the quantum of trade receivable pending AE b. To Ld. TPO/AO for considering both trade payables and trade receivables for the purpose of notional interest to be charged for determining the ALP value of the Trade receivables c. To Ld. TPO/AO for re-computation of the operating margin of the assessee after considering the submissions wherein each comparable has been distinguished with details, how the same is not comparable. d. To Ld. TPO/AO to eliminate those comparable that are functionally dissimilar huge turnover compared with the tested party, etc e. To Ld. TPO/AO, allow Extraordinary FOREX Loss as non-operative and allow computation accordingly f. Render such other orders as the Hon'ble Tribunal may deem appropriate in the interest of justice and fairness

Sd/- Sd/- (मनु कुमार गिरर) (गगन गोयल) (MANU KUMAR GIRI) (GAGAN GOYAL) न्याययक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER चेन्नई/Chennai, ददनाांक/Dated: 18th September 2026. KB आदेश की प्रयतललपप अग्रेपषत/Copy to: 1. अपीलार्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकर आयुक्त/CIT, Chennai /Madurai/Coimbatore/Salem 4. पवभागीय प्रयतयनधि/DR 5. गार्ड फाईल/GF K Digitally signed by K BABU BABU Date: 2026.09.28 10:16:10 +05'30'

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