BORGWARNER COOLING SYSTEMS (INDIA) PRIVATE LIMITED,KANCHIPURAM vs. DCIT CORPORATE CIRCLE 1(1), CHENNAI

आयकर अपीलीय अिधकरण, ‘ड�’ �ायपीठ, चे�ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH: CHENNAI

�ी मनु कुमार िग�र, �ाियक सद� एवं �ी एस. आर. रघुनाथा, लेखा सद�केसम� BEFORE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRI S. R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./IT(TP)A No.129/Chny/2024 िनधा�रण वष�/Assessment Year: 2021-22 BorgWarner Cooling System The Deputy Commissioner of (India) Limited, Income Tax, Vs. Plot No. E-14, Sipcot Industrial CORP CRICLE 1(1), park, Mambakkam, Kanchipuram CHENNAI-600034, Tamil Nadu – 602106. Tamil Nadu

[PAN: AABCB5837E] (अपीलाथ�/Assessee) (��यथ�/Respondent)

अपीलाथ� की ओर से/ Assessee by : Ms. Hema Muralikrishnan, Advocate ��थ� की ओर से /Respondent by : Mr. ARV Sreenivasan, CIT सुनवाई क� तार�ख/Date of Hearing : 26.09.2025

घोषणा क� तार�ख /Date of : 23.12.2025 Pronouncement आदेश / O R D E R PER MANU KUMAR GIRI, JM: The captioned appeal by the assessee for Assessment Year (‘AY' in short) 2021-22 arising out of final assessment order dated 28.10.2024 passed by .10.2024 passed by Assessing Officer, u/s.143(3) r.w.s. 144C(13) Assessing Officer, u/s.143(3) r.w.s. 144C(13) r.w.s.144B of the Act pursuant to the directions of r.w.s.144B of the Act pursuant to the directions of r.w.s.144B of the Act pursuant to the directions of Ld. Dispute Resolution Panel-2, Bengaluru(‘DRP' in short) u/s.144C(5) of the Act Bengaluru(‘DRP' in short) u/s.144C(5) of the Act Bengaluru(‘DRP' in short) u/s.144C(5) of the Act dated 05.09.2024.

(i) Transfer Pricing (“TP”) adjustment arising from disallowance of (i) Transfer Pricing (“TP”) adjustment arising from disallowance of (i) Transfer Pricing (“TP”) adjustment arising from disallowance of management services and testing & validation services received management services and testing & validation services received management services and testing & validation services received from Associated Enterprises (“AEs”), and from Associated Enterprises (“AEs”), and (ii) TP adjustment on account of (ii) TP adjustment on account of notional interest on outstanding notional interest on outstanding receivables.

The assessee has raised various grounds of appeal which are The assessee has raised various grounds of appeal which are The assessee has raised various grounds of appeal which are disposed of together for convenience. disposed of together for convenience.

Amount Amount Particulars (INR) (INR) Sale of finished products Sale of finished products 48,67,32,689 48,67,32,689 Purchase of raw materials Purchase of raw materials 1,74,37,623 1,74,37,623 Provision of design & support services Provision of design & support services 8,09,23,484 8,09,23,484 Management services Management services – paid 4,39,44,329 4,39,44,329 Testing & validation services Testing & validation services – paid 1,47,70,483 1,47,70,483 IT-related services related services 1,81,81,427 1,81,81,427 Royalty payment Royalty payment 7,85,76,720 7,85,76,720 Capital expenditure expenditure 1,31,60,543 1,31,60,543 Reimbursements paid Reimbursements paid 6,06,916 Reimbursements received Reimbursements received 34,86,774

The TPO proposed adjustment only in respect of The TPO proposed adjustment only in respect of (d) management (d) management services and (e) testing & validation services (e) testing & validation services, holding ALP at Nil , holding ALP at Nil. The ld.DRP upheld the adjustment. DRP upheld the adjustment.

The assessee aggregated all international transactions (except aggregated all international transactions (except aggregated all international transactions (except reimbursements received) and applied reimbursements received) and applied TNMM as the Most Appropriate Most Appropriate Method (MAM) with with OP/OC as the PLI. The assessee assessee earned an operating margin of operating margin of 42.98% on OC as against the comparable as against the comparable arithmetic mean of arithmetic mean of 11.27%, demonstrating that the transactions, , demonstrating that the transactions, taken together, were at arm’s length. taken together, were at arm’s length. The TPO rejected aggregation The TPO rejected aggregation and benchmarked the impugned transactions independently, applying and benchmarked the impugned transactions independently, applying and benchmarked the impugned transactions independently, applying “Other Method” under Rule 10AB an “Other Method” under Rule 10AB and determining their ALP at nil. d determining their ALP at nil.

