M/S. ZF RANE AUTOMOTIVE INDIA PVT. LTD.,CHENNAI vs. DCIT, NCC-8(1), CHENNAI

आयकर अपीलीय अिधकरण, ’ड� ड�ड� ड�’’ �यायपीठ, चे�नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH: CHENNAI माननीय �ी मनु कुमार िग�र, �ाियक सद� एवं माननीय �ी �ी �ी एस �ी एस एस.आर एस आर आर.रघुनाथा आर रघुनाथा रघुनाथा ,लेखा रघुनाथा लेखा लेखा सद�य लेखा सद�य सद�य केकेकेके सम सद�य सम सम । सम BEFORE HON’BLE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND HON’BLE SHRI S. R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./IT(TP)A No.111/Chny/2024 िनधा"रण वष"/Assessment Year: 2021-22

M/s ZF Rane Automotive India v. The Deputy Commissioner of Private Limited. Income Tax, Maithri 132, Cathedral Road, Non Corporate Circle-8(1), Chennai (Gopalpuram), No.121, Mahatma Gandhi Gopalpuram, Road, Chennai, Tamil Nadu 600086 Nungambakkam Chennai-600034 [PAN: AAACR3147C] (अपीलाथ%/Appellant) (&'यथ%/Respondent)

: Mr. S P Chidambaram, अपीलाथ% क( ओर से/ Appellant by Advocate. : Mr.ARV Sreenivasan, CIT &'यथ% क( ओर से /Respondent by : 10.12.2025 सुनवाईक(तार�ख/Date of Hearing घोषणाक(तार�ख /Date of : 23.12.2025 Pronouncement आदेश / O R D E R PER MANU KUMAR GIRI, JM: This appeal by the Assessee is arising out of the order of the Deputy Commissioner of Income Tax, Non-Corporate Circle-8(1), Chennai passed u/s.143(3) r.w.s.144C(13) r.w.s 144B of the Income Tax Act, 1961 (‘Act’ in

IT(TP)A No.111 IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. M/s. ZF Rane Automotive India Pvt. Ltd. 2 short) vide order dated 09.10.2024 for As short) vide order dated 09.10.2024 for Assessment year sessment year (‘AY’ in short) 2021-22.

A. The AO / TPO / DRP erred in The AO / TPO / DRP erred in confirming the downward confirming the downward adjustment to the value of international transactions in relation adjustment to the value of international transactions in relation adjustment to the value of international transactions in relation to the manufacturing business carried on by the Appellant. to the manufacturing business carried on by the Appellant. to the manufacturing business carried on by the Appellant.

2.2 Incorrect treatment of Export incentives as non Incorrect treatment of Export incentives as non Incorrect treatment of Export incentives as non- operating income while computing margins of the operating income while computing margins of the operating income while computing margins of the Appellant

A. The AO / TPO / DRP erred in law and facts by considering The AO / TPO / DRP erred in law and facts by considering The AO / TPO / DRP erred in law and facts by considering the export incentive i.e., Duty Drawback and MEIS income as the export incentive i.e., Duty Drawback and MEIS income as the export incentive i.e., Duty Drawback and MEIS income as non-operating income while computing the margins of the operating income while computing the margins of the operating income while computing the margins of the Appellant and the comparable companies. Appellant and the comparable companies.

2.3 Incorrect treatment of cash discount as Incorrect treatment of cash discount as Incorrect treatment of cash discount as non- operating income operating income

A. The AO / TPO / DRP erred in law in considering Cash The AO / TPO / DRP erred in law in considering Cash The AO / TPO / DRP erred in law in considering Cash discount as other income not relating to normal operations of discount as other income not relating to normal operations of discount as other income not relating to normal operations of the Appellant as per Rule 10TA without appreciating the fact the Appellant as per Rule 10TA without appreciating the fact the Appellant as per Rule 10TA without appreciating the fact that such cash discounts are directly related to the that such cash discounts are directly related to the that such cash discounts are directly related to the business of the Appellant and received for early payment of purchase price. the Appellant and received for early payment of purchase price. the Appellant and received for early payment of purchase price.

2.4 Incorrect treatment of provision for doubtful debts Incorrect treatment of provision for doubtful debts Incorrect treatment of provision for doubtful debts written back as non written back as non-operating income

IT(TP)A No.111 IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. M/s. ZF Rane Automotive India Pvt. Ltd. 3 A. The AO / TPO / DRP failed to take cognizance of the fact The AO / TPO / DRP failed to take cognizance of the fact The AO / TPO / DRP failed to take cognizance of the fact that the provision written back d that the provision written back during the year pertains to uring the year pertains to reversal of a portion of provision amount created in the earlier reversal of a portion of provision amount created in the earlier reversal of a portion of provision amount created in the earlier years which were originally treated as operating in nature. years which were originally treated as operating in nature. years which were originally treated as operating in nature.

2.5 Incorrect treatment of miscellaneous expenses, bad Incorrect treatment of miscellaneous expenses, bad Incorrect treatment of miscellaneous expenses, bad debts/ expenses written off, provisions for expenses debts/ expenses written off, provisions for expenses debts/ expenses written off, provisions for expenses as non-operating expense operating expense

A. The AO / TPO / DRP erred in law and facts by considering The AO / TPO / DRP erred in law and facts by considering The AO / TPO / DRP erred in law and facts by considering the miscellaneous expense, bad debts/ expenses written off, the miscellaneous expense, bad debts/ expenses written off, the miscellaneous expense, bad debts/ expenses written off, provisions for expenses as non provisions for expenses as non-operating expenses while operating expenses while computing the margins of comparable companies. computing the margins of comparable companies.

2.6 Incorrect t t rejection rejection rejection of of of comparable comparable comparable companies companies companies selected by Appellant selected by Appellant

A. The AO / TPO / DRP erred in rejecting the following The AO / TPO / DRP erred in rejecting the following The AO / TPO / DRP erred in rejecting the following comparable companies selected by the appellant in its transfer comparable companies selected by the appellant in its transfer comparable companies selected by the appellant in its transfer pricing documentation. pricing documentation. • Jay Ushin Limited Jay Ushin Limited • Shivam Autotech Limited Shivam Autotech Limited • Omax Auto Limited Auto Limited • Minda Vast Access Systems Pvt Ltd Minda Vast Access Systems Pvt Ltd

2.7 Inclusion of new comparable companies Inclusion of new comparable companies Inclusion of new comparable companies

A. The AO / TPO / DRP erred in not considering the following The AO / TPO / DRP erred in not considering the following The AO / TPO / DRP erred in not considering the following comparable companies identified by the Appellant based on the comparable companies identified by the Appellant based on the comparable companies identified by the Appellant based on the updated information available in the public dom updated information available in the public domain at the time ain at the time of Transfer Pricing Assessment proceedings. of Transfer Pricing Assessment proceedings. • Ashimori India Pvt Ltd Ashimori India Pvt Ltd • Youngshin Automotive India Pvt Limited Youngshin Automotive India Pvt Limited • Komos Automotive India Pvt Limited Komos Automotive India Pvt Limited

IT(TP)A No.111 IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. M/s. ZF Rane Automotive India Pvt. Ltd. 4 • JTEKT India Limited JTEKT India Limited

2.8 Non-exclusion of functionally dissimilar comparable exclusion of functionally dissimilar comparable exclusion of functionally dissimilar comparable companies

A. The AO / TPO / The AO / TPO / DRP erred in not excluding comparable DRP erred in not excluding comparable companies which are functionally dissimilar to the business of companies which are functionally dissimilar to the business of companies which are functionally dissimilar to the business of the Appellant • IAC International Automotive India Private Limited IAC International Automotive India Private Limited IAC International Automotive India Private Limited

2.9 Incorrect determination of margins in respect of Incorrect determination of margins in respect of Incorrect determination of margins in respect of comparable companies comparable companies

A. The AO / TPO / The AO / TPO / DRP erred in not rectifying the errors in DRP erred in not rectifying the errors in margin computation of the comparable companies. margin computation of the comparable companies. margin computation of the comparable companies.

