LANXESS India Private Limited Vs DCIT (ITAT Mumbai)
LANXESS India Private Limited (the assessee) appealed against the assessment order dated 31/10/2018 passed under section 143(3) read with section 144C(13) of the Income Tax Act, 1961, for the Assessment Year 2014-15. The crux of the appeal revolved around the method used for benchmarking transactions, specifically regarding the export of finished goods (Manufacturing segment).
The key points of contention in the appeal were:
- Assessment Methodology: The assessee contested the adjustment made by the Deputy Commissioner of Income Tax (DCIT) and Transfer Pricing Officer (TPO) to the arm’s length price of the international transaction of exporting finished goods. The TPO applied the Comparable Uncontrolled Price (CUP) method instead of the Transactional Net Margin Method (TNMM) adopted by the assessee. The adjustment amounted to Rs. 2,38,66,092.
- Effect of DRP Directions: The assessee argued that the DCIT did not appropriately consider the directions of the Dispute Resolution Panel (DRP), which stated that the adjustment should be calculated for each concerned transaction, and the variation of +/-3% should be considered only from the total, not individually.
The assessee, a company engaged in manufacturing and trading of chemical and chemical intermediates, had entered into various international transactions with its Associated Enterprises (AEs), including the export of manufactured finished goods, royalty expenses, and intra-group services.
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