LUBRIZOL ADVANCED MATERIALS INDIA PVT LTD.,MUMBAI vs. ASSESSMENT UNIT (INCOME TAX DEPARTMENT), DELHI

This appeal is filed by the assessee against the assessment order passed under section 143 (3) read with section 144C (3) read with section 144B of The Income Tax Act, 1961 (The Act) by Assessment Unit, Income Tax Department (The Learned Assessing Officer) for the assessment year 2018 – 19 on 1/8/2022 wherein the return filed by the assessee declaring a loss of ₹ 102,714,898/– on 29/11/2018 is assessed at Rs 189,01,260/– by making a transfer pricing adjustment under section 92CA of ₹ 121,616,158/–.

Assessee has raised following grounds of appeal:-

Without prejudice to ground 1 above, on facts and circumstances of the case and in law, Deputy Commissioner of Income Tax (Transfer Pricing)- 3(1)(1) ('Learned TPO) erred in proposing upward adjustment amounting to Rs.9,61,52,233 to total income of Appellant in respect of international transaction of provision of marketing support services and further the learned Dispute Resolution Panel -1, Mumbai (DRP) erred in confirming/enhancing the adjustments to Rs. 12,16,16,158.

Without prejudice to ground 1 above, on facts and in the circumstances of the case and in law, learned TPO/DRP erred in mentioning that the method adopted by Appellant is Cost Plus Method (CPM') instead of TNMM without considering the submissions and transfer pricing study conducted by Appellant wherein margins are computed using operating profit/operating cost as PLI and learned TPO also have used same PLI while determining the arm's length price of the 'international transactions of provision of MSS.

Without prejudice to ground 1 above, on facts and in the circumstance of case and in law, the learned DRP erred in confirming the action of TPO by selecting the following companies as comparable to the Appellant in determining the arm's length price of the international transactions -

Without prejudice to ground 1 above, on facts and circumstance of case and in law, the learned DRP erred in determining the arm's length price of the international transaction by upholding the rejection of all comparable companies selected by the Appellant. The Appellant submits that the following companies should be considered as comparable in determining

Without prejudice to the ground labove, on the facts and in the circumstances of the case and in law, the Learned DRP erred in confirming the action of TPO who has considered the operating revenue of the Appellant at Rs.43,30,84,468 instead of Rs. 44,85,32,931 as credited to profit and loss account and offered to tax during the year under consideration and which includes accrued revenue of Rs. 1,54,48,463 not yet invoiced to Associated Enterprise while in determining Arm's length price of international transaction of provision of MSS.

Without prejudice to the ground labove, on the facts and in the circumstances of the case and in the law the Learned DRP/TPO has erred in computing the margin of Appellant without excluding the corresponding accrued cost to the accrued revenue of Rs. 1,54,48,463 while computing operating profit and operating cost in determining Arm's length price of international transaction of provision of MSS.

The learned transfer-pricing officer examines the various details and examined the comparability study raising an issue that why three different comparable companies were excluded despite having similar functions assets and risk. The assessee was also questioned why a set-off comparable companies as transfer pricing study report are included when those are not functionally comparable. Assessee objected to the same as per letter dated 19/7/2021. The same was considered by the learned transfer pricing officer and retained only three comparable companies whose three year weighted unadjusted average operating profit/total cost PLI was determined at 30.73%. Based on this, arm’s-length profit level indicator of 30.73% was applied to the operating revenue of ₹

The learned departmental representative could not show us any evidence that the learned assessing officer has not received the direction on 14/6/2022 or even in the month of June 2022.

According to the provisions of section 144C (13) of the act the learned assessing officer shall upon the receipt of the direction issued under subsection (5) in conformity with such direction complete notwithstanding anything to the contrary contained in section 153 the assessment without providing any further opportunity by of being heard to the assessee within one month from the end of the month in which such directions are received.

According to rule 11 of The Income Tax (Dispute Resolution Panel) Rules, 2009 the panel shall after the

As we have already quashed the assessment order passed is barred by limitation, adjudication on other grounds is not required.

In the result, appeal of the assessee is allowed.