2.10 Adjustment for basic custom duty Adjustment for basic custom duty A. The AO / TPO / DRP erred in rejecting the customs duty The AO / TPO / DRP erred in rejecting the customs duty The AO / TPO / DRP erred in rejecting the customs duty adjustment without appreciating the fact that adjustment adjustment without appreciating the fact that adjustment adjustment without appreciating the fact that adjustment towards basic customs duty if not undertaken would distort the customs duty if not undertaken would distort the customs duty if not undertaken would distort the comparability results owing to the differences in the percentage comparability results owing to the differences in the percentage comparability results owing to the differences in the percentage of imports by the Appellant vis of imports by the Appellant vis-à-vis the average imports of vis the average imports of comparable companies. comparable companies.

2.11 Adjustment for basic custom duty Adjustment for basic custom duty

2.12 Joint venture arrangemen Joint venture arrangement in substance is a third party t in substance is a third party negotiated arrangement negotiated arrangement

2.13 Fresh search process undertaken is unwarranted and Fresh search process undertaken is unwarranted and Fresh search process undertaken is unwarranted and incorrect

2.14 Short credit of TDS and TCS Short credit of TDS and TCS

2.15 Incorrect computation of Interest u/s 234C “ Incorrect computation of Interest u/s 234C “

IT(TP)A No.111 IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. M/s. ZF Rane Automotive India Pvt. Ltd. 5 3. The facts of the case are that the Assessee, a joint The facts of the case are that the Assessee, a joint The facts of the case are that the Assessee, a joint venture between Rane Holdings Limited, India, and TRW Automotive JV LLC, USA, is Rane Holdings Limited, India, and TRW Automotive JV LLC, USA, is Rane Holdings Limited, India, and TRW Automotive JV LLC, USA, is engaged in the manufacture of hydraulic power steering gears, hydraulic engaged in the manufacture of hydraulic power steering gears, hydraulic engaged in the manufacture of hydraulic power steering gears, hydraulic pumps, power rack-and and-pinion steering gears, airbags, and safety seat belt pinion steering gears, airbags, and safety seat belt systems for the automotive i systems for the automotive industry. During the assessment year 2021 During the assessment year 2021-22, the Assessee entered into certain international transactions with its the Assessee entered into certain international transactions with its the Assessee entered into certain international transactions with its Associated Enterprises (AEs). The learned Authorised Representative (Ld. Associated Enterprises (AEs). The learned Authorised Representative (Ld. Associated Enterprises (AEs). The learned Authorised Representative (Ld. AR) submitted that the Transactional Net Margin Method (TNMM) was AR) submitted that the Transactional Net Margin Method (TNMM) was AR) submitted that the Transactional Net Margin Method (TNMM) was adopted as the most appropriate method for benchmarking these opted as the most appropriate method for benchmarking these opted as the most appropriate method for benchmarking these transactions. The Assessee reported a margin of 3.56%, while the margins transactions. The Assessee reported a margin of 3.56%, while the margins transactions. The Assessee reported a margin of 3.56%, while the margins of eight comparable companies ranged from 1.69% to 4.03%, with a of eight comparable companies ranged from 1.69% to 4.03%, with a of eight comparable companies ranged from 1.69% to 4.03%, with a median of 3.73%. The Transfer Pricing Officer ( The Transfer Pricing Officer (‘TPO’ in s ’ in short) accepted the use of TNMM as the appropriate method. However, the TPO adjusted the use of TNMM as the appropriate method. However, the TPO adjusted the use of TNMM as the appropriate method. However, the TPO adjusted the margins of the Assessee and the comparable companies by excluding the margins of the Assessee and the comparable companies by excluding the margins of the Assessee and the comparable companies by excluding certain income and expenses and by including or excluding certain certain income and expenses and by including or excluding certain certain income and expenses and by including or excluding certain comparables. As a result, the TPO de As a result, the TPO determined the Assessee’s margin at termined the Assessee’s margin at 0.58% as against the margins of six comparable companies ranging 0.58% as against the margins of six comparable companies ranging 0.58% as against the margins of six comparable companies ranging between 5.52% and 6.14%, with a median of 5.83%. Since the Assessee’s between 5.52% and 6.14%, with a median of 5.83%. Since the Assessee’s between 5.52% and 6.14%, with a median of 5.83%. Since the Assessee’s margin did not fall within the acceptable range, a transfer pricing margin did not fall within the acceptable range, a transfer pricing margin did not fall within the acceptable range, a transfer pricing adjustment was proposed based on the difference between the Assessee’s osed based on the difference between the Assessee’s osed based on the difference between the Assessee’s margin of 0.58% and the median margin of the comparable companies at margin of 0.58% and the median margin of the comparable companies at margin of 0.58% and the median margin of the comparable companies at 5.83%. Vide order dated 12.10.2023, the TPO quantified the adjustment at 5.83%. Vide order dated 12.10.2023, the TPO quantified the adjustment at 5.83%. Vide order dated 12.10.2023, the TPO quantified the adjustment at Rs.5,10,00,000/-. Consequently, the Assessing Officer passed a . Consequently, the Assessing Officer passed a . Consequently, the Assessing Officer passed a draft

IT(TP)A No.111 IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. M/s. ZF Rane Automotive India Pvt. Ltd. 6 assessment order dated 20.12.2023 incorporating the said transfer pricing assessment order dated 20.12.2023 incorporating the said transfer pricing assessment order dated 20.12.2023 incorporating the said transfer pricing adjustment.

IT(TP)A No.111 IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. M/s. ZF Rane Automotive India Pvt. Ltd. 7 (ii) Whether cash discounts should be treated as Whether cash discounts should be treated as Whether cash discounts should be treated as operating income while computing the Assessee’s operating income while computing the Assessee’s operating income while computing the Assessee’s margin; (iii) Whether miscellaneous expenses should be treated as Whether miscellaneous expenses should be treated as Whether miscellaneous expenses should be treated as operating expenses in the case of comparable operating expenses in the case of comparable operating expenses in the case of comparable companies; and companies; and (iv) Whether functi Whether functionally comparable companies should onally comparable companies should be included. be included.

The ld. AR submitted that the remaining grounds are merely AR submitted that the remaining grounds are merely AR submitted that the remaining grounds are merely consequential in nature and do not require separate adjudication, as they consequential in nature and do not require separate adjudication, as they consequential in nature and do not require separate adjudication, as they would become academic if the above issues are decided in favour would become academic if the above issues are decided in favour would become academic if the above issues are decided in favour of the Assessee.

IT(TP)A No.111 IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. M/s. ZF Rane Automotive India Pvt. Ltd. 8 The Ld. DR strongly relied upon and supported the orders and directions of The Ld. DR strongly relied upon and supported the orders and directions of The Ld. DR strongly relied upon and supported the orders and directions of the lower authorities.

