BORG WARNER COOLING SYSTEMS ( INDIA ) PRIVATE LIMITED ,KANCHIPURAM vs. ADDL.CIT , NFAC , DELHI

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ITTPA 51/CHNY/2022Status: DisposedITAT Chennai28 April 2026AY 2018-201922 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

For AY 2018-19, the Tribunal held that the TPO was not justified in determining the ALP of management and testing & validation services at Nil. The TPO rejected the assessee's benchmarking analysis without demonstrating the applicability of Section 92C(3) of the Act and determined the ALP at Nil using the 'Other Method' without any comparable uncontrolled transaction, which is not sustainable. The assessee had adequately demonstrated the nature of services and their benefits. The Tribunal found that the assessee's aggregated approach under TNMM, reporting a margin of 20.57% (higher than comparables), was acceptable, and the TPO's rejection was unsubstantiated. The disallowance was deleted. For AY 2020-21, regarding notional interest on outstanding receivables, the Tribunal respectfully followed the Coordinate Bench's decision in the assessee's own case for AY 2021-22. It was held that where receivables are closely linked to the main transaction and working capital adjustments are granted under TNMM, no separate TP adjustment for notional interest is warranted, especially when the assessee is debt-free. The addition was directed to be deleted. Regarding the disallowance of Rs. 43,09,815 under Section 43B, the Tribunal noted that this issue was not adjudicated in the draft or final assessment orders, nor was it raised before the AO or DRP. The disallowance was made by the CPC in an intimation under Section 143(1). As the cause of action did not arise in the present proceedings, this ground was rejected. Stay applications were dismissed as infructuous.

What were the facts?

The assessee, BorgWarner Cooling Systems India Pvt. Ltd. (BCSIPL), filed appeals against final assessment orders for Assessment Years (AY) 2018-19 and 2020-21. The appeals challenge orders passed under Section 143(3) r.w.s. 144C(13) r.w.s. 144B of the Income Tax Act, 1961. For AY 2018-19, the dispute concerns the disallowance of management charges of Rs. 8,08,29,334 paid to its Associated Enterprise (AE) by determining the Arm's Length Price (ALP) as 'nil'. For AY 2020-21, the issues are a transfer pricing adjustment for managerial, testing, and engineering service fees of Rs. 15,55,89,516, imputation of notional interest of Rs. 3,94,046 on outstanding receivables, and disallowance of Rs. 43,09,815 for expenses claimed under Section 43B on a payment basis.

What were the issues?

1. Whether the Transfer Pricing Officer (TPO) was justified in determining the Arm's Length Price (ALP) of management and testing & validation services at Nil for AY 2018-19, and if so, under what provision of the Act? - Assessee's contention: The assessee complied with Sections 92 to 92F and Rules 10A to 10E, maintained contemporaneous documentation, and benchmarked transactions using TNMM. The TPO failed to demonstrate satisfaction of Section 92C(3). Commercial expediency and business needs are the prerogative of the assessee. Detailed need-benefit documentation was provided, establishing actual receipt and utilization of services. An aggregated approach under TNMM is appropriate for closely linked transactions, supported by Rule 10A and OECD guidelines. Reliance was placed on the assessee's own case for AY 2021-22. - Revenue's contention: The assessee failed to substantiate the actual receipt of services with credible evidence, as held by the TPO and Dispute Resolution Panel (DRP). 2. Whether an adjustment is warranted for notional interest on outstanding receivables from AEs for AY 2020-21? - Assessee's contention: The issue is covered by the assessee's own case for AY 2021-22, where it was held that receivables linked to main transactions cannot be benchmarked separately. Working capital adjustments under TNMM account for receivables. A separate adjustment for notional interest would be double counting. As the assessee is debt-free, there is no actual cost of funds for receivables. - Revenue's contention: Not recorded. 3. Whether the disallowance of Rs. 43,09,815 for expenses claimed under Section 43B on a payment basis for AY 2020-21 is valid? - Assessee's contention: Not recorded. - Revenue's contention: Not recorded.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 144B,Section 92 to 92F,Section 92C(3),Section 43B,Section 143(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI

Before: SHRI GEORGE GEORGE KAND MS PADMAVATHY S

Hearing: 16.04.2026Pronounced: 28.04.2026

आदेश/ O R D E R PER GEORGE GEORGE K, VICE PRESIDENT: These appeals filed by the assessee are directed against two final assessment orders dated 28.07.2022 and 23.07.2024 passed under section 143(3) r.w.s.144C(13) r.w.s. 144B of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Years are 2018-19 & 2020-21.

