Claimed that MEIS scrip income and duty drawback arise directly from export operations, forming part of core operating revenue, and are meant to neutralize operating costs; excluding them would distort true operating margins.

Argued that these incentives are policy-driven subsidies, not part of routine business activity, and should be treated as non-operating, hence not considered in computing operating margin

Held that export incentives are intrinsically linked to exports, mitigate operating costs, and directly affect operating margins; therefore, they must be included in operating revenue to ensure proper arm’s length analysis.

Contended that differences in receivables, payables, and inventory levels between itself and comparables materially affect profitability, and working capital adjustment (“WCA”) is necessary to reflect true arm’s length margins; submitted detailed supporting analysis for the same.

Rejected WCA, claiming the assessee failed to demonstrate its impact on margins; comparables lacked reliable data, and relied on Mobis India Ltd. case where WCA was denied due to lack of substantiation.

Directed TPO to grant WCA, noting that working capital differences directly influence operating margins; relied on Doowon Automotive India Pvt. Ltd. case which supports granting WCA when such differences exist to ensure fair comparability and proper arm’s length margin computation.