“5. We have perused the orders and heard the rival “5. We have perused the orders and heard the rival “5. We have perused the orders and heard the rival contentions. The issue under contentions. The issue under discussion is is against against treatment of export incentives and whether the same were treatment of export incentives and whether the same were treatment of export incentives and whether the same were operating income or non operating income or non-operating income. The case of operating income. The case of Revenue was that the same are non Revenue was that the same are non-operating income as operating income as some of the comparable companies do not have such income some of the comparable companies do not have such income some of the comparable companies do not have such income and hence, the same are and hence, the same are to be excluded from operating to be excluded from operating margins of Assessee by applying the parity principle. In our margins of Assessee by applying the parity principle. In our margins of Assessee by applying the parity principle. In our view, the approach of the Revenue is fundamentally flawed. view, the approach of the Revenue is fundamentally flawed. view, the approach of the Revenue is fundamentally flawed. We believe the correct approach to determine whether an We believe the correct approach to determine whether an We believe the correct approach to determine whether an income is operating or non income is operating or non-operating would be hea operating would be heavily dependent upon the character of such income and its dependent upon the character of such income and its dependent upon the character of such income and its proximity to the normal business operation. Viewed from this proximity to the normal business operation. Viewed from this proximity to the normal business operation. Viewed from this angle, we feel that both the export incentives are intertwined angle, we feel that both the export incentives are intertwined angle, we feel that both the export incentives are intertwined with the core operation of manufacturing and export as the with the core operation of manufacturing and export as the with the core operation of manufacturing and export as the entitlement of such incentive is wholly on manufacturing and uch incentive is wholly on manufacturing and uch incentive is wholly on manufacturing and export. In fact, Section 28 of the Act, specifically states that export. In fact, Section 28 of the Act, specifically states that export. In fact, Section 28 of the Act, specifically states that these export incentives will chargeable to tax as “profits and these export incentives will chargeable to tax as “profits and these export incentives will chargeable to tax as “profits and gains of business or profession”, accordingly taking a cue from gains of business or profession”, accordingly taking a cue from gains of business or profession”, accordingly taking a cue from

IT(TP)A No.111 IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. M/s. ZF Rane Automotive India Pvt. Ltd. 9 the corporate tax p the corporate tax provisions it could be safely inferred that rovisions it could be safely inferred that export incentives are operating in nature. Further, the Act export incentives are operating in nature. Further, the Act export incentives are operating in nature. Further, the Act does not provide any specific definition of the specific term does not provide any specific definition of the specific term does not provide any specific definition of the specific term “operating income”. Therefore we refer to other related “operating income”. Therefore we refer to other related “operating income”. Therefore we refer to other related Enactments/Rules to decipher the me Enactments/Rules to decipher the meaning of the aforesaid aning of the aforesaid term. In this regard, the Safe Harbour Rules 10TA (1)(i) term. In this regard, the Safe Harbour Rules 10TA (1)(i) term. In this regard, the Safe Harbour Rules 10TA (1)(i) defines “operating revenue” in an inclusive manner to mean defines “operating revenue” in an inclusive manner to mean defines “operating revenue” in an inclusive manner to mean “the revenue earned by the assessee in the previous year in “the revenue earned by the assessee in the previous year in “the revenue earned by the assessee in the previous year in relation to the international transaction during the cour relation to the international transaction during the cour relation to the international transaction during the course of its normal operations but not including the following, namely…….. normal operations but not including the following, namely…….. normal operations but not including the following, namely…….. (vii) other incomes not relating to normal operations of the (vii) other incomes not relating to normal operations of the (vii) other incomes not relating to normal operations of the assessee”. From this definition it is clear that an income to assessee”. From this definition it is clear that an income to assessee”. From this definition it is clear that an income to form part of operating income it should be derived from form part of operating income it should be derived from form part of operating income it should be derived from normal operations. Undoubtedly in the instant case, the export l operations. Undoubtedly in the instant case, the export l operations. Undoubtedly in the instant case, the export incentive is derived during the course of normal operations. incentive is derived during the course of normal operations. incentive is derived during the course of normal operations. Apart from this definition, the Cost Accounting Standards Apart from this definition, the Cost Accounting Standards Apart from this definition, the Cost Accounting Standards elucidates the term Revenue from operations as under: elucidates the term Revenue from operations as under: elucidates the term Revenue from operations as under:

“4.9 Revenue from operat “4.9 Revenue from operations: is the income arising in ions: is the income arising in the course of the ordinary activities of an entity from the the course of the ordinary activities of an entity from the the course of the ordinary activities of an entity from the sale of goods or rendering of services. Revenue from sale of goods or rendering of services. Revenue from sale of goods or rendering of services. Revenue from operations represents income arising from the sale of operations represents income arising from the sale of operations represents income arising from the sale of goods or rendering of services and includes other goods or rendering of services and includes other goods or rendering of services and includes other operating revenue, such as sale of scrap, government g revenue, such as sale of scrap, government g revenue, such as sale of scrap, government subsidies, subsidies, subsidies, or or or incentives incentives incentives received. received. received. Revenue Revenue Revenue from from from operations is generally recognised at the net value operations is generally recognised at the net value operations is generally recognised at the net value excluding indirect taxes. Sometime, revenue is presented excluding indirect taxes. Sometime, revenue is presented excluding indirect taxes. Sometime, revenue is presented at the gross value including excise duty and the excis at the gross value including excise duty and the excis at the gross value including excise duty and the excise duty is presented as deduction from such gross value of duty is presented as deduction from such gross value of duty is presented as deduction from such gross value of the revenue. the revenue.

Other Operating Revenue is the incidental income arising Other Operating Revenue is the incidental income arising Other Operating Revenue is the incidental income arising in the course of ordinary activities of an entity but not in the course of ordinary activities of an entity but not in the course of ordinary activities of an entity but not arising from the sale of main goods or services, and it arising from the sale of main goods or services, and it arising from the sale of main goods or services, and it does not incl does not include Other Income.

IT(TP)A No.111 IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. M/s. ZF Rane Automotive India Pvt. Ltd. 10 Examples: (i) Sale of By (i) Sale of By-products; (ii) Sale of manufacturing scrap; (ii) Sale of manufacturing scrap; (iii) Export incentives received from Government; and (iii) Export incentives received from Government; and (iii) Export incentives received from Government; and (iv) Product related subsidies or grants received from (iv) Product related subsidies or grants received from (iv) Product related subsidies or grants received from Government” Government”

Further, the purpose of these export Further, the purpose of these export incentives are implicit incentives are implicit from the respective schemes as under: from the respective schemes as under:

Duty Drawback is a trusted and time Duty Drawback is a trusted and time-tested scheme tested scheme administered by CBIC to promote exports. It rebates the administered by CBIC to promote exports. It rebates the administered by CBIC to promote exports. It rebates the incidence of customs and Central Excise duties, chargeable on incidence of customs and Central Excise duties, chargeable on incidence of customs and Central Excise duties, chargeable on imported and excisable ma imported and excisable material respectively when used as terial respectively when used as inputs for goods to be exported. This WTO compliant scheme inputs for goods to be exported. This WTO compliant scheme inputs for goods to be exported. This WTO compliant scheme ensures that exports are zero ensures that exports are zero-rated and do not carry the rated and do not carry the burden of the specified taxes. Duty Drawback provides burden of the specified taxes. Duty Drawback provides burden of the specified taxes. Duty Drawback provides essential support to exporters. The scheme comprises essential support to exporters. The scheme comprises essential support to exporters. The scheme comprises three categories, i.e. (i) All industry Rate (ii) Brand Rate and (iii) categories, i.e. (i) All industry Rate (ii) Brand Rate and (iii) categories, i.e. (i) All industry Rate (ii) Brand Rate and (iii) Drawback on re-export of imported goods. export of imported goods.

