When benchmarking international transactions using the Resale Price Method, import duties must be adjusted or excluded from operating costs if the tested party incurs significantly higher customs duties compared to domestic comparable companies, ensuring comparability of profit margins under Rule 10B(3) of the Income Tax Rules, 1962.

ORDER

PER MANISH AGARWAL, AM :

The present appeal is filed by the assessee against the order dated 22.03.2025 by Ld. Commissioner of Income Tax (A), Delhi-44 Delhi [“Ld.CIT(A)”] in Appeal No. CIT(A), Gurgaon-1/10102/2016-17 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the assessment order dated 23.03.2016 passed u/s 143(3)/144C of the Act pertaining to Assessment Year 2012-13.

2. Brief facts of the case are that the assessee is a company, engaged in the business of trading of metal working oils and fluids, crude and refined petroleum oils and lubricants. The return of income for the year under appeal was filed on 29.10.2012, declaring loss of INR 1,78,20,758/-. The assessee has imported the above stated items from its Associated Enterprises (AEs) and sold in Indian market. The assessee has entered into following international transactions with its AEs:-

3. Since the assessee has entered into international transactions with its AE, a reference was made for determination of Arm Length Price (ALP) of international transactions u/s 92CA of the Act. The assessee in its Transfer Pricing Study Report (“TPSR”) worked out G.P./sales at 11.02% wherein the assessee has excluded the Import duty payment of INR 65,43,447/- being extraordinary item however, AO/TPO has included the same in the total cost and worked out the GP/sales at 3.42%. The assessee selected Resale Price Method (RPM) as Most Appropriate Method (“MAM”) for working of the PLI and after taking Four comparable, has worked out the mean margin at 7.76% which according to assessee is lower than the G.P percentage declared by it therefore, no adjustment was made. The TPO by using current years data has worked out the mean margin of all the four comparable taken by the assessee at 9.21% and by comparing the PLI of 3.42% of the assessee computed after the inclusion of Import duty payment in the total cost, made the ALP adjustment of INR 49,85,462/- of the international transaction of import of traded goods. Thereafter, AO passed the draft assessment order proposing the adjustment made by TPO on account of ALP adjustment on international transaction of INR 49,85,462/-. Since the assessee has not filed any objection before Ld. DRP, therefore, the final assessment order was passed on 23.03.2016 at a total loss of INR 1,28,35,300/- by making addition of INR 49,85,462/-towards adjustment in ALP of international transactions.

4. Against the said order, assessee preferred appeal before Ld. CIT(A) before whom assessee made three claims:-

(i) Using of multiple year data instead of current year data;

(ii) making appropriate comparability adjustment towards import duty payment; and

(iii) Working capital adjustments.

5. Ld.CIT(A) had not accepted any of the claim of the assessee and dismissed the appeal filed by the assessee.

6. Aggrieved by the said order, assessee is in appeal before Tribunal by taking following grounds of appeal:-

“Based on the facts and circumstances of the case and in law, Yushiro India Company Private Limited(hereinafter referred to as "Yushiro India" or the "Company" or the "Appellant"), respectfully craves leave to prefer an appeal against the order passed by the Commissioner of Income Tax Appeal, Delhi-44 ['CIT(A)-44' or Ld. CIT(A)] dated