IT(TP)A Nos.51/Chny/2022, 57/Chny/2024 :- 2 -: & SA Nos.113 & 116/Chny/2026 2. Common issues are involved in these appeals. Hence, they were heard together and are being disposed of by this consolidated order. The solitary issue that is raised for assessment year 2018-19 is regarding disallowance of payment of management charges of Rs.8,08,29,334/- paid by the assessee to its AE by determining the Arms Length Price (ALP) as ‘nil’. For the assessment year 2020-21, three issues are raised namely:- i. Transfer pricing adjustment with respect to the payment of managerial, testing, engineering service fees for Rs.15,55,89,516/-. ii. Imputation of notional interest of Rs.3,94,046/- for the outstanding receivables. iii. Disallowance of Rs.43,09,815/- disregarding the allowance claimed u/s.43B of the Act on payment basis

3.

We shall first adjudicate IT(TP)A No.51/CHNY/2022, concerning assessment year 2018-19.

4.

Brief facts of the case are as follows: The assessee, BorgWarner Cooling Systems (India) Private Limited (“BCSIPL”), is a wholly owned subsidiary of BorgWarner Thermal Systems Inc., USA. It is engaged in the business of manufacturing, assembling,

IT(TP)A Nos.51/Chny/2022, 57/Chny/2024 :- 3 -: & SA Nos.113 & 116/Chny/2026 and sale of automotive viscous and Visctronics fan drives and plastic fans. During the year under consideration namely AY 2018-19, the assessee had entered into various international transactions with its Associated Enterprises (“AEs”), including payment of management fees, testing and validation charges, royalty, and other related transactions. In the TP study, the assessee aggregated its international transactions (except reimbursements) and benchmarked the same using the Transactional Net Margin Method (TNMM) as the most appropriate method, adopting Operating Profit/Operating Cost (OP/OC) as the Profit Level Indicator. The assessee earned an operating margin of 20.57% of its operating cost, whereas the comparable companies has earned an arithmetic mean margin of 13.06% on operating cost.

5.

For the assessment year 2018-19, return of income was selected for scrutiny and notice u/s.143(2) of the Act was issued on 23.09.2019. During the course of assessment proceedings, case was referred to TPO to determine ALP of international transaction undertaken by assessee with its AE’s. The Transfer Pricing Officer (“TPO”) though has not recorded any adverse finding with regard to the overall PLI of the assessee carved out the transaction of

IT(TP)A Nos.51/Chny/2022, 57/Chny/2024 :- 4 -: & SA Nos.113 & 116/Chny/2026 payment of management fee and product validation charges and determined the Arm’s Length Price (“ALP”) of management and testing & validation charges as Nil by applying the “Other Method”. The TPO held that the assessee failed to furnish adequate documentary evidence to substantiate the receipt of services from its Associated Enterprises (“AEs”). It was observed that the assessee did not produce evidence to demonstrate the expenditure incurred has benefited the assessee nor did it furnish supporting documentation evidencing the actual rendition of services or the costs incurred by the AEs in providing such services.

6.

The Dispute Resolution Panel (“DRP”) upheld the action of the TPO, observing that the assessee had failed to establish the actual receipt of services as well as the need and benefit derived therefrom, notwithstanding the documentation submitted. The DRP further held that the Arm’s Length Price of such services ought to be determined on a transaction-by-transaction basis, rather than by adopting an aggregated approach under TNMM.

7.

The Ld. AR submitted that the assessee has duly complied with the provisions of Sections 92 to 92F of the Act read with Rules 10A to 10E of the Income-tax Rules for determination of the Arm’s

IT(TP)A Nos.51/Chny/2022, 57/Chny/2024 :- 5 -: & SA Nos.113 & 116/Chny/2026 Length Price (“ALP”) and has maintained all requisite contemporaneous documentation in respect of its international transactions with its Associated Enterprises (“AEs”). It was submitted that the transfer pricing documentation and benchmarking analysis undertaken by the Assessee were prepared in good faith and in accordance with law, without any intention to avoid taxes. The assessee has maintained all necessary information and documents as prescribed under the Rules and has duly benchmarked its transactions to justify that the same are at arm’s length. It was contended that the TPO has failed to demonstrate how the conditions laid down under section 92C(3) of the Act have been satisfied so as to reject the Assessee’s analysis. On the issue of commercial expediency, the Ld. AR submitted that it is the prerogative of the Assessee to incur expenditure for the smooth conduct of its business and the tax authorities cannot question the necessity of such expenditure. It was argued that the determination of business needs and the value of services lies within the domain of the businessman, and the benefit derived from such services cannot always be quantified in precise monetary terms.