Duty Drawback on re Duty Drawback on re-export of imported goods: Duty export of imported goods: Duty Drawback can also be claimed or the export of duty Drawback can also be claimed or the export of duty Drawback can also be claimed or the export of duty-paid imported goods. Under this facility, imported goods. Under this facility, goods imported earlier goods imported earlier may be exported and Duty Drawback of up to 98% of import may be exported and Duty Drawback of up to 98% of import may be exported and Duty Drawback of up to 98% of import duty paid can be claimed on such exports. Proof of duty paid duty paid can be claimed on such exports. Proof of duty paid duty paid can be claimed on such exports. Proof of duty paid on importation and identification of the export goods as those on importation and identification of the export goods as those on importation and identification of the export goods as those that that that were were were imported imported imported earlier earlier earlier are are are among among among the the the primary primary primary requirements under this scheme. quirements under this scheme.

MEIS

What is Merchandise Exports from India Scheme (MEIS) What is Merchandise Exports from India Scheme (MEIS) What is Merchandise Exports from India Scheme (MEIS) Scheme

IT(TP)A No.111 IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. M/s. ZF Rane Automotive India Pvt. Ltd. 11 A scheme designed to provide rewards to exporters to offset A scheme designed to provide rewards to exporters to offset A scheme designed to provide rewards to exporters to offset infrastructural inefficiencies and associated costs. The Duty infrastructural inefficiencies and associated costs. The Duty infrastructural inefficiencies and associated costs. The Duty Credit Scrips and goods imported/ Credit Scrips and goods imported/ domestically procured domestically procured against them shall be freely transferable. The Duty Credit against them shall be freely transferable. The Duty Credit against them shall be freely transferable. The Duty Credit Scrips can be used for: Scrips can be used for:

(i) Payment of Basic Customs Duty and Additional Customs Payment of Basic Customs Duty and Additional Customs Payment of Basic Customs Duty and Additional Customs Duty specified under sections 3(1), 3(3) and 3(5) of the Duty specified under sections 3(1), 3(3) and 3(5) of the Duty specified under sections 3(1), 3(3) and 3(5) of the Customs Tariff Act, 1975 for import of inputs or goods, Customs Tariff Act, 1975 for import of inputs or goods, Customs Tariff Act, 1975 for import of inputs or goods, including capital goods, as per DoR Notification, except including capital goods, as per DoR Notification, except including capital goods, as per DoR Notification, except items listed in Appendix 3A. items listed in Appendix 3A.

(ii) Payment of Central excise duties on domestic procurement ment of Central excise duties on domestic procurement ment of Central excise duties on domestic procurement of inputs or goods, of inputs or goods,

(iii) Payment of Basic Customs Duty and Additional Customs Payment of Basic Customs Duty and Additional Customs Payment of Basic Customs Duty and Additional Customs Duty specified ender Sections 3(1), 3(3) and 3(5) of the Duty specified ender Sections 3(1), 3(3) and 3(5) of the Duty specified ender Sections 3(1), 3(3) and 3(5) of the Customs Tariff Act, 1975 and fee as per paragraph 3.18 of Customs Tariff Act, 1975 and fee as per paragraph 3.18 of Customs Tariff Act, 1975 and fee as per paragraph 3.18 of this Policy

Objective of the Merchandise Exports from India Scheme Objective of the Merchandise Exports from India Scheme Objective of the Merchandise Exports from India Scheme (MEIS) is to promote the manufacture and export of notified (MEIS) is to promote the manufacture and export of notified (MEIS) is to promote the manufacture and export of notified goods/ products.

IT(TP)A No.111 IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. M/s. ZF Rane Automotive India Pvt. Ltd. 12 this decision does not actually aid the contention of the Ld this decision does not actually aid the contention of the Ld this decision does not actually aid the contention of the Ld DR/DRP. The other decision which was considered by DRP and DR/DRP. The other decision which was considered by DRP and DR/DRP. The other decision which was considered by DRP and also emphasised by Ld DR in the case of Goodyear India Ltd also emphasised by Ld DR in the case of Goodyear India Ltd also emphasised by Ld DR in the case of Goodyear India Ltd (supra), the issue was whether export incentive and rebate (supra), the issue was whether export incentive and rebate (supra), the issue was whether export incentive and rebate should be reduced from cost of goods. What was held was should be reduced from cost of goods. What was held was should be reduced from cost of goods. What was held was that such incentives w that such incentives were available to an Assessee only after ere available to an Assessee only after the exports were made and therefore, could not go to reduce the exports were made and therefore, could not go to reduce the exports were made and therefore, could not go to reduce the cost of goods. Apparently, the issue for consideration in the cost of goods. Apparently, the issue for consideration in the cost of goods. Apparently, the issue for consideration in the aforesaid case is different from the issue under the aforesaid case is different from the issue under the aforesaid case is different from the issue under consideration. Therefore, the decision of consideration. Therefore, the decision of Goodyear is Goodyear is distinguishable on facts. Our view is also supported by the distinguishable on facts. Our view is also supported by the distinguishable on facts. Our view is also supported by the jurisdictional Tribunal decision in the case of M/s. Greenland jurisdictional Tribunal decision in the case of M/s. Greenland jurisdictional Tribunal decision in the case of M/s. Greenland Exports Pvt Ltd v DCIT ITA No.514/Mds/2016 wherein it was Exports Pvt Ltd v DCIT ITA No.514/Mds/2016 wherein it was Exports Pvt Ltd v DCIT ITA No.514/Mds/2016 wherein it was held that export incentives and duty drawback are considered held that export incentives and duty drawback are considered held that export incentives and duty drawback are considered to be operating in nature. Relevant extract of the ruling is o be operating in nature. Relevant extract of the ruling is o be operating in nature. Relevant extract of the ruling is provided below:

“We have perused the orders and heard the rival “We have perused the orders and heard the rival “We have perused the orders and heard the rival contentions insofar as duty drawback and export contentions insofar as duty drawback and export contentions insofar as duty drawback and export incentives are concerned, the cases relied on by the ld. incentives are concerned, the cases relied on by the ld. incentives are concerned, the cases relied on by the ld. AR do support assessee’s c AR do support assessee’s case. As for the case of ase. As for the case of Goodyear India Ltd (supra) relied on by the Assessing Goodyear India Ltd (supra) relied on by the Assessing Goodyear India Ltd (supra) relied on by the Assessing Officer, the issue was whether export incentive and Officer, the issue was whether export incentive and Officer, the issue was whether export incentive and rebate could be reduced from cost of goods. What was rebate could be reduced from cost of goods. What was rebate could be reduced from cost of goods. What was held was that such incentives were available to an held was that such incentives were available to an held was that such incentives were available to an assessee only after th assessee only after the exports were made and e exports were made and therefore, could not go to reduce the cost of goods. In therefore, could not go to reduce the cost of goods. In therefore, could not go to reduce the cost of goods. In the cases relied by the Assessee, it has been uniformly the cases relied by the Assessee, it has been uniformly the cases relied by the Assessee, it has been uniformly held that such incentives were to be considered as a held that such incentives were to be considered as a held that such incentives were to be considered as a part of operational income under TNM method while part of operational income under TNM method while part of operational income under TNM method while working working out out the the m margin argin of of an an Assessee Assessee for for comparability……hence we set aside the orders of the comparability……hence we set aside the orders of the comparability……hence we set aside the orders of the authorities below on this issue and direct the Assessing authorities below on this issue and direct the Assessing authorities below on this issue and direct the Assessing officer/TPO to rework the results of the Assessee after officer/TPO to rework the results of the Assessee after officer/TPO to rework the results of the Assessee after considering the above terms as operational in nature.” considering the above terms as operational in nature.” considering the above terms as operational in nature.”

