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TMI Blog2021 (8) TMI 1212X X X X Extracts X X X X X X X X Extracts X X X X ..... dication. 4. Ground No. 2 raised by the assessee for not considering return on value added cost (ROVAC), ground Nos. 3, 4 and 5 are connected to ground No. 2. Therefore, we adjudicate ground Nos. 2 to 5 collectively. 5. Brief facts of the case are that the assessee company was incorporated in India on 31-10-2006 as a private limited company for executing turnkey projects in India, to build paint shops for car manufactures in India. During the year, Geico India was primarily engaged into sales transactions pursuant to an arrangement with its associated enterprise (AE) to procure the materials and related services (engineering, drawings and designs) from third party suppliers to be supplied to the AE for the customer project of the AE. In r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support services to its AE, it bears relatively lesser risks and perform relatively lesser functions as compared to a full risk distributor. Geico India primarily renders such services to its AE on a back to back basis and against firm purchase commitments from its AE's customers without holding any inventory. It is, further, submitted that the value addition by Geico India in essence reflects in the value added costs incurred by it in procuring and selling activities and not in the cost of the purchase of material itself. According to TPO, that the profit level indicator (PLI) prescribed under TNMM is the net operating margins computed in relation to the prescribed base and the transaction being compared is sales to AE and the same ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he role of business support service provider and is limited to co-ordination of the logistics for supply of materials and services procured from third party Indian suppliers. Further, the assessee also contended return on value added cost (ROVAC) is the most appropriate PLI to measure the returns of the assessee in view of the transactions in trading sector. At Page No. 317 of the paper book, we note that along with the additional submissions the assessee also provided the result of search conducted for identifying companies in the trading sector. Therefore, it is clear from the record the assessee made an alternative submission before the DRP to treat its services in trading activities rather than business support services without any prej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not permissible. The ld. DR further drew our attention to the profit and loss account of the assessee submitted there was no reason shown by the assessee why it paid consultancy charges and argued by which it itself shows the assessee is not in trading activities but in business support service provider. He vehemently argued that the assessee did not produce any agreement evidencing its transaction before all the authorities including this Tribunal and it is very difficult to form an opinion in the absence of any agreement and he supported the order of TPO consequently, the adjustment made by the AO in the final assessment order. 8. On perusal of the Page No. 19 of the paper book we note that the nature of operations of assessee is in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... engaged into sales transactions pursuant to an arrangement to its AE to procure the materials and related services (engineering, drawings and designs) from third party suppliers to be supplied to the AE for the customer project of the AE. In support of this the ld. AR drew our attention to Invoice placed at Page No. 241 of the paper book. On perusal of the Excise Invoice Cum Delivery Challan at Page No. 241 of the paper book we note that Webb India Private Limited raised the delivery challan in the name of assessee and the shipment shows to its AE's project. In the said challan the unit price has shown as Rs. 30,13,765/- and the assessee raised Export Invoice in the name of its AE's project in Russia which is at Page No. 242 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purposes of computing the PLI, as if would directly influence the PLI being in the denomination for computation of the rates. Therefore, it is evident the TPO did not accept the ROVAC as PLI for TNMM concerning the transaction compared in the present case is sales by the assessee to its AE. The profit and loss account for the period 01-04-2011 to 31-03-2012 is placed at Page No. 17 of the paper book. We note that the assessee has shown revenue from operations at Rs. 21,48,52,862/- the details of which in Note No. 2.12 at Page No. 31 of the paper book. Further, the assessee also shown expenses totaling to Rs. 20,72,54,620/- in which the contract expenses has shown as Rs. 18,16,07,299/- which is inclusive of consultancy fees the detai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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