8.

The Ld. AR further submitted that the assessee had furnished detailed need-benefit documentation before the DRP,

IT(TP)A Nos.51/Chny/2022, 57/Chny/2024 :- 6 -: & SA Nos.113 & 116/Chny/2026 evidencing the necessity of availing management and testing & validation services, the nature of activities performed by the AEs, and the benefits derived therefrom. The said documentation, as contained in the paper book, clearly establishes the actual receipt and utilization of services. It was also contended that the services received from the AEs are inextricably linked to the day-to-day operations of the Assessee. Accordingly, the Assessee had rightly adopted an aggregated approach under TNMM, as evaluating such closely linked transactions on a standalone basis would lead to distorted results. The principle of aggregation, it was submitted, is well recognized under Rule 10A of the Rules as well as under OECD Transfer Pricing Guidelines. The Ld. AR also placed reliance on the order of the Hon’ble Chennai Tribunal in the assessee’s own case for Assessment Year 2021–22, wherein under similar facts, the issue was decided in favour of the assessee.

9.

The Ld.DR relied upon the orders of the TPO and DRP. It was submitted that the assessee failed to substantiate the actual receipt of services from its AEs with credible evidence.

10.

We have heard the rival submissions and perused the material available on record. The primary issue for consideration is

IT(TP)A Nos.51/Chny/2022, 57/Chny/2024 :- 7 -: & SA Nos.113 & 116/Chny/2026 whether the TPO was justified in determining the Arm’s Length Price (“ALP”) of management and testing & validation services at Nil. It is observed that the assessee had benchmarked its international transactions on an aggregated basis under TNMM and reported an operating margin of 20.57%, which is significantly higher than the margin earned by comparable companies. The TPO rejected the benchmarking analysis without demonstrating the applicability of section 92C(3) of the Act and proceeded to determine the ALP of the impugned transactions at Nil by applying the “Other Method”, without bringing on record any comparable uncontrolled transaction. Such an approach is not sustainable in law.

11.

On perusal of the material on record, we find that the assessee has adequately demonstrated the nature of services received from its AEs, including technical services in the nature of testing and validation of customized product designs and management support services relating to procurement strategy, supplier coordination, system upgrades, inventory planning, and cash flow optimization. The assessee has also furnished need- benefit analysis substantiating the business rationale of availing such services. In our considered view, the TPO/DRP erred in questioning the commercial expediency of the expenditure and in

IT(TP)A Nos.51/Chny/2022, 57/Chny/2024 :- 8 -: & SA Nos.113 & 116/Chny/2026 disregarding the evidences furnished by the Assessee without proper examination. It is a settled principle that the Revenue cannot sit in judgment over the business decisions of the assessee. Further, considering that the services availed are closely linked with the manufacturing and operational activities of the assessee, the aggregation approach adopted under TNMM cannot be faulted.

12.

We also find that an identical issue has been considered by the coordinate Bench of this Tribunal in the assessee’s own case for Assessment Year 2021–22 in IT(TP)A No.129/CHNY/2024, order dated 23.12.2025, wherein under similar facts, the Tribunal held that determination of ALP of intra-group services at Nil without applying one of the prescribed methods and without proper benchmarking is unsustainable. The Tribunal further held that once the assessee demonstrates receipt of services and business purpose, the ALP cannot be determined at Nil merely on conjectures.

13.

In the absence of any distinguishing facts brought on record by the Revenue, we respectfully follow the aforesaid decision of the coordinate Bench in the assessee’s own case. Accordingly, we hold that the determination of ALP of management and testing &

IT(TP)A Nos.51/Chny/2022, 57/Chny/2024 :- 9 -: & SA Nos.113 & 116/Chny/2026 validation services at Nil is unsustainable and the adjustment made by the TPO and upheld by the DRP is directed to be deleted.

