ZF Commercial Vehicle Control Systems India Ltd. Vs DCIT (ITAT Chennai)
Summary: The assessee, ZF Commercial Vehicle Control Systems India Ltd., engaged in manufacture and sale of automotive components and provision of software development and other services to group companies, filed its return for AY 2022-23 declaring total income of Rs.2,25,58,80,483/-. Since it had international transactions, the matter was referred to the TPO for determination of arm’s length price. The TPO proposed a downward margin adjustment of Rs.47,42,726 in respect of IT support services and an upward adjustment of Rs.55,98,519 towards interest on receivables. The AO additionally disallowed scientific research expenditure of Rs.2,19,87,252. The DRP upheld these adjustments and disallowance, leading to the appeal before ITAT Chennai.
On the IT support services, the assessee had availed centralized IT services from its AE involving third-party software and licences such as Microsoft Office 365, Salesforce and Zoom, with the AE charging a 5% markup. The Tribunal noted that the TPO had already accepted the overall margins under TNMM, which included the impugned IT expenditure. Relying on the Delhi High Court ruling in Magneti Marelli Powertrain India Pvt. Ltd. vs. DCIT [2016] 75 taxmann.com 212 (Delhi) and the Chennai Tribunal decision in Haworth India (P.) Ltd v. Dy. CIT [2025] 179 taxmann.com 220, ITAT held that after accepting the overall TNMM analysis, the TPO could not carve out one component and separately determine its ALP at Nil using another method. The AO/TPO was accordingly directed to delete the downward adjustment.
