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TMI Blog2021 (1) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... ble DRP"), is bad in law and void ab initio as it has been passed in gross violation of principle of natural justice and without complying with the mandatory conditions of section 92CA(3) r.w.s. 92C(3) of the Act for the reason that the Ld. TPO did not serve upon the Appellant any written show cause notice as required and mandated in terms of proviso to Section 92C(3) r.w.s. 92CA(3) of the Act. 2. The Ld. AO / Ld. TPO, in pursuance of the directions of the Hon'ble DRP under section 144C(5) of the Act, grossly erred in making an upward transfer pricing adjustment of Rs. 1,12,40,803/- in respect of impugned international transaction of provision of business facilitation services by the Appellant to its Associated Enterprises ('AEs') and in doing so, 2.1 The Ld. AO grossly erred in not excluding 'Mahindra Insurance Brokers Ltd' from the set of the comparable uncontrolled companies selected by the Appellant for benchmarking the impugned international transaction of provision of business facilitation services despite this company having related party transactions exceeding 15% and has earned extra-ordinary high profit margin. 2.2 The Ld. AO / Ld. TPO grossly er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord. The assessee, Basell Polyolefins (India) Private Limited is engaged in the multiple business activities namely provision of business facilitation services to Associated Enterprises (AE), trading in polyolefins products and manufacturing of polyolefins products. The assessee is subsidiary of LyondellBasell Group LyondellBasell Group is one of the world's largest independent chemical group with more than 14,000 employees worldwide. LyondellBasell is a global manufacturer of chemicals and polymers including polyolefins and advanced polyolefins, a refiner of heavy, high sulphur crude oil and leading develop and licensor of technologies for the production of polymers, LyondeliBasell has vertically integrated facilities, broad product portfolio, manufacturing flexibility, superior technology base and operational excellence to deliver exceptional value to customers across the petrochemical chain - from refining to advanced product applications. LyondellBasell's petrochemical products are the basic building blocks used to manufacture goods such as personal care products, fresh food packaging, lightweight plastics, construction materials, automotive components, durable textiles, medic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee was computed as under:- Particulars Rs. OPERATING INCOME Revenue from operations 180,865,010 Other operating income Infrastructure cost reimbursement 5,827,628 Total Operating Income (A) 186,692,639 OPERATING EXPENSES Employee benefits expenses 97,467,277 General and administrative expenses 64,498,779 Total Operating Cost (B) 161,966,056 Operating Profit [C=(A)-(B)] 24,726,582 Return on total cost 15.27% 4.4. The ld. TPO observed that the assessee while calculating OP/OC margin had included the reimbursement of infrastructure cost which was towards cost of fixed assets and hence, required to be netted off from the fixed assets and cannot be considered as operating revenue. He also observed that similar inclusion carried out by the ld. TPO for the A.Y.2011-12 was upheld by the ld. DRP. Accordingly, the revised OP/OC margin of the business facilitation service segment was worked out at 11.67% as under:- Particulars Amount (Rs.) Operating Income (w/o. re-imbursement of infra cost)[A] 18,08,65,010 Total Operating Costs (B) 16,19,66,056 Operating Profit (C-(A)-(B) 1,88,98,954 Return on Total Cost (C)/(B) 11.67% 4.5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r service provider plus operating in open market and also undertaking selling and marketing activities. We find that the assessee had pleaded before the ld. DRP that there are material differences in the risk and functional profile of assessee's business facilitation service segment vis-à-vis the comparables selected by the assessee itself, which necessitates comparability adjustments favourable to the assessee. 4.9. We also find that the assessee in para 5.7 of the TP study report had reserved its right to apply the following comparability adjustments i.e. a) for differential risk profile b) for functional profile c) working capital adjustment. We find that the ld AR submitted before us that if Icra Onine Ltd alone is included in the final list of comparables chosen by the ld. TPO, the assessee would be well within +/- 5% tolerance range permitted in the statute and hence no adjustment would be required to be made to international transaction of the assessee. He further submitted that once this is done, the adjudication of other grounds on comparables for both inclusion and exclusion would become academic. We find that the PLI of Icra Online Ltd., was considered at 1.87% a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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