The assessee relied on various Tribunal rulings relied on various Tribunal rulings and filed the written and filed the written submissions as under: submissions as under:

WRITTEN SUBMISSIONS 1) Background

BorgWarner Cooling Systems (India) Private Limited ('BCSIFL or the BorgWarner Cooling Systems (India) Private Limited ('BCSIFL or the BorgWarner Cooling Systems (India) Private Limited ('BCSIFL or the Company or the Assessee) is a private invited company incorporated in Company or the Assessee) is a private invited company incorporated in Company or the Assessee) is a private invited company incorporated in 2001, having its registered office in SPCOT Industrial Park, 2001, having its registered office in SPCOT Industrial Park, 2001, having its registered office in SPCOT Industrial Park, Sriperumbudur, near Chennai BCSIPL is a wholly owned subsi Sriperumbudur, near Chennai BCSIPL is a wholly owned subsi Sriperumbudur, near Chennai BCSIPL is a wholly owned subsidiary of BorgWarner Thermal Systems inc. USA. There are several other BorgWarner Thermal Systems inc. USA. There are several other BorgWarner Thermal Systems inc. USA. There are several other entities belonging to the Borg Warner group that are "Associated entities belonging to the Borg Warner group that are "Associated entities belonging to the Borg Warner group that are "Associated Enterprises in relation to the assessee herein. The Company Enterprises in relation to the assessee herein. The Company Enterprises in relation to the assessee herein. The Company manufactures, assembles and sells automotive viscous & Visctr manufactures, assembles and sells automotive viscous & Visctr manufactures, assembles and sells automotive viscous & Visctronics fan drives and plastic fans. fan drives and plastic fans.

The AEs provide the design of the base product technology and other The AEs provide the design of the base product technology and other The AEs provide the design of the base product technology and other patented documents to the assessee herein through training and patented documents to the assessee herein through training and patented documents to the assessee herein through training and documents stored digital platforms. Based on the understanding of the documents stored digital platforms. Based on the understanding of the documents stored digital platforms. Based on the understanding of the base technology, th base technology, the sales team of the assessee herein starts e sales team of the assessee herein starts interacting with customers (OEMs) to explain how they could partner interacting with customers (OEMs) to explain how they could partner interacting with customers (OEMs) to explain how they could partner on new vehicle launches. The customers evaluate the technology, on new vehicle launches. The customers evaluate the technology, on new vehicle launches. The customers evaluate the technology, based on their vehicle specifications such as load carrying conditions, based on their vehicle specifications such as load carrying conditions, based on their vehicle specifications such as load carrying conditions, cooling requirements etc. These requirements would be customer equirements etc. These requirements would be customer equirements etc. These requirements would be customer 4 specific and will vary according to the engine room available and how specific and will vary according to the engine room available and how specific and will vary according to the engine room available and how customer would like to design their engine packaging. The major customer would like to design their engine packaging. The major customer would like to design their engine packaging. The major changes that would be required to make the product fit for purpose t changes that would be required to make the product fit for purpose t changes that would be required to make the product fit for purpose to local geographic conditions would include but not limited to, shaft local geographic conditions would include but not limited to, shaft local geographic conditions would include but not limited to, shaft design and fank disk mounting based on customer mounting concept, design and fank disk mounting based on customer mounting concept, design and fank disk mounting based on customer mounting concept, fluid viscosity etc. Based on customer specific requirements, the fluid viscosity etc. Based on customer specific requirements, the fluid viscosity etc. Based on customer specific requirements, the product design needs to be tweaked/updated. Since the product design needs to be tweaked/updated. Since the product design needs to be tweaked/updated. Since the AE owns the technology, it is imperative that they are involved in validating the technology, it is imperative that they are involved in validating the technology, it is imperative that they are involved in validating the product tweaked for customer requirements. Hence, the AEs test the product tweaked for customer requirements. Hence, the AEs test the product tweaked for customer requirements. Hence, the AEs test the tweaked design and either suggest further changes or validate the tweaked design and either suggest further changes or validate the tweaked design and either suggest further changes or validate the same. As a mark of completion of testing, same. As a mark of completion of testing, the relevant results and the relevant results and reports are shared to the assessee's team to take it back to customer reports are shared to the assessee's team to take it back to customer reports are shared to the assessee's team to take it back to customer to launch the product and add top to launch the product and add top-lion growth. (Page 226 of the lion growth. (Page 226 of the appeal paper book, internal page 6 of the TPO's order) appeal paper book, internal page 6 of the TPO's order) appeal paper book, internal page 6 of the TPO's order)

Further, AEs aided the assessee herein i Further, AEs aided the assessee herein in formulating and reviewing n formulating and reviewing commodity commodity commodity strategy, strategy, strategy, formulating formulating formulating procurement procurement procurement strategies strategies strategies and and and coordinating with supplier, updating the user authenticator app from coordinating with supplier, updating the user authenticator app from coordinating with supplier, updating the user authenticator app from push notification to software token inventory planning and strategizing push notification to software token inventory planning and strategizing push notification to software token inventory planning and strategizing cash flow savings etc. Al th cash flow savings etc. Al these services on the management side of ese services on the management side of the business were provided by the Als and management services were the business were provided by the Als and management services were the business were provided by the Als and management services were paid by the assessee to the AEs. paid by the assessee to the AEs.

The testing and validation services and management services provided The testing and validation services and management services provided The testing and validation services and management services provided by the AEs form an integral part of the busines by the AEs form an integral part of the business of the assessee herein s of the assessee herein and help the assessee in manufacturing better products suited to and help the assessee in manufacturing better products suited to and help the assessee in manufacturing better products suited to customers' need with better raw materials and at lower prices which customers' need with better raw materials and at lower prices which customers' need with better raw materials and at lower prices which helps the assessee herein in maintaining the quality of the produce as helps the assessee herein in maintaining the quality of the produce as helps the assessee herein in maintaining the quality of the produce as well as its Profit margins. well as its Profit margins.

The Details of international transactions undertaken by the assessee The Details of international transactions undertaken by the assessee The Details of international transactions undertaken by the assessee herein during the subject assessment year (AY") is given below: herein during the subject assessment year (AY") is given below: herein during the subject assessment year (AY") is given below:

Particulars Facts Facts Nature & value of a) Sale of finished products a) Sale of finished products 48,67,32,689 international b) Purchase of raw materials b) Purchase of raw materials 1,74,37,623 transactions c) Provision of design and support services c) Provision of design and support services 8,09,23,484 d) Payment towards receipt of management services d) Payment towards receipt of management services d) Payment towards receipt of management services 4,39,44,329 e) Payment towards receipt of testing and validation services e) Payment towards receipt of testing and validation services e) Payment towards receipt of testing and validation services 1,47,70,483 f) Payment toward f) Payment towards receipt of IT related services s receipt of IT related services 1,81,81,427 g) Payment of royalty g) Payment of royalty 7,85,76,720 h) Payment towards capital expenditure h) Payment towards capital expenditure 1,31,60,543 i) Reimbursements paid i) Reimbursements paid 6,06,916 j) Reimbursements received j) Reimbursements received 34,86,774

Among the transactions listed above, items (d) and (e) have been disallowed Among the transactions listed above, items (d) and (e) have been disallowed Among the transactions listed above, items (d) and (e) have been disallowed by the TPO and the same was upheld by DRP. by the TPO and the same was upheld by DRP.