IT(TP)A No.111 IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. M/s. ZF Rane Automotive India Pvt. Ltd. 13 The Hon’ble Bombay High Court in the case of CIT v. Welspun e Bombay High Court in the case of CIT v. Welspun e Bombay High Court in the case of CIT v. Welspun Zucchi Textiles Ltd. In ITA No. 1286/2014 dt 06.01.2017held Zucchi Textiles Ltd. In ITA No. 1286/2014 dt 06.01.2017held Zucchi Textiles Ltd. In ITA No. 1286/2014 dt 06.01.2017held as under:

“4. Regarding question (ii): “4. Regarding question (ii):- (a) The TPO while arriving (a) The TPO while arriving at the ALP for the export of bathrobes and towels had at the ALP for the export of bathrobes and towels had at the ALP for the export of bathrobes and towels had excluded the DEPB benefi excluded the DEPB benefit and depreciation while t and depreciation while arriving at the operating profits and total cost arriving at the operating profits and total cost arriving at the operating profits and total cost respectively of the respondent for the purposes of respectively of the respondent for the purposes of respectively of the respondent for the purposes of application of the TNMM method to arrive at ALP. This application of the TNMM method to arrive at ALP. This application of the TNMM method to arrive at ALP. This exclusion of DEPB benefit from profit and depreciation exclusion of DEPB benefit from profit and depreciation exclusion of DEPB benefit from profit and depreciation from costs, was done o from costs, was done only while arriving at the profits of nly while arriving at the profits of the respondent assessee and not while arriving at the the respondent assessee and not while arriving at the the respondent assessee and not while arriving at the profit margin of the comparables. (b) Being aggrieved, profit margin of the comparables. (b) Being aggrieved, profit margin of the comparables. (b) Being aggrieved, the respondent assessee filed an appeal to the CIT(A). the respondent assessee filed an appeal to the CIT(A). the respondent assessee filed an appeal to the CIT(A). In appeal, the CIT(A) by an order dated 2nd November, In appeal, the CIT(A) by an order dated 2nd November, In appeal, the CIT(A) by an order dated 2nd November, 2012 held that both the DEPB as well as the depreciation 012 held that both the DEPB as well as the depreciation 012 held that both the DEPB as well as the depreciation are part of the operating income/expenses respectively. are part of the operating income/expenses respectively. are part of the operating income/expenses respectively. Thus, they have to be taken into account while arriving Thus, they have to be taken into account while arriving Thus, they have to be taken into account while arriving at the operating profit and total cost before determining at the operating profit and total cost before determining at the operating profit and total cost before determining the margin on adoption of TNMM the margin on adoption of TNMM method. (c) Being method. (c) Being aggrieved, the Revenue carried the issue in appeal to aggrieved, the Revenue carried the issue in appeal to aggrieved, the Revenue carried the issue in appeal to the Tribunal. By the impugned order, the Tribunal held the Tribunal. By the impugned order, the Tribunal held the Tribunal. By the impugned order, the Tribunal held that so far DEPB benefit is concerned, the issue arose that so far DEPB benefit is concerned, the issue arose that so far DEPB benefit is concerned, the issue arose for consideration before it in the case for consideration before it in the case of respondent assessee itself for of respondent assessee itself for Assessment year 2005 Assessment year 2005- 06 and 2007 06 and 2007-08 and the Tribunal held that the same has 08 and the Tribunal held that the same has to be included for the purposes of arriving at operating to be included for the purposes of arriving at operating to be included for the purposes of arriving at operating profit for the application of TNMM method. This on the profit for the application of TNMM method. This on the profit for the application of TNMM method. This on the basis that comparison should be made on like to like and basis that comparison should be made on like to like and basis that comparison should be made on like to like and similar to similar. So far as the depreciation is similar. So far as the depreciation is concerned, the impugned order of the Tribunal adopted concerned, the impugned order of the Tribunal adopted concerned, the impugned order of the Tribunal adopted the same reasoning which it had applied while holding the same reasoning which it had applied while holding the same reasoning which it had applied while holding that DEPB benefit is includable in arriving at the net that DEPB benefit is includable in arriving at the net that DEPB benefit is includable in arriving at the net profit in its order in the earlier assessment years 2 profit in its order in the earlier assessment years 2 profit in its order in the earlier assessment years 2005- 06 and 2007 06 and 2007-08 in the subject assessment year with 08 in the subject assessment year with

IT(TP)A No.111 IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. M/s. ZF Rane Automotive India Pvt. Ltd. 14 regard to claim of depreciation. Therefore, the DEPB was regard to claim of depreciation. Therefore, the DEPB was regard to claim of depreciation. Therefore, the DEPB was includable in arriving at the operating profit and includable in arriving at the operating profit and includable in arriving at the operating profit and depreciation was includable while arriving at the total depreciation was includable while arriving at the total depreciation was includable while arriving at the total costs of the respondent assessee as t costs of the respondent assessee as the same is not he same is not excluded in arriving at the profits of the comparable excluded in arriving at the profits of the comparable excluded in arriving at the profits of the comparable companies. (d)We find that so far as exclusion of DEPB companies. (d)We find that so far as exclusion of DEPB companies. (d)We find that so far as exclusion of DEPB benefit in arriving at the operating profit of the benefit in arriving at the operating profit of the benefit in arriving at the operating profit of the respondent assessee is concerned, the order of the respondent assessee is concerned, the order of the respondent assessee is concerned, the order of the Tribunal for the assessment ye Tribunal for the assessment years 2005-06 and 2007 06 and 2007-08 were appealed by the revenue to this Court. Mr. Suresh were appealed by the revenue to this Court. Mr. Suresh were appealed by the revenue to this Court. Mr. Suresh Kumar, learned Counsel appearing for the Revenue very Kumar, learned Counsel appearing for the Revenue very Kumar, learned Counsel appearing for the Revenue very fairly states that this very issue was raised by the fairly states that this very issue was raised by the fairly states that this very issue was raised by the Revenue in its appeal before this Court for the earlier Revenue in its appeal before this Court for the earlier Revenue in its appeal before this Court for the earlier assessment yea assessment years being Income Tax Appeal No.1827 of rs being Income Tax Appeal No.1827 of 2013 relating to AY 2005 2013 relating to AY 2005-06 and Income Tax Appeal 06 and Income Tax Appeal No.171 of 2014 relating to AY 2007 No.171 of 2014 relating to AY 2007-08. However, this 08. However, this Court by orders dated 22nd September, 2015 for AY Court by orders dated 22 September, 2015 for AY 2005-06 and 1st July, 2016 for AY 2007 06 and 1st July, 2016 for AY 2007-08, dismissed 08, dismissed the Revenue’s appeal. In the above view, the issue with the Revenue’s appeal. In the above view, the issue with the Revenue’s appeal. In the above view, the issue with regard to the exclusion of the DEPB benefit stands regard to the exclusion of the DEPB benefit stands regard to the exclusion of the DEPB benefit stands concluded by virtue of order of this Court against the concluded by virtue of order of this Court against the concluded by virtue of order of this Court against the Revenue and in fa Revenue and in favour of the respondent assessee.” vour of the respondent assessee.”