IT(TP)A No.57/CHNY/2024, Assessment year 2020-21 14. For the assessment year 2020-21, the assessee filed its return of income on 18.12.2020 admitting total income of Rs.59,64,37,170/-. The case was selected for scrutiny under CASSS and notice u/s.143(2) of the Act was issued on 29.06.2021. During the course of assessment proceedings, the case was referred to TPO to determining the ALP of international transactions undertaken by the assessee with its AE’s. The TPO passed the order u/s.92AC of the Act on 26.07.2023. In the said TPO’s order, he proposed TP adjustment of Rs.15,59,83,562/-. The details of TP adjustments proposed by the TPO are detailed below:-

Particulars Amount (in Rs.) Downward adjustment towards 15,55,89,516/- Payment of Management services Upward adjustment towards Interest on 3,94,046/- Trade Receivables Total 15,59,83,562

15.

Pursuant to TPO’s order passed u/s.92AC of the Act, the AO passed the draft assessment order incorporating the TP adjustment

IT(TP)A Nos.51/Chny/2022, 57/Chny/2024 :- 10 -: & SA Nos.113 & 116/Chny/2026 proposed by the TPO. The AO also made certain corporate tax disallowances (Corporate tax disallowance made by the AO is not subject matter of issue before the Tribunal). Aggrieved by the draft assessment order, assessee filed objections before the DRP on 26.10.2023. The DRP vide its direction dated 05.06.2024 disposed off the assessee’s objections. The DRP rejected the objections raised by the assessee and pursuant to the DRP’s direction, impugned final assessment order was passed. Aggrieved by the final assessment order, assessee is in appeal before the Tribunal. We shall adjudicate the three issues raised by the assessee as under.

Transfer pricing adjustment with respect to the payment of managerial, testing, engineering service fees for Rs.15,55,89,516/- 16. During the transfer pricing proceedings, the TPO rejected the benchmarking analysis undertaken by the Assessee and held that the Transactional Net Margin Method (TNMM) adopted by the Assessee was not the most appropriate method for benchmarking intra-group service transactions. The TPO observed that TNMM compares overall margins and does not reliably determine the arm’s length price of specific intra-group services, particularly where comparable companies may not have incurred similar expenditure.

IT(TP)A Nos.51/Chny/2022, 57/Chny/2024 :- 11 -: & SA Nos.113 & 116/Chny/2026 Accordingly, relying on Rules 10B and 10C, the TPO adopted the “Other Method” as the most appropriate method and determined the Arm’s Length Price (“ALP”) of the intra-group services at Nil. The TPO further held that the Assessee failed to substantiate the actual receipt of services from its Associated Enterprises (“AEs”). It was observed that the Assessee did not furnish evidence regarding the expenditure incurred by the AEs, nor details of the quantum of costs involved in rendering such services. The TPO also noted that the Assessee merely described the nature of services without demonstrating their actual rendition, arm’s length value, or tangible commercial benefit. It was further observed that certain services, such as training through standard materials, did not justify payment of management fees. Accordingly, the TPO concluded that the Assessee failed to establish the arm’s length nature of such payments.

17.

The Dispute Resolution Panel (“DRP”) upheld the action of the TPO. The DRP observed that the Assessee had not adequately demonstrated the nature of services availed or their nexus with its business operations. The DRP further held that the Assessee failed to establish the actual rendition of services and the need-benefit thereof, and accordingly confirmed the determination of ALP at Nil.

IT(TP)A Nos.51/Chny/2022, 57/Chny/2024 :- 12 -: & SA Nos.113 & 116/Chny/2026

18.

The Ld. AR submitted that the assessee has complied with the provisions of Sections 92 to 92F of the Act read with Rules 10A to 10E and has maintained all requisite contemporaneous documentation to substantiate the arm’s length nature of its international transactions. The benchmarking under TNMM was undertaken in good faith, and the TPO has not demonstrated the applicability of section 92C(3) to reject the same. It was contended that the services received from the AEs are inextricably linked to the day-to-day operations of the Assessee and, therefore, were rightly benchmarked on an aggregated basis under TNMM, in line with Rule 10A and OECD Guidelines. Evaluating such transactions on a standalone basis would lead to distorted results. The Ld. AR further submitted that the TPO erred in applying the “Other Method” as a residual method without exhausting the prescribed methods and without undertaking any comparable analysis. It was argued that the determination of ALP at Nil is arbitrary, based on a hypothetical comparison, and not supported by any third-party data. On the issue of commercial expediency, it was submitted that the necessity of expenditure is within the domain of the businessman and cannot be questioned by the Revenue. The benefit derived from such services may not always be quantifiable in monetary terms. The Ld.