MAM The Assessee company has aggregated all the International Transactions The Assessee company has aggregated all the International Transactions The Assessee company has aggregated all the International Transactions (except reimbursement of expenses received) (except reimbursement of expenses received) and adopted Transactional Net and adopted Transactional Net Margin Method ("TNMM") as the most appropriate method ("MAM") for Margin Method ("TNMM") as the most appropriate method ("MAM") for Margin Method ("TNMM") as the most appropriate method ("MAM") for determining the arm's length price of its International Transactions. The same determining the arm's length price of its International Transactions. The same determining the arm's length price of its International Transactions. The same has been detailed in pages 157 to 160 of the factual paper book dated 5 has been detailed in pages 157 to 160 of the factual paper book dated 5 has been detailed in pages 157 to 160 of the factual paper book dated 5 March 202 March 2025. PLI Operating profit ("OP")/Operating Cost ("OC"). The same has been detailed in Operating profit ("OP")/Operating Cost ("OC"). The same has been detailed in Operating profit ("OP")/Operating Cost ("OC"). The same has been detailed in section 5.1.5.1 of pages 157 to 160 of the factual paper book dated 5 March section 5.1.5.1 of pages 157 to 160 of the factual paper book dated 5 March section 5.1.5.1 of pages 157 to 160 of the factual paper book dated 5 March 2025. 2025. Benchmarking a) a) Tested party: BCSIPL methodology b) b) Tested party data: BCSIPL has earned an operating margin of 42.98 : BCSIPL has earned an operating margin of 42.98 percent of its operating cost, whereas the comparable companies has earned percent of its operating cost, whereas the comparable companies has earned percent of its operating cost, whereas the comparable companies has earned an arithmetic mean margin of 11.27 Percent on operating cost. The same has an arithmetic mean margin of 11.27 Percent on operating cost. The same has an arithmetic mean margin of 11.27 Percent on operating cost. The same has been detailed in pages 131, 351 & 352 of the factual pape been detailed in pages 131, 351 & 352 of the factual pape been detailed in pages 131, 351 & 352 of the factual paper book dated 5 March 2025, submitted before your Honour's. March 2025, submitted before your Honour's. c) c) Comparable data: Companies engaged in manufacturing of engine cooling : Companies engaged in manufacturing of engine cooling systems in India. systems in India. Grounds of Appeal Grounds of Appeal

iii) Judicial Precedents relied upon by the assessee iii) Judicial Precedents relied upon by the assessee

A. TP adjustment in relation to A. TP adjustment in relation to disallowance of management and testing & validation charges disallowance of management and testing & validation charges

Grounds of appeal Judicial Precedents Judicial Precedents • Ground of Appeal 4 Bonfiglioli Transmissions Private Limited Bonfiglioli Transmissions Priva [TS-388-ITAT ITAT-2018(CHNY)-TP) (The Rejection of the combined TNMM approach adopted Rejection of the combined TNMM approach adopted relevant extract of the ruling is provided relevant extract of the ruling is provided by the Assessee in benchmarking the subject by the Assessee in benchmarking the subject vide Para 10 at Page 12 of the Case law vide Para 10 at Page 12 of the Case law transactions paper book) • Siemens Gamesa Renewable Power Pvt Siemens Gamesa Renewable Power Pvt Ltd [ITA Nos., 1420 & 376/Mds/2017) Ltd [ITA Nos., 1420 & 376/Mds/2017) (The relevant extract of the ruling is (The relevant extract of the ruling is provided vide Para 20.2 at Page 114 of provided vide Para 20.2 at Page 114 of the Caselaw paper book) the Caselaw paper book) Ground of Appeal 5 Durr Durr India India Private Private Limited Limited (ITA (ITA Nos. Nos. 754/Mds/2014, 754/Mds/2014, 972/Mds/2015, 972/Mds/2015, Arbitrarily applying "Other method" under Rule Arbitrarily applying "Other method" under Rule 455/Mds/2016) (The relevant extract of the 455/Mds/2016) (The relevant extract of the 10AB ruling is provided vide Para 10 at Page 160 of vided vide Para 10 at Page 160 of the Caselaw paper book) the Caselaw paper book) • Grounds of Appeal 6 and 7 Grounds of Appeal 6 and 7 Redington India Private Limited (ITA No. Redington India Private Limited ( 1155/Mds/2016) (The relevant extract of 1155/Mds/2016) (The relevant extract of Questioning the commercial expediency of the Questioning the commercial expediency of the the ruling is provided vide Para 6 at Page the ruling is provided vide Para 6 at Page transaction and disregarding the need transaction and disregarding the need-benefit & 197 of the Case law paper book) 197 of the Case law paper book) rendition test demonstrated by the Assessee rendition test demonstrated by the Assessee • Trimble Information Technologies India Trimble Information Technologies India Private Private Ltd Ltd Vs. Vs. Income Income Tax Tax Officer Officer (IT(TP)A No.28/Chny/2024) (The relevant (IT(TP)A No.28/Chny/2024) (The relevant extract of the ruling is provided vide Para extract of the 5 at Page 210 of the Case law paper 5 at Page 210 of the Case law paper book)