IT(TP)A No.111 IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. M/s. ZF Rane Automotive India Pvt. Ltd. 15 in the Assessee’s own case for Assessment Year 2020 in the Assessee’s own case for Assessment Year 2020-21, we direct the 21, we direct the Assessing Officer to recompute t Assessing Officer to recompute the Assessee’s margin by treating export he Assessee’s margin by treating export incentives as operating income. Consequently, Ground No. 2.2 raised by incentives as operating income. Consequently, Ground No. 2.2 raised by incentives as operating income. Consequently, Ground No. 2.2 raised by the Assessee stands allowed. the Assessee stands allowed.

IT(TP)A No.111 IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. M/s. ZF Rane Automotive India Pvt. Ltd. 16 "8.4 We have heard the contentions of the rival parties and "8.4 We have heard the contentions of the rival parties and "8.4 We have heard the contentions of the rival parties and perused the material available on record and we proceed to perused the material available on record and we proceed to perused the material available on record and we proceed to decide the issue without considering the additional evidence in decide the issue without considering the additional evidence in decide the issue without considering the additional evidence in this regard. The question is whether the cash discount this regard. The question is whether the cash discount this regard. The question is whether the cash discount reflected as income in the Profit and Loss can be treated as reflected as income in the Profit and Loss can be treated as reflected as income in the Profit and Loss can be treated as operating revenue. It is quite explicit from the undisputed operating revenue. It is quite explicit from the undisputed operating revenue. It is quite explicit from the undisputed facts of the case that the income in relation to cash discount is e that the income in relation to cash discount is e that the income in relation to cash discount is nothing, but an income earned due to early payment of nothing, but an income earned due to early payment of nothing, but an income earned due to early payment of invoices to suppliers. The Ld AR also contended that expense invoices to suppliers. The Ld AR also contended that expense invoices to suppliers. The Ld AR also contended that expense could be reduced by the component of cash discount and net could be reduced by the component of cash discount and net could be reduced by the component of cash discount and net amount could have been disclosed amount could have been disclosed as expense or in the as expense or in the alternative gross amount of expense is disclosed as debit to alternative gross amount of expense is disclosed as debit to alternative gross amount of expense is disclosed as debit to P&L and the corresponding cash discount is separately shown P&L and the corresponding cash discount is separately shown P&L and the corresponding cash discount is separately shown as income in the P&L, in either case the overall impact and the as income in the P&L, in either case the overall impact and the as income in the P&L, in either case the overall impact and the nature of such cash discount remains the same. We nature of such cash discount remains the same. We nature of such cash discount remains the same. We agree in principal that cash discount ought to be treated as operating principal that cash discount ought to be treated as operating principal that cash discount ought to be treated as operating revenue and observation of the DRP by placing reliance on revenue and observation of the DRP by placing reliance on revenue and observation of the DRP by placing reliance on Rule 10TA of Safe Harbour Rules is not correct. In fact, even Rule 10TA of Safe Harbour Rules is not correct. In fact, even Rule 10TA of Safe Harbour Rules is not correct. In fact, even as per the definition of Safe harbour Rules, we are of the view as per the definition of Safe harbour Rules, we are of the view as per the definition of Safe harbour Rules, we are of the view that the said income is derived from the normal operation of that the said income is derived from the normal operation of that the said income is derived from the normal operation of business and therefore it ought to be treated as operating business and therefore it ought to be treated as operating business and therefore it ought to be treated as operating revenue. We also note that issue arising in the present appeal revenue. We also note that issue arising in the present appeal revenue. We also note that issue arising in the present appeal is squarely covered by the decision of this Tribunal in the case is squarely covered by the decision of this Tribunal in the case is squarely covered by the decision of this Tribunal in the case of M/s. Hyundai Motor India Limited vs ACIT Hyundai Motor India Limited vs ACIT - - ITA No. 3912/Chny/2017 wherein it has been held that discount 3912/Chny/2017 wherein it has been held that discount 3912/Chny/2017 wherein it has been held that discount income are to be considered as operating income for the income are to be considered as operating income for the income are to be considered as operating income for the purpose of computing operating margins. Relevant extract of purpose of computing operating margins. Relevant extract of purpose of computing operating margins. Relevant extract of the said decision is provided below: the said decision is provided below:

" 52. As regards commission / discount income, 52. As regards commission / discount income, 52. As regards commission / discount income, incentives and insurance claim income, we find that all incentives and insurance claim income, we find that all incentives and insurance claim income, we find that all these incomes are generated from main business activity these incomes are generated from main business activity these incomes are generated from main business activity of the Assessee of manufacturing and sales of cars. The of the Assessee of manufacturing and sales of cars. The of the Assessee of manufacturing and sales of cars. The Assessee has received commission / discount Assessee has received commission / discount Assessee has received commission / discount on procurement of raw materials and insurance claim is procurement of raw materials and insurance claim is procurement of raw materials and insurance claim is received towards damaged cars manufactured by the received towards damaged cars manufactured by the received towards damaged cars manufactured by the

IT(TP)A No.111 IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. M/s. ZF Rane Automotive India Pvt. Ltd. 17 Assessee. When the Assessee is recognizing income Assessee. When the Assessee is recognizing income Assessee. When the Assessee is recognizing income from sale of cars as operating in nature, then insurance from sale of cars as operating in nature, then insurance from sale of cars as operating in nature, then insurance claim received towards damaged cars is also claim received towards damaged cars is also operating in operating in nature and hence, we are of the considered view that nature and hence, we are of the considered view that nature and hence, we are of the considered view that the ld. TPO has erred in considering commission / the ld. TPO has erred in considering commission / the ld. TPO has erred in considering commission / discount income, incentives and insurance income as discount income, incentives and insurance income as discount income, incentives and insurance income as non-operating income. Hence, we direct the ld. TPO to operating income. Hence, we direct the ld. TPO to operating income. Hence, we direct the ld. TPO to consider commission / discount i consider commission / discount income, incentives and ncome, incentives and insurance claim as operating income for the purpose of insurance claim as operating income for the purpose of insurance claim as operating income for the purpose of computing operating margin." computing operating margin."

8.5 Following this decision, we direct so the TPO to re 8.5 Following this decision, we direct so the TPO to re 8.5 Following this decision, we direct so the TPO to re- determine the margin of the Assessee after including the determine the margin of the Assessee after including the determine the margin of the Assessee after including the same. Thus this ground of appeal is same. Thus this ground of appeal is decided in favour of the decided in favour of the Assessee. The grounds of appeal No.2.3 raised by Assessee is Assessee. The grounds of appeal No.2.3 raised by Assessee is Assessee. The grounds of appeal No.2.3 raised by Assessee is thus, allowed."

IT(TP)A No.111 IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. M/s. ZF Rane Automotive India Pvt. Ltd. 18 IT(TP)A No.53/Chny/2024, wherein the Tribunal held that miscellaneous IT(TP)A No.53/Chny/2024, wherein the Tribunal held that miscellaneous IT(TP)A No.53/Chny/2024, wherein the Tribunal held that miscellaneous expenses should be treated as operating expenses. expenses should be treated as operating expenses.