IT(TP)A Nos.51/Chny/2022, 57/Chny/2024 :- 13 -: & SA Nos.113 & 116/Chny/2026 AR submitted that detailed need-benefit documentation, along with extensive email correspondences and supporting evidence (running into several pages), was furnished before the TPO, DRP, and this Tribunal to substantiate the actual receipt of services and benefits derived therefrom. Illustratively, the AEs provided testing and validation services such as addressing soldering failures and shaft fatigue testing, and management support services including sourcing strategy, supplier analysis, data integration, and quality issue resolution, all of which contributed to operational efficiency and cost optimization. Accordingly, it was submitted that the assessee has adequately demonstrated the receipt of services, their business relevance, and the arm’s length nature of the payments. The Ld.AR placed reliance on the order of the coordinate Bench of the Tribunal in the assessee’s own case for AY 2021–22.

19.

The Ld. DR relied on the orders of the TPO and DRP and submitted that the assessee failed to substantiate the actual receipt of services from its AEs with credible evidence. It was contended that the assessee merely described the nature of services without demonstrating their actual rendition, cost incurred by the AEs, or the tangible benefit derived therefrom. The Ld. DR submitted that no independent entity would pay for such services in the absence of

IT(TP)A Nos.51/Chny/2022, 57/Chny/2024 :- 14 -: & SA Nos.113 & 116/Chny/2026 demonstrable benefit, and therefore, the TPO was justified in determining the ALP at Nil. It was further argued that certain services, including standard training and support, do not warrant separate compensation. It was also contended that the aggregation approach under TNMM is not appropriate for benchmarking intra- group services, which ought to be evaluated on a transaction-by- transaction basis. The Ld. DR supported the adoption of the “Other Method” and submitted that the TPO’s approach is in accordance with the provisions of the Act and Rules. Accordingly, it was prayed that the adjustment made by the TPO and upheld by the DRP be sustained.

20.

We have heard the rival submissions and perused the material available on record. The issue for consideration is the determination of Arm’s Length Price (“ALP”) of management and testing & validation services at Nil by the TPO. It is observed that the TPO rejected the benchmarking analysis undertaken by the Assessee under TNMM without demonstrating the applicability of the conditions prescribed under section 92C(3) of the Act and proceeded to determine the ALP by adopting the “Other Method”, without bringing on record any comparable uncontrolled transaction. Such an approach, in our considered view, is not in accordance with

IT(TP)A Nos.51/Chny/2022, 57/Chny/2024 :- 15 -: & SA Nos.113 & 116/Chny/2026 law. From the material placed on record, we find that the Assessee has furnished detailed documentation, including need-benefit analysis and supporting evidences, to substantiate the receipt of services from its AEs. The nature of services, as explained, including testing and validation support and management services, are closely linked with the business operations of the assessee.

21.

The TPO/DRP, in our view, erred in disregarding the evidences furnished by the Assessee and in questioning the commercial expediency of the expenditure. It is a settled position that the Revenue cannot step into the shoes of the businessman to determine the necessity of such expenditure. Further, considering that the services are integrally connected with the manufacturing and operational activities of the Assessee, the aggregation approach adopted under TNMM cannot be faulted.

22.

We also note that in the Assessee’s own case for Assessment Year 2021–22 in IT(TP)A No.129/CHNY/2024 dated 23.12.2025, the coordinate Bench of this Tribunal, on similar facts, has held that determination of ALP of intra-group services at Nil without proper benchmarking is unsustainable. In the absence of

IT(TP)A Nos.51/Chny/2022, 57/Chny/2024 :- 16 -: & SA Nos.113 & 116/Chny/2026 any change in facts, we respectfully follow the said decision. Accordingly, we hold that the determination of ALP of management and testing & validation services at Nil is unsustainable and the adjustment made by the TPO and upheld by the DRP is directed to be deleted.