B. Interest on outstanding receivables B. Interest on outstanding receivables

Grounds of Appeal Judicial Precedents Judicial Precedents • Ground of Appeal 10 Sony Ericsson Mobile Communications Sony Ericsson Mobile Communications India Private Limited (ITA No. 16/2014) India Private Limited (ITA No. 16/2014) The The AO/TPO AO/TPO erroneously erroneously treated treated outstanding outstanding (The relevant extract of the ruling is (The relevant extract of the ruling is receivables as a separate international t receivables as a separate international transaction provided in Page Nos 140 of the Appeal provided in Page Nos 140 of the Appeal without appreciating the fact that it is inextricably without appreciating the fact that it is inextricably paper book) linked to the main International transaction linked to the main International transaction • The Bombay Dyeing & Mfg. Co. Limited The Bombay Dyeing & Mfg. Co. Limited [ITA No. 1716/Mum/2017) (The relevant [ITA No. 1716/Mum/2017) (The relevant extract of the ruling is provided in Page e ruling is provided in Page No 142 of the Appeal paper book) No 142 of the Appeal paper book) • Ingersoll Ingersoll Rand Rand India India Limited Limited [ITAT [ITAT- 2017(Bang)-TP) (The relevant extract of TP) (The relevant extract of the ruling is provided in Page Nos 144 of the ruling is provided in Page Nos 144 of the Appeal paper book) the Appeal paper book) Ground of Appeal 11 Kusum Healthcare Pvt. Ltd. (ITA No. 3717/ Kusum Healthcare Pvt. Ltd. (ITA No. 3717/ Del/2017) (The relevant extracts of the Del/2017) (The relevant extracts of the Interest on outstanding receivab Interest on outstanding receivables is subsumed in ruling is provided vide Para 8 at Pag 233 of ruling is provided vide Para 8 at Pag 233 of Working Capital adjustment made to primary Working Capital adjustment made to primary the Caselaw paper book) the Caselaw paper book) transaction • Ground of Appeal 12 Temenos Temenos India India Private Private Limited Limited (The (The relevant extract of the ruling is provided relevant extract of the ruling is provided vide Para 11, 12 at Pages 244, 245 of the Para 11, 12 at Pages 244, 245 of the Case law paper book) Case law paper book) not appreciating the fact that Assessee is a debt appreciating the fact that Assessee is a debt free entity • Sanmina-SCI SCI India India Pvt Pvt Ltd Ltd (IT(TP)A (IT(TP)A No.23/CHNY/2018) (The relevant extract No.23/CHNY/2018) (The of the ruling is provided vide Para 55 at of the ruling is provided vide Para 55 at Page 253 of the Case law paper book) Page 253 of the Case law paper book) • Integra Software Services P Ltd (ITA No. Integra Software Services P Ltd (ITA No. 736/CHNY/2017) (The relevant extract of 736/CHNY/2017) (The relevant extract of the ruling is provided vide Para 34 at Pag the ruling is provided vide Para 268 of the Case law paper book) 268 of the Case law paper book) • Ground of Appeal 15 Contitech Contitech India India Pvt Pvt Ltd (ITA No 370/Del/2015) (The relevant ruling is 370/Del/2015) (The relevant ruling is provided vide Para 21, 22 at Page Nos. provided vide Para 21, 22 at Page Nos. 389 and 390 of the Case law paper book) 389 and 390 of the Case law paper book) Without prejudice to the above contentions, the Without prejudice to the above contentions, the interest on outstanding receivables ought to have interest on outstanding receivables ought to have • Jewellmark Jewellmark India India Pvt. Pvt. Ltd Ltd (ITA (ITA been only after netting off receivables with been only after netting off receivables with No.432/M/2014) (The relevant extract of No.432/M/2014) (The relevant extract of outstanding payables to AEs/advances from AEs outstanding payables to AEs/advances from AEs the ruling is provided vide Para 8 of Page the ruling is provided vide Para 8 of Page No 395 of the Case law paper book) he Case law paper book)

