Idemitsu Lube India Private Limited vs. DCIT

Parties Involved

Facts Summary

The Assessee, Idemitsu Lube India Private Limited, filed a return of income declaring a total income of Rs. 47,40,50,620/-. The case was selected for ‘Complete Scrutiny’ under CASS. Since the Assessee had entered international transactions and specified domestic transactions with Associate Enterprises, the case was referred to the Transfer Pricing Officer for computation of Arm’s Length Price in relation to International Transactions with Associated Enterprises. The Transfer Pricing Officer passed an order proposing to make an adjustment on account of the ‘manufacturing segment’ of Rs. 6,51,04,770/- and proposed a TP Adjustment on international transactions for the year under consideration. The Assessee filed objections before the Dispute Resolution Panel, which directed the TPO to apply margins as per law and to exclude two companies from the final set of comparables. The final assessment order was passed making an adjustment of Rs. 4,53,19,689/- to the international transaction of purchase of raw material from AEs. The Assessee filed an application for rectification, which was also passed by the TPO. Challenging the Final Assessment order, the Assessee preferred the present appeal.…

Legal Issues

• 1. Transfer Pricing ('TP') adjustment amounting to INR 4,53,19,689 in respect of the international transaction pertaining to purchase of raw material.
• 2. Error in computing the margins of comparable companies.
• 3. Considering 'loss on foreign exchange translation' w.r.t External Commercial Borrowing ('ECB') to the extent of INR 6,79,51,132 (being a capital loss) as operating in nature for the purpose of calculation of operating profit margin relating to 'manufacturing segment'.
• 4. Erroneously rejecting the functionally comparable companies selected by the Appellant.
• 5. Arbitrarily selecting two companies as comparables for determination of arm's length price.
• 6. Disregarding the updated margins of comparable companies submitted by the Appellant.

Judgment Outcome

Decided in favour of Assessee.

Precedents Relied Upon

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