ITAT Treats Doubtful Debts and Taxes as Operating Expenses Under TNMM

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  • Last Updated on 17 May, 2026

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TNMM operating expenses

Case Details: Wipro GE Healthcare (P.) Ltd. vs. DCIT [2026] 186 taxmann.com 324 (Bangalore-Trib.)

Judiciary and Counsel Details

  • Keshav Dubey, Judicial Member & Waseem Ahmed, Accountant Member
  • Dhinalshah, Adv. for the Appellant.
  • Dr Divya K.J., CIT (DR) for the Respondent.

Facts of the Case

The assessee was engaged in contract manufacturing, distribution of medical products, software and engineering design services, and ITeS services. During transfer pricing proceedings, the TPO treated provisions for doubtful debts and rates & taxes as non-operating expenses while computing operating margins of the assessee and comparable companies under TNMM.

The assessee contended that the provision for doubtful debts had a direct nexus with operating revenue, as it arose from trade receivables generated in the normal course of business. It was further submitted that rates and taxes comprised statutory levies such as customs duty, road tax and similar charges incurred in connection with regular business operations and therefore constituted operating expenditure.

The matter reached before the Bangalore Tribunal.

ITAT Held

The Tribunal held that the provision for doubtful debts was intrinsically linked with sales and realisation of trade receivables and therefore constituted an operating expense for the purpose of computing margins under TNMM. The Tribunal also observed that rates and taxes arising from routine business operations could not be treated as non-operating merely because they were statutory levies.

Accordingly, the ITAT directed the AO/TPO to treat both provisions for doubtful debts and rates & taxes as operating items while recomputing the operating margins of the assessee as well as comparable companies.

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied