AI Drafter 
TaxTMI 
TaxTMI 
2017 (3) TMI 1178
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.... involved in these two appeals are common in nature, these appeals are clubbed together, heard together, disposed off by this common order for the sake of convenience. 2. The common ground in these two appeals is with regard to downward adjustment to Transfer Pricing (TP) -Rs. 4,58,00,000/- (A.Y. 2009-10) and Rs. 3,83,93,740/-(A.Y.2010-11). 3. The brief facts of the case are that the assessee is Oronite's Joint venture between M/s. Chennai Petroleum Corporation Ltd., and M/s.Chevron Oronite Company LLC USA. The assessee is engaged in the manufacture and sale of lube additives. For these two assessment years, there was downward adjustments by TPO to Transfer Pricing (TP) -Rs. 4,58,00,000/- (A.Y. 2009-10) and Rs. 3,83,93,740/-(A.Y.2010-....
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....nature and Lubrizol enjoys a monopoly in this segment and enjoy higher margin. Further, within Automotive segment too, Lubrizol market Automotive Gear Oil Additives, Automatic Transmission Fluids deliver significantly better margins. 4.1 Further, it was submitted that there is also a possibility that for exports, Lubrizol prices/margin levels was comparatively high: In 2009-10, Lubrizol exports constituted approx. 14% of their Sales Turnover. While assessee's export sales constituted less than one percent of the total turnover. 4.2 Further the financials of Lubrizol was not in the public domain and therefore cannot be obtained for comparison. Even assuming but not admitting if the Lubrizol is compared with the assessee company, then t....
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....tered into Sub-contracting agreement United prosperous Limited in Gujarat for making Zinc. Therefore the cost of zinc in the case of IAL and Lubrizol cannot be compared one to one. 4.5 According to ld.A.R, necessary adjustments has to be done to reflect the cost which IAL would have incurred had manufacturing activity been carried out by the assessee company rather than subcontracting cost which is higher than the in house manufacturing cost. Since the in house manufacturing cost of ZINC in Lubrizol is not available, the In house Manufacturing Cost of Rs. 9021.73/MT of Phenate (Semi Finished good- a similar product to ZIWC) (Refer page No.42 to 46) in assessee is considered as the base for arriving at the In house manufacturing cost of Z....
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....transportation cost had the sales been made locally. According to ld.A.R, the adjustments on account of interstate transportation cost and re-computing the PLI of IAL and Lubrizol considering the adjustments were to be considered which was furnished in the paper book at page-5 viz: (a) Mineral Oil/ Base Oil (b) Zinc Procurement (c) Transportation cost 5. On the other hand, ld.D.R submitted that the assessee company has not contested the fact that M/s. Lubrizol India Pvt. Ltd. is in the same line of business and is comparable. Before the TPO, it has also been submitted that Lubrizol is a comparable company. However, the selective cherry picking by the appellant company asking for adjustments in Mineral Oil Price, Zinc Tolling and....
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....ronite Company LLC USA. IOCL has given better discount in Lube Oil price/MT to Lubrizol, which is not available to the assessee. In our opinion, if it is reflected in the financial statement of Lubrizol, it is appropriate to give credit to the same and computation of T.P adjustments thereafter while determining the ALP. Accordingly we remit the issue to the file of AO for reconsideration and give proper adjustments on account of raw materials cost of Lubrizol and mineral oil. This issue is remitted to the file of AO for fresh consideration. 6.1 Regarding Tolling fee for ZINC, it was submitted that Lubrizol toll had their own Zinc and on other hand, the assessee entered into sub contract agreement with UPL Ltd. in Gujarat for making Zinc.....