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Showing contexts for: OP/Sale in Weatherford Drilling & Production ... vs Assessee on 30 June, 2015Matching Fragments
2. Facts as submitted to Assessing Officer 2.1 The Manufacturing division of WDPS is engaged in manufacturing of Gas Lift Valves ("GLV") and Packers Manufacture, which is essentially a labour assisted assembly process.
2.2 The Sales to AEs of Rs. 34,26,77,543 represents more than So% of the revenue generated by the Manufacturing division of WDPS for the period under consideration viz. FY 2008-09. The Assessee substantiated the arm's length nature of these transactions by adopting Transactional Net Margin Method ("TNMM") considering Operating Profit/ Sales ("OP/Sales") as Profit Level Indicator ("PIT). A structured benchmarking process was carried out by the Assessee which is reflected in the TP Study report, identifying 7 comparables having average OP/Sales of 8.85%, whereas OP/Sales of the tested party i.e. Manufacturing division of WDPS, was 16.15%;
of the Paper Book for the rationale of characterization). Ideally a licensed manufacturer will target to earn a return on sales and not over costs, thus the PLI was chosen to be OP/Sales. Since PLI denotes measurement of the profits earned by any entity in view of its functional profile, the Assessee is of the view that OP/Sales should be considered as PLI. (Please refer Page Nos.271 to 271 of the Paper Book for the same)
10.l. The following paragraphs summarise the facts and the legal arguments to provide a macro insight on the issue along with the key arguments.
a, WDPS operates vide two divisions Manufacturing division and the WESS India division b. Manufacturing division of WDPS during the FT 2008-09 observed a return on sales of 16.15% and based on the economic analysis in its TP documentation had identified 7 comparables with the mean of OP/Sales of 8.85%, to substantiate the arm's length nature of this international transaction.
Ground of objection No.2C; limiting the search process only to 'Valves' The Assessee objects the key-word search carried out by Ld. TPO/AO by to select 'Valves', 'Industrial Valves' and 'Other Valves'.
2. Facts as submitted to Assessing Officer The Assessee substantiated the arm's length nature of its international transaction of Sales to AEs of the Manufacturing division of WDPS to be at arm's length by adopting TNMM considering OP/Sales as PLI. A structured benchmarking process was carried out by the Assessee which is reflected in the TP Study report, identifying 7 comparables having average OP/Sales of 8.85%, whereas OP/Sales of the tested party i.e. Manufacturing division of WDPS was,l6.15%.