The dispute between rival parties have arisen w.r.t. computation/ determination of ALP of assessee’s international transaction for import of lubricating oil from its AE during the relevant period. The assessee in its transfer pricing study adopted cost plus method for benchmarking its international transactions with its AE and its AE was adopted as tested party. The assessee compared the prices charged of lubricating oil by its AE to it with the prices charged by its AE from the companies situated in other geographical areas/countries such as Nepal, China, Ghana, etc. and the assessee came into conclusion that the price charged by its AE from the assessee for import of lubricating oil is within ALP of international transaction entered into by the assessee for import of lubricating oil from its AE and no TP adjustments/additions are warranted under s. 92C. As per AO, while assessee has stated that it adopted cost plus method but in-fact the assessee adopted comparable uncontrolled prices (CUP) method, wherein it adopted internal CUP method to benchmark its international transaction with its AE for import of lubricating oil. The assessee’s AE is manufacturing base oil and converting into lubricants oil and supplying the same to its subsidiaries/associated companies worldwide. As per AO, the AE doesn’t assume much risk as it manufactures and supply to its subsidiaries/associated companies across globe. The brand ‘Caltex’ in which the assessee and its AE dealt is a 100 years old brand . The AO adopted Transactional Net Margin method (TNMM) as in the opinion of the AO internal CUP method adopted by the assessee is not reliable keeping in view geographical differences prevailing in different countries wherein the subsidiaries/associated companies were situated to whom supplies were also made by its AE, different qualities of lubricating oil supplied by its AE in different geographies/countries as also the difference in quantity dealt in these different geographical markets rendering CUP method as unreliable. We are of the view that the authorities below have rightly adopted TNMM due to these differences noted by the authorities below as CUP method requires high degree of comparison in the product/services, geographies and other attributes such as scale of operations, type of market etc. The comparative chart submitted by the assessee reflecting supplies made by its AE in other geographies (countries) clearly reveals that there are product quality differential and other differences such as scale of operations as the assessee is admittedly buying in larger quantities from its AE etc , than quantities sold by its AE in other geographical(countries) areas making CUP unreliable. Thus, so far as TNMM adopted by authorities below is concerned, we concur with the views of the authorities below as TNMM will compare the operating margins of the assessee’s business with that of operating margins of companies operating in similar businesses. This is the first year of operations of the assessee-company and the assessee has stated to have claimed certain expenses which were incurred for initial set-up of businesses which are not routine expenses such as setting up of the company/infrastructure/offices/depots and hiring costs of new employees etc. which the assessee claimed that it has pulled down OP/TC to a negative figure of (-)18.97 per cent because substantial expenses were incurred towards these initial costs. The assessee requires to be given adjustments for these extraordinary costs incurred in the first year of operations. The onus is on the assessee to justify the exclusion of these extraordinary costs while computing PLI. Under these circumstances, the AO rightly adopted TNM method and finally shortlisted Sah Petroleum Ltd. and Gulf Oil Corporation Ltd. The assessee has not come forward with its list of comparables as it adopted cost plus method as detailed above and adopted its AE as tested parties and comparative prices charged by its AE in different geographical areas were considered. Both the companies selected as comparable by authorities below are engaged in the business of lubricating oil . Both these comparable companies are old and well established companies dealing in established brands. The assessee is also dealing in established Brand ‘Caltex’ which is more than 100 years old. We have observed that Sah Petroleum Ltd. is engaged majorly and primarily in business of lubricating oil. The assessee has contended that segment results of Sah Petroleum Ltd. are not available in the audited financial statements which are placed in paper book. We reject this contention of the assessee because Sah Petroleum Ltd. is majorly and primarily in Lubricating oils business, thus, there is no need to have separate segment results of the said company to be considered for computing ALP and for TP adjustments. So far as Gulf Oil Corporation Ltd. is concerned , it is in business of lubricating oils and explosives. The explosive business of said Gulf Oil Corporation Ltd. was divested into separate company w.e.f. 1st Oct., 2010. Segments results are available for Gulf Oil Corporation Ltd. from the audited financial statements as are available on record which are placed in filed. The authorities below are directed to adopt PLI being OP/TC of the lubricating business of Gulf Oil Corporation Ltd. based on segment results of Gulf Oil Corporation Ltd. The claim of the assessee that no TP adjustment has been made in the next year and hence no adjustment can be made in this year lacks merit as firstly complete details are not filed by the assessee as to the comparable shortlisted, TP study report of that year etc to substantiate its contention and secondly principles ofres judicataare not applicable to IT proceedings. Under these circumstances and factual matrix of the case, the matter need to be set aside and restored to the file of the AO/TPO for re-adjudication by recomputing ALP for benchmarking international transactions of the assessee for import of lubricating oils from its AE on merits in accordance with law in accordance with our directions as outlined in this order. The assessee is directed to provide cogent evidences/material to support its contentions. The assessee at the same time is also given liberty to file its list of com-parables as the same were not filed by the assessee earlier as it was stated to be following cost plus method. The necessary evidences filed by the assessee in its defence shall be admitted by the AO which shall be adjudicated on merits in accordance with law. Needless to say that the AO shall provide proper and adequate opportunity of being heard to the assessee in accordance with principles of natural justice. We order accordingly.