C. Rebuttal against contentions of the Ld. Department Representatives (Ld.DR) during dated C. Rebuttal against contentions of the Ld. Department Representatives (Ld.DR) during dated C. Rebuttal against contentions of the Ld. Department Representatives (Ld.DR) during dated 3rd July, 2025 7 Argument of Learned Department Representatives Argument of Learned Department Representatives Contention of the assessee Contention of the assessee The Ld. Departmental Representative (DR) placed The Ld. Departmental Representative (DR) placed The Assessee submits that the subject The Assessee submits that the subject reliance on the judgment of the Hon'ble Supreme reliance on the judgment of the Hon'ble Supreme caselaw deals with absolute proposition of caselaw deals with absolute proposition of Court in the case of SAP Labs India Private Ltd., Court in the case of SAP Labs India Private Ltd., law and that in all cases where the Tribunal law and that in all cases where the Tribunal contending that the Assessee's reliance on various contending that the Assessee's reliance on various has determined the arm's length price (ALP) rmined the arm's length price (ALP) decisions rendered by Hon'ble Tribunals across decisions rendered by Hon'ble Tribunals across the same cannot be final and can be a the same cannot be final and can be a India is misplaced, placed, as as each each case must case must be be subject matter of scrutiny by the Hon'ble subject matter of scrutiny by the Hon'ble adjudicated on its own facts and the cited orders do adjudicated on its own facts and the cited orders do High Court in an appeal. High Court in an appeal. not constitute binding law of the land. not constitute binding law of the land.

Hence the reliance placed by the Ld. DR in Hence the reliance placed by the Ld. DR in the case of SAP Labs India Private Limited is the case of SAP Labs India Private Limited is erroneous and irrelevant erroneous and irrelevant to the facts of the present case.

Erroneously concluded that, the Assessee has not Erroneously concluded that, the Assessee has not The Assessee wishes to reiterate that it has The Assessee wishes to reiterate that it has received any management support from its AEs by received any management support from its AEs by received a range of support services in the received a range of support services in the relying of the cost-benefit documentation submitted benefit documentation submitted nature of management services from its AEs, nature of management services from its AEs, by the Assessee and stated that there is only one by the Assessee and stated that there is only one which include but not limited to sourcing which include but not limited to sourcing mail evidence to prov mail evidence to prove that the Assessee has support. The same is evident from the pport. The same is evident from the received received procurement/sourcing procurement/sourcing related related support support detailed detailed cost cost-benefit documentation from AEs submitted before the TPO/ DRP. Further the submitted before the TPO/ DRP. Further the Assessee vide its written submission dated Assessee vide its written submission dated 23 June 2025 has provided a short write up 23 June 2025 has provided a short write up of sample services received from AEs during of sample services received from AEs during the year and the mail evidence for such d the mail evidence for such sample services were submitted before your sample services were submitted before your Honour's as part of factual paper book dated Honour's as part of factual paper book dated 5 March 2025.

Further the Assessee wishes to submit that Further the Assessee wishes to submit that the the need need and and benefits benefits received received from from obtaining the impugned services from its AEs obtaining the impugned services from its AEs is is documented documented in in the the cost-benefit cost documentation.

The argument of the Ld. DR that sourcing The argument of the Ld. DR that sourcing support has been mentioned only once in the support has been mentioned only once in the cost-benefit documentation does not suffice benefit documentation does not suffice to to establish establish the the absence absence of of such such a a transaction.

9.1 Rejection of Combined TNMM .1 Rejection of Combined TNMM: We observe that the We observe that the assessee’s international transactions are highly integrated, forming part of a international transactions are highly integrated, forming part of a international transactions are highly integrated, forming part of a lue chain of product design → validation → manufacturing manufacturing → single value chain of product design sales. Manufacturing cannot be separated from testing/validation or sales. Manufacturing cannot be separated from testing/validation or sales. Manufacturing cannot be separated from testing/validation or management support, which directly influences production efficiency management support, which directly influences production efficiency management support, which directly influences production efficiency and pricing. The comparable set accepted by the TPO for TNMM shows The comparable set accepted by the TPO for TNMM shows The comparable set accepted by the TPO for TNMM shows that the assessee’s margin is substantially higher than industry that the assessee’s margin is substantially higher than industry that the assessee’s margin is substantially higher than industry comparables comparables (42.98% (42.98% vs vs 11.27%). 11.27%). In In line line with with Bonfiglioli Transmissions Private Limited [TS Transmissions Private Limited [TS-388-ITAT-2018(CHNY) 2018(CHNY)-TP) (Para 10 at Page 12 of the Case law paper book) and Siemens Gamesa the Case law paper book) and Siemens Gamesa the Case law paper book) and Siemens Gamesa Renewable Power Pvt Ltd [ITA Nos., 1420 & 376/Mds/2017) (Para 20.2 Renewable Power Pvt Ltd [ITA Nos., 1420 & 376/Mds/2017) (Para 20.2 Renewable Power Pvt Ltd [ITA Nos., 1420 & 376/Mds/2017) (Para 20.2 at Page 114 of the Case at Page 114 of the Case law paper book), and several decisions of this , and several decisions of this Tribunal, Tribunal, Tribunal, when when when overall overall overall profitability profitability profitability demonstrates demonstrates demonstrates arm’s arm’s arm’s length length length compliance, selective segregation is unwarranted. , selective segregation is unwarranted. We accordingly hold We accordingly hold that rejection of combined TNMM is unjustified. that rejection of combined TNMM is unjustified.

9.2 ALP Determination at Nil ALP Determination at Nil – Benefit Test:

The TPO concluded that the assessee failed to prove receipt of services The TPO concluded that the assessee failed to prove receipt of services The TPO concluded that the assessee failed to prove receipt of services and determined ALP of manage and determined ALP of management services and testing & validation ment services and testing & validation services at Nil. It is now settled law that the TPO cannot question It is now settled law that the TPO cannot question It is now settled law that the TPO cannot question commercial expediency ( commercial expediency (Redington India Private Limited (ITA No. Redington India Private Limited (ITA No. 1155/Mds/2016 Para 6 at Page 197 of the Case law paper book) and 1155/Mds/2016 Para 6 at Page 197 of the Case law paper book) and 1155/Mds/2016 Para 6 at Page 197 of the Case law paper book) and Trimble Information Technologies India Private Ltd Vs. Income Tax Technologies India Private Ltd Vs. Income Tax Technologies India Private Ltd Vs. Income Tax Officer (IT(TP)A No.28/Chny/2024 Para 5 at Page 210 of the Case law Officer (IT(TP)A No.28/Chny/2024 Para 5 at Page 210 of the Case law Officer (IT(TP)A No.28/Chny/2024 Para 5 at Page 210 of the Case law paper book)). Further, ALP cannot be determined at Nil without Further, ALP cannot be determined at Nil without Further, ALP cannot be determined at Nil without applying any recognised method. applying any recognised method. We find that testing & validation We find that testing & validation services are technically mandatory for product launch because base technically mandatory for product launch because base technically mandatory for product launch because base technology is owned by AE. Validation reports, test results and emails technology is owned by AE. Validation reports, test results and emails technology is owned by AE. Validation reports, test results and emails placed in the paper book demonstrate actual rendition of services. placed in the paper book demonstrate actual rendition of services. placed in the paper book demonstrate actual rendition of services.

For For For management management management services, services, services, the the the assessee assessee assessee submitted submitted submitted sample sample sample documentation and a detailed cost tion and a detailed cost-benefit report. The DR’s selective benefit report. The DR’s selective reading of one sample email reading of one sample email cannot negate the entire evidence on cannot negate the entire evidence on record. Following the ratio in Following the ratio in Durr India Private Limited (ITA Nos. Durr India Private Limited (ITA Nos. 754/Mds/2014, 972/Mds/2015, 455/Mds/2016 Para 10 at Page 160 of 754/Mds/2014, 972/Mds/2015, 455/Mds/2016 Para 10 at Page 160 of 754/Mds/2014, 972/Mds/2015, 455/Mds/2016 Para 10 at Page 160 of the Caselaw paper book) the Caselaw paper book) and Redington, we hold that the TPO’s and Redington, we hold that the TPO’s approach fails the requirements of Section 92C and Rule 10AB the requirements of Section 92C and Rule 10AB the requirements of Section 92C and Rule 10AB. Accordingly, the ALP of management services and testing/validation the ALP of management services and testing/validation the ALP of management services and testing/validation services stands accepted under aggregated TNMM. services stands accepted under aggregated TNMM. The TP adjustment The TP adjustment on this issue is deleted deleted.