“9.3. We have heard the rival submissions and perused the 9.3. We have heard the rival submissions and perused the 9.3. We have heard the rival submissions and perused the materials available on record. The case of Revenue was that materials available on record. The case of Revenue was that materials available on record. The case of Revenue was that the Miscellaneous Expense is non the Miscellaneous Expense is non-operating expense and it is operating expense and it is excluded for comparable companies and similar expenses are excluded for comparable companies and similar expenses are excluded for comparable companies and similar expenses are excluded for Assess excluded for Assessee as well by applying the parity principle. ee as well by applying the parity principle. In our view, the approach of the Revenue is fundamentally In our view, the approach of the Revenue is fundamentally In our view, the approach of the Revenue is fundamentally flawed. We believe the correct approach to determine whether flawed. We believe the correct approach to determine whether flawed. We believe the correct approach to determine whether an expense is operating or non an expense is operating or non-operating would be heavily operating would be heavily dependent upon the character of su dependent upon the character of such expense and its ch expense and its proximity to the normal business operation. Viewed from this proximity to the normal business operation. Viewed from this proximity to the normal business operation. Viewed from this angle, we feel that Miscellaneous Expense is part of any normal angle, we feel that Miscellaneous Expense is part of any normal angle, we feel that Miscellaneous Expense is part of any normal business operation. In fact as per Section 37 of the Act, the business operation. In fact as per Section 37 of the Act, the business operation. In fact as per Section 37 of the Act, the same is allowed as business expenditure, according same is allowed as business expenditure, according same is allowed as business expenditure, accordingly taking a cue from the corporate tax provisions it could be safely inferred cue from the corporate tax provisions it could be safely inferred cue from the corporate tax provisions it could be safely inferred that Miscellaneous expense is operating in nature. Therefore that Miscellaneous expense is operating in nature. Therefore that Miscellaneous expense is operating in nature. Therefore Miscellaneous expense incurred by every company in its usual Miscellaneous expense incurred by every company in its usual Miscellaneous expense incurred by every company in its usual course of business cannot be said that they have no nexu course of business cannot be said that they have no nexu course of business cannot be said that they have no nexus with

IT(TP)A No.111 IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. M/s. ZF Rane Automotive India Pvt. Ltd. 19 normal operation of business. The view expressed is supported normal operation of business. The view expressed is supported normal operation of business. The view expressed is supported by the decision of the Delhi Tribunal in the case of ITO vs E by the decision of the Delhi Tribunal in the case of ITO vs E by the decision of the Delhi Tribunal in the case of ITO vs E Value serve.com (2016) 75 taxmann.com 195 (Delhi Value serve.com (2016) 75 taxmann.com 195 (Delhi Value serve.com (2016) 75 taxmann.com 195 (Delhi – Trib) wherein it is held that miscellaneous expenses ought to be wherein it is held that miscellaneous expenses ought to be wherein it is held that miscellaneous expenses ought to be treated as operating expenses for Assessee as well as s operating expenses for Assessee as well as s operating expenses for Assessee as well as comparable companies. Relevant para of the order is produced comparable companies. Relevant para of the order is produced comparable companies. Relevant para of the order is produced below:

“47. Ground no. 6: The main contention of department is “47. Ground no. 6: The main contention of department is “47. Ground no. 6: The main contention of department is that ld. CIT(A) had concluded that misc. income and that ld. CIT(A) had concluded that misc. income and that ld. CIT(A) had concluded that misc. income and misc. expenses were operating prof misc. expenses were operating profits without verifying its without verifying their nature. We find that ld. CIT(A) has observed in their nature. We find that ld. CIT(A) has observed in their nature. We find that ld. CIT(A) has observed in regard to misc. income that the same pertained to income regard to misc. income that the same pertained to income regard to misc. income that the same pertained to income from other sources and the misc. income was included as from other sources and the misc. income was included as from other sources and the misc. income was included as part of operating profit in the case of comparable part of operating profit in the case of comparable part of operating profit in the case of comparable company. Therefo company. Therefore, there could not be any prejudice to re, there could not be any prejudice to revenue on this count. As regards misc. expenses, ld. revenue on this count. As regards misc. expenses, ld. revenue on this count. As regards misc. expenses, ld. CIT(A) has observed that the same included a multitude CIT(A) has observed that the same included a multitude CIT(A) has observed that the same included a multitude of expenses that were too small in value. But since they of expenses that were too small in value. But since they of expenses that were too small in value. But since they pertained to the operations of the company, they w pertained to the operations of the company, they w pertained to the operations of the company, they were treated as operating expenses for both the tested party treated as operating expenses for both the tested party treated as operating expenses for both the tested party as well as the comparable companies. The as well as the comparable companies. The TP analysis, as we have earlier observed, is not an exact TP analysis, as we have earlier observed, is not an exact TP analysis, as we have earlier observed, is not an exact science and we have to arrive at reasonable conclusions science and we have to arrive at reasonable conclusions science and we have to arrive at reasonable conclusions which would not materially affect the pro which would not materially affect the profit margins. which would not materially affect the profit margins. Therefore, we do not find any reason to interfere with the Therefore, we do not find any reason to interfere with the Therefore, we do not find any reason to interfere with the finding of ld. CIT(A) on this count. In the result ground finding of ld. CIT(A) on this count. In the result ground finding of ld. CIT(A) on this count. In the result ground no. 6 is dismissed”. no. 6 is dismissed”.

9.4. In view of our above discussions/observation and the 9.4. In view of our above discussions/observation and the 9.4. In view of our above discussions/observation and the judicial precedents as above, we hold that Mi judicial precedents as above, we hold that Mi judicial precedents as above, we hold that Miscellaneous expense ought to be considered as part of “operating expense” expense ought to be considered as part of “operating expense” expense ought to be considered as part of “operating expense” of comparable companies (wherever applicable) irrespective of of comparable companies (wherever applicable) irrespective of of comparable companies (wherever applicable) irrespective of whether the assessee has incurred such Miscellaneous expense whether the assessee has incurred such Miscellaneous expense whether the assessee has incurred such Miscellaneous expense or not and we direct so the TPO to redetermine the margin o or not and we direct so the TPO to redetermine the margin o or not and we direct so the TPO to redetermine the margin of the comparable companies after including the same. As a the comparable companies after including the same. As a the comparable companies after including the same. As a

IT(TP)A No.111 IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. M/s. ZF Rane Automotive India Pvt. Ltd. 20 result, the ground of appeal no. 2.5 raised by the Assessee is result, the ground of appeal no. 2.5 raised by the Assessee is result, the ground of appeal no. 2.5 raised by the Assessee is allowed.”

IT(TP)A No.111 IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. M/s. ZF Rane Automotive India Pvt. Ltd. 21 this basis, it was argued that Jay Ushin ought not to have been excluded this basis, it was argued that Jay Ushin ought not to have been excluded this basis, it was argued that Jay Ushin ought not to have been excluded from the final set of comparables. The learned AR further submitted that from the final set of comparables. The learned AR further submitted that from the final set of comparables. The learned AR further submitted that this issue is squarely covered by the decision of the Tribunal in the this issue is squarely covered by the decision of the Tribunal in the this issue is squarely covered by the decision of the Tribunal in the Assessee’s own case for Assessment Year 2020 Assessee’s own case for Assessment Year 2020- -21 in IT(TP)A No.53/Chny/2024, wherein the Tribunal decided the issue in favour of the No.53/Chny/2024, wherein the Tribunal decided the issue in favour of the No.53/Chny/2024, wherein the Tribunal decided the issue in favour of the Assessee and directed the TPO to include Jay Ushin in the final list of Assessee and directed the TPO to include Jay Ushin in the final list of Assessee and directed the TPO to include Jay Ushin in the final list of comparable companies. comparable companies.

