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TMI Blog2017 (3) TMI 1178X X X X Extracts X X X X X X X X Extracts X X X X ..... t of raw materials cost of Lubrizol and mineral oil. This issue is remitted to the file of AO for fresh consideration. 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. Therefore the cost of Zinc in the case of assessee is higher compared to the cost incurred by the Lubrizol towards the Zinc. In our opinion, if the details of cost of procurement of Zinc by tolling, the same by Lubrizol is available and if the AO finds that the cost price of the Zinc incurred by the Lubrizol is lesser as compared to the assessee’s case, then the suitable adjustments to be made while determining the ALP. Accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 4,58,00,000/- (A.Y. 2009-10) and ₹ 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 ₹ 3,83,93,740/-(A.Y.2010-11) in respect of international transaction with its AE by following TNMM Method and bench marking the financials of M/s.Lubrizol India Pvt. Ltd., which is also in the business of manufacturing automobile additives, like the assessee s company. The assessee company had a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the following adjustments has to be given while computing PLI. Adjustments on account of Lube oil/base oil/ Mineral oil price: The ld.A.R submitted that the cost of procurement of Lube Oil or Mineral Oil which is one of the major raw material used in the additive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich 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 ₹ 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 ZINC (Semi finished goods). He submitted that the quantity of Zinc procured from Toiler for the FY 2009-10 is 2614.25 MT. The average cost of procurement from the Toiler is ₹ 28,919 /MT. The difference cost of ₹ 17979/MT (being ₹ 28,919/ MT minus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nished 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 Transportation is not tenable for the reasons that adjustments cannot only be restricted to it items adverse to the assessee company. The Assessing Officer has rightly pointed out even though the turnover this of assessee company and the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. Therefore the cost of Zinc in the case of assessee is higher compared to the cost incurred by the Lubrizol towards the Zinc. In our opinion, if the details of cost of procurement of Zinc by tolling, the same by Lubrizol is available and if t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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