9.3 Interest on Outstanding Receivables .3 Interest on Outstanding Receivables:

The TPO treated outstanding receivables as a separate international The TPO treated outstanding receivables as a separate international The TPO treated outstanding receivables as a separate international transaction. However, in However, in Sony Ericsson Mobile Communications India Sony Ericsson Mobile Communications India Private Limited (ITA No. 16/2014 Private Limited (ITA No. 16/2014 Page Nos 140 of the Appeal paper ge Nos 140 of the Appeal paper book), The The The Bombay Bombay Bombay Dyeing Dyeing Dyeing & & & Mfg. Mfg. Mfg. Co. Co. Co. Limited Limited Limited [ITA [ITA [ITA No. No. No. 1716/Mum/2017 Page No 142 of the Appeal paper book) 1716/Mum/2017 Page No 142 of the Appeal paper book) 1716/Mum/2017 Page No 142 of the Appeal paper book) and Ingersoll Rand India Limited [ITAT Rand India Limited [ITAT-2017(Bang)-TP Page Nos 144 of the Appeal TP Page Nos 144 of the Appeal paper book), courts have held that where courts have held that where receivables are closely linked receivables are closely linked to the main transaction, they cannot be benchmarked separately. to the main transaction, they cannot be benchmarked separately. to the main transaction, they cannot be benchmarked separately.

We also note that the working capital adjustment has been granted the working capital adjustment has been granted the working capital adjustment has been granted under TNMM. Following Following Kusum Healthcare Pvt. Ltd. (ITA No. 3717/ Healthcare Pvt. Ltd. (ITA No. 3717/ Del/2017 Para 8 at Pag 233 of the Caselaw paper book) Del/2017 Para 8 at Pag 233 of the Caselaw paper book) Del/2017 Para 8 at Pag 233 of the Caselaw paper book), once working capital adjustment is granted, no separate adjustment is granted, no separate TP adjustment survives. TP adjustment survives.

It is also undisputed that the assessee is a debt It is also undisputed that the assessee is a debt It is also undisputed that the assessee is a debt-free company. Decisions in Temenos India Private Limited (Para 11, 12 at Pages 244, Para 11, 12 at Pages 244, 245 of the Case law paper book 245 of the Case law paper book), Sanmina-SCI India Pvt Ltd (IT(TP)A SCI India Pvt Ltd (IT(TP)A No.23/CHNY/2018 Para 55 at Page 253 of the Case law paper book No.23/CHNY/2018 Para 55 at Page 253 of the Case law paper book 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 and Integra Software Services P Ltd (ITA No. 736/CHNY/2017 Para 34 and Integra Software Services P Ltd (ITA No. 736/CHNY/2017 Para 34 at Page 268 of the Case law paper book 268 of the Case law paper book) hold that notional interest cannot be imputed where the assessee has no borrowing cost. cannot be imputed where the assessee has no borrowing cost. cannot be imputed where the assessee has no borrowing cost. The alternative plea of netting alternative plea of netting-off receivables with payables, supported by off receivables with payables, supported by Contitech and Jewellmark Jewellmark (referred supra), also favours the , also favours the assessee. Accordingly, the TP adjustment on notional interest is deleted the TP adjustment on notional interest is deleted the TP adjustment on notional interest is deleted.

The ld.DR for the revenue for the revenue heavily relied on the Supreme Court ruling heavily relied on the Supreme Court ruling in SAP Labs India Pvt Ltd SAP Labs India Pvt Ltd. However, SAP Labs deals with the principle However, SAP Labs deals with the principle that Tribunal orders are not binding prece that Tribunal orders are not binding precedents. It does not prohibit dents. It does not prohibit reliance on coordinate bench decisions on reliance on coordinate bench decisions on propositions of law propositions of law, particularly well-settled TP jurisprudence. settled TP jurisprudence. The assessee correctly The assessee correctly pointed out that these decisions do not contradict SAP Labs. pointed out that these decisions do not contradict SAP Labs. pointed out that these decisions do not contradict SAP Labs. Therefore, the ld.DR’s reliance is mi DR’s reliance is misplaced.

Based on the entire conspectus of entire conspectus of facts, evidence and judicial ratios facts, evidence and judicial ratios referred supra, we hold , we hold that the TPO was not justified in rejecting the he TPO was not justified in rejecting the aggregated TNMM approach. aggregated TNMM approach. ALP of management services and testing ALP of management services and testing & validation services c & validation services cannot be determined at Nil. TP adjustments in TP adjustments in respect of these services are deleted. respect of these services are deleted. Adjustment on interest on Adjustment on interest on outstanding receivables is also deleted. outstanding receivables is also deleted.

. Order pronounced on the 23rd day of December, 2025, in Chennai. Order pronounced on the December, 2025, in Chennai.

Sd/- Sd/ Sd/- (�ी एस. आर. रघुनाथा रघुनाथा) (मनु कुमार कुमार िग�र) (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