Imputation of notional interest of Rs.3,94,046/- for the outstanding receivables (Ground Nos.11 to 16):- 23. The TPO observed that the Assessee had substantial outstanding receivables from its Associated Enterprises (AEs) arising from services rendered. According to the TPO, the delay in realization of such receivables resulted in funds being made available to the AEs, which is in the nature of financing or funding extended by the Assessee. The TPO held that such extended credit period goes beyond normal business practices and effectively constitutes a separate international transaction in the nature of a loan/advance. It was further noted that the Assessee had not charged any interest on such delayed receivables. Placing reliance on the provisions of Chapter X of the Income-tax Act, 1961, the TPO concluded that any income arising from an international transaction, including uncharged or notional income, is required to be computed having regard to the Arm’s Length Price (ALP). Accordingly, the TPO proceeded to determine the ALP by imputing

IT(TP)A Nos.51/Chny/2022, 57/Chny/2024 :- 17 -: & SA Nos.113 & 116/Chny/2026 notional interest on the outstanding receivables from AEs and proposed an adjustment.

24.

The DRP upheld the approach adopted by the TPO. The Panel referred to the Explanation to Section 92B of the Act, which clarifies that the term “international transaction” includes deferred payment, receivables, or any other debt arising during the course of business. Relying on the aforesaid provision, the DRP held that outstanding receivables from AEs constitute an independent international transaction, separate from the underlying service transaction. The DRP further observed that delayed realization of receivables amounts to a credit facility extended to AEs, warranting benchmarking. The Panel also placed reliance on various judicial precedents which support the view that delay in receivables from AEs can be subjected to transfer pricing adjustments by imputing interest. Accordingly, the DRP confirmed the adjustment made by the TPO towards notional interest on outstanding receivables.

25.

The Learned AR submitted that the action of the TPO/DRP in treating outstanding receivables from AEs as a separate international transaction and imputing notional interest thereon is

IT(TP)A Nos.51/Chny/2022, 57/Chny/2024 :- 18 -: & SA Nos.113 & 116/Chny/2026 erroneous and unsustainable in law. It was contended that the timing of realization of receivables, whether early or delayed, is merely incidental to the primary international transaction of rendering services and does not constitute a separate transaction in itself. The outstanding receivables only represent amounts due to the Assessee in the ordinary course of business against services rendered to its AEs. The AR further submitted that, in line with normal industry practice, independent service providers factor the credit period and potential delays in collection into their pricing/mark-up. Thus, the time value of money is already embedded in the pricing of services, and there is no requirement to charge separate interest on delayed payments. It was also argued that credit terms relating to receivables and payables directly impact sales and cost structures. Sellers factor in pricing and time value of money, while buyers account for purchase price and credit period. Accordingly, differences in credit terms inherently affect financial results due to embedded interest elements. The AR emphasized that under the Transactional Net Margin Method (TNMM), working capital adjustments are carried out to neutralize differences in receivables, payables, and inventory between the tested party and comparables. Such adjustments already account for the impact of outstanding receivables on profitability. Where

IT(TP)A Nos.51/Chny/2022, 57/Chny/2024 :- 19 -: & SA Nos.113 & 116/Chny/2026 comparable companies have similar working capital levels, the impact of credit terms becomes negligible. It was submitted that in the present case, the comparison of margins after granting working capital adjustment under a combined transaction approach adequately captures the effect of receivables, including any implicit interest element. Therefore, making a separate adjustment towards notional interest on receivables would amount to double counting, which is impermissible.

26.

Without prejudice, the AR also submitted that the Assessee is a debt-free company, having neither availed any borrowings nor incurred any interest expenditure for its working capital requirements. Accordingly, there is no actual cost incurred on account of funds blocked in receivables, and hence, no basis for imputing notional interest.

27.

Further, the AR placed reliance on the decision of the Hon’ble Chennai Tribunal in the Assessee’s own case for AY 2021– 22 in IT(TP)A No.129/Chny/2024 (order dated 23.12.2025), wherein this issue was decided in favour of the Assessee.

IT(TP)A Nos.51/Chny/2022, 57/Chny/2024 :- 20 -: & SA Nos.113 & 116/Chny/2026 28. We have considered the rival submissions and perused the material on record. We find that the issue of adjustment on account of notional interest on outstanding receivables from AEs is squarely covered in favour of the assessee by the order of the Coordinate Bench in the assessee’s own case for AY 2021–22 in IT(TP)A No.129/Chny/2024 (order dated 23.12.2025). The relevant finding of reads as under:-

“The TPO treated outstanding receivables as a separate international transaction. However, in Sony Ericsson Mobile Communications India Private Limited (ITA No. 16/2014 Page Nos 140 of the Appeal paper book), The Bombay Dyeing & Mfg. Co. Limited [ITA No. 1716/Mum/2017 Page No 142 of the Appeal paper book) and Ingersoll Rand India Limited [ITAT-2017(Bang)-TP Page Nos 144 of the Appeal paper book), courts have held that where receivables are closely linked to the main transaction, they cannot be benchmarked separately. We also note that the working capital adjustment has been granted under TNMM. Following Kusum Healthcare Pvt. Ltd. (ITA No. 3717/Del/2017 Para 8 at Pag 233 of the Caselaw paper book), once working capital adjustment is granted, no separate TP adjustment survives. It is also undisputed that the assessee is a debt-free company. Decisions in Temenos India Private Limited (Para 11, 12 at Pages 244, 245 of the Case law paper book), Sanmina-SCI India Pvt Ltd (IT(TP)Α No.23/CHNY/2018 Para 55 at Page 253 of the Case law paper book) and Integra Software Services P Ltd (ITA No. 736/CHNY/2017 Para 34 at Page 268 of the Case law paper book) hold that notional interest cannot be imputed where the assessee has no borrowing cost. The alternative plea of netting-off receivables with payables, supported by Contitech and Jewellmark (referred supra), also favours the assessee. Accordingly, the TP adjustment on notional interest is deleted.

IT(TP)A Nos.51/Chny/2022, 57/Chny/2024 :- 21 -: & SA Nos.113 & 116/Chny/2026 The Id.DR for the revenue heavily relied on the Supreme Court ruling in SAP Labs India Pvt Ltd. However, SAP Labs deals with the principle that Tribunal orders are not binding precedents. It does not prohibit reliance on coordinate bench decisions on propositions of law, particularly well- settled TP jurisprudence. The assessee correctly pointed out that these decisions do not contradict SAP Labs. Therefore, the Id.DR's reliance is misplaced.” 29. Respectfully following the same, and in the absence of any change in facts or law, we hold that no separate adjustment is warranted on account of outstanding receivables, particularly when the international transaction has been benchmarked under TNMM after granting working capital adjustment. Accordingly, the addition made by the TPO and sustained by the DRP is directed to be deleted.

Disallowance of Rs.43,09,815/- disregarding the allowance claimed u/s.43B of the Act on payment basis, Ground No.17:-

30.

In Ground No.17, the assessee has raised the issue of disallowance of expenses on nature of leave encashment and bonus. The above expenses were claimed by the assessee on actual payment basis u/s.43B of the Act. However, we notice that this issue was not adjudicated in draft assessment order nor in the final assessment order. The disallowance was made by the CPC in the intimation issued u/s.143(1) of the Act. The assessee has not raised this ground before the AO nor before the DRP. Since, the

IT(TP)A Nos.51/Chny/2022, 57/Chny/2024 :- 22 -: & SA Nos.113 & 116/Chny/2026 cause of action does not arise in the present proceedings, this ground raised by the assessee is rejected.

SA Nos.113 & 116/CHNY/2026

31.

Since we have disposed off the appeals, the Stay applications are rendered infructuous and are dismissed.

32.

In the result, the appeals filed by the assessee in IT(TP)A No.51/CHNY/2022 is allowed and IT(TP)A No.57/CHNY/2024 is partly-allowed and the stay applications filed by the assessee are dismissed.

Order pronounced in the open court on 28th April, 2026 at Chennai.

Sd/- Sd/- (प�मावती एस) (जॉज� जॉज� के) (PADMAVATHY S) (GEORGE GEORGE K) लेखा सद�य/ACCOUNTANT MEMBER उपा�य� /VICE PRESIDENT चे�ई/Chennai, �दनांक/Dated, the 28th April, 2026 RSR आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु�त /CIT, Chennai 4. �वभागीय ��त�न�ध/DR By Order 5. गाड� फाईल/GF. Digitally signed by REKHA REKHA SENTHIL RAJ SENTHIL RAJ Date: 2026.04.30 10:34:49 +05'30'

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