IT(TP)A No.111 IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. M/s. ZF Rane Automotive India Pvt. Ltd. 22 Ushin should also be included as a comparable company. Ushin should also be included as a comparable company. Ushin should also be included as a comparable company. Therefore, we direct the TPO to include Jay Ushin in the final Therefore, we direct the TPO to include Jay Ushin in the final Therefore, we direct the TPO to include Jay Ushin in the final list of comparables companies.” f comparables companies.”

IT(TP)A No.111 IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. M/s. ZF Rane Automotive India Pvt. Ltd. 23 22. On the other hand, the Ld.DR relied upon the orders of the lower On the other hand, the Ld.DR relied upon the orders of the lower On the other hand, the Ld.DR relied upon the orders of the lower authorities, which excluded Shivam Autotech on the ground of functional authorities, which excluded Shivam Autotech on the ground of functional authorities, which excluded Shivam Autotech on the ground of functional dissimilarity.

As this issue has already been adjudicated in IT(TP)A No.53/Chny/2024 As this issue has already been adjudicated in IT(TP)A No.53/Chny/2024 As this issue has already been adjudicated in IT(TP)A No.53/Chny/2024 for Assessment Year 2020 Assessment Year 2020-21, we follow the same decision and direct the 21, we follow the same decision and direct the

IT(TP)A No.111 IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. M/s. ZF Rane Automotive India Pvt. Ltd. 24 Assessing Officer to include Shivam Autotech in the final list of comparable Assessing Officer to include Shivam Autotech in the final list of comparable Assessing Officer to include Shivam Autotech in the final list of comparable companies.

IT(TP)A No.111 IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. M/s. ZF Rane Automotive India Pvt. Ltd. 25 dealt with this issue in the Assessee’s own case f dealt with this issue in the Assessee’s own case for Assessment Year 2020 or Assessment Year 2020- 21, wherein it was held that the Assessee and Omax Auto are engaged in 21, wherein it was held that the Assessee and Omax Auto are engaged in 21, wherein it was held that the Assessee and Omax Auto are engaged in the same line of manufacturing auto components, and Omax Auto was the same line of manufacturing auto components, and Omax Auto was the same line of manufacturing auto components, and Omax Auto was directed to be included in the final list of comparable companies. The directed to be included in the final list of comparable companies. The directed to be included in the final list of comparable companies. The relevant findings of the relevant findings of the Tribunal in the earlier decision are reproduced Tribunal in the earlier decision are reproduced below: “11.9 We have heard both the parties and considered relevant “11.9 We have heard both the parties and considered relevant “11.9 We have heard both the parties and considered relevant material available on record. We find that the Assessee has material available on record. We find that the Assessee has material available on record. We find that the Assessee has chosen Talbros Automotive as comparable company, and the chosen Talbros Automotive as comparable company, and the chosen Talbros Automotive as comparable company, and the said company has been said company has been accepted by the TPO. Talbros accepted by the TPO. Talbros Automotive is engaged in manufacture of chassis systems, Automotive is engaged in manufacture of chassis systems, Automotive is engaged in manufacture of chassis systems, suspension systems gaskets, heat shields, forgings, anti suspension systems gaskets, heat shields, forgings, anti suspension systems gaskets, heat shields, forgings, anti- vibration components and it is on the same line that of Omax vibration components and it is on the same line that of Omax vibration components and it is on the same line that of Omax Autos which manufactures steering shafts, axle shaft Autos which manufactures steering shafts, axle shaft Autos which manufactures steering shafts, axle shafts, piston, Gear Shifter Shaft Assembly etc., Since, Talbros Automotive Gear Shifter Shaft Assembly etc., Since, Talbros Automotive Gear Shifter Shaft Assembly etc., Since, Talbros Automotive has been accepted as comparable company, TPO ought to has been accepted as comparable company, TPO ought to has been accepted as comparable company, TPO ought to have also included Omax Autos as a comparable company. have also included Omax Autos as a comparable company. have also included Omax Autos as a comparable company. Therefore, we direct the TPO to include the same in final Therefore, we direct the TPO to include the same in final Therefore, we direct the TPO to include the same in final comparable matrix. comparable matrix. The Assessing Officer/TPO is directed to The Assessing Officer/TPO is directed to rework the Arm’s Length Price of the international transactions rework the Arm’s Length Price of the international transactions rework the Arm’s Length Price of the international transactions based on our direction in paras supra.” based on our direction in paras supra.”

As this issue has already been adjudicated in IT(TP)A No.53/Chny/2024 As this issue has already been adjudicated in IT(TP)A No.53/Chny/2024 As this issue has already been adjudicated in IT(TP)A No.53/Chny/2024 for Assessment Year 2020 for Assessment Year 2020-21, we follow the same decision and direct the 21, we follow the same decision and direct the Assessing Officer to include Omax Auto Ltd. in the final list of comparable Assessing Officer to include Omax Auto Ltd. in the final list of comparable Assessing Officer to include Omax Auto Ltd. in the final list of comparable companies. We further direct the Assessing Officer to recompute the Arm’s companies. We further direct the Assessing Officer to recompute the Arm’s companies. We further direct the Assessing Officer to recompute the Arm’s Length Price of the international transactions in accordanc Length Price of the international transactions in accordanc Length Price of the international transactions in accordance with our directions given in the preceding paras. directions given in the preceding paras.

IT(TP)A No.111 IT(TP)A No.111/Chny/2024 M/s. ZF Rane Automotive India Pvt. Ltd. M/s. ZF Rane Automotive India Pvt. Ltd. 26 27. As noted earlier, the ld As noted earlier, the ld. AR submitted that if the issues decided in AR submitted that if the issues decided in favor of the Assessee as above, the remaining grounds of appeal would favor of the Assessee as above, the remaining grounds of appeal would favor of the Assessee as above, the remaining grounds of appeal would become academic and, therefore, do not require adjudication. become academic and, therefore, do not require adjudication. become academic and, therefore, do not require adjudication. Accordingly, the Assessee’s appeal is treated as partly allowed for statistical Accordingly, the Assessee’s appeal is treated as partly allowed for statistical Accordingly, the Assessee’s appeal is treated as partly allowed for statistical purposes.

Order pronounced on 23rd day of December, 2025 at Chennai. Order pronounced on 5 at Chennai.

Sd/- Sd/ Sd/- रघुनाथा) (मनु कुमार कुमार िग�र) (एस. आर. रघुनाथा (S.R.RAGHUNATHA) (S.R.RAGHUNATHA) (MANU KUMAR GIRI) (MANU KUMAR GIRI) लेखा सद�य/ACCOUNTANT MEMBER �याियक सद�य/JUDICIAL MEMBER /ACCOUNTANT MEMBER /JUDICIAL MEMBER चे�नई/Chennai, -दनांक/Dated: 23rd December, 2025. December, 2025. EDN, Sr. PS 1. अपीलाथ%/Appellant आदेशक( &ितिल.पअ/े.षत 2. &'यथ%/Respondent 3. आयकरआयु0/CIT, Chennai / Madurai / Salem / Coimbatore. CIT, Chennai / Madurai / Salem / Coimbatore. CIT, Chennai / Madurai / Salem / Coimbatore. 4. .वभागीय&ितिनिध/DR 5. गाड"फाईल/GF