Tribunal excludes company from transfer pricing computation, addressing taxpayer's primary contention.

The Tribunal allowed the appeal, directing the exclusion of M/s. Gateway Distriparks Ltd. as a comparable for computing the Arm's Length Price, thereby addressing the primary contention of the assessee regarding the adjustment to international transactions with Associated Enterprises.

---

---

Issues Involved:
1. Delay in filing the appeal.
2. Adjustment to international transactions with Associated Enterprises (AEs).
3. Selection of comparable companies for benchmarking.
4. Initiation of penalty proceedings under Section 271(1)(c) of the Income-tax Act, 1961.
5. Admission of additional grounds of appeal arising from a rectification order under Section 154.

Issue-wise Detailed Analysis:

1. Delay in Filing the Appeal:
The Tribunal noted a delay of 283 days in filing the appeal. The delay was attributed to the assessee’s initial filing of an additional ground before the ITAT, which was not adjudicated due to procedural requirements. The Tribunal had previously indicated that any delay would be considered sympathetically. Given these circumstances, the Tribunal found the delay was not deliberate and condoned it, allowing the appeal to proceed.

2. Adjustment to International Transactions with AEs:
The primary contention was the adjustment of Rs. 3,87,07,126 to the international transactions of the assessee with its Associated Enterprises (AEs) as directed by the Dispute Resolution Panel (DRP). The DRP had included M/s. Gateway Distriparks Ltd. (GDL) as a comparable company, which the assessee contested. The Tribunal noted that the Transfer Pricing Officer (TPO) had initially rejected GDL as a comparable due to its functional differences and asset intensity. However, the DRP directed its inclusion for consistency, which the TPO later rectified by including GDL, leading to the disputed adjustment.

3. Selection of Comparable Companies for Benchmarking:
The assessee argued that GDL was not functionally comparable due to its asset-intensive nature and different business operations. The Tribunal observed that for AY 2013-14, the DRP had excluded GDL as a comparable due to its significant differences in functions, assets, and risks (FAR). The Tribunal found that the facts and legal principles for AY 2012-13 were similar to AY 2013-14 and agreed that GDL should not be included as a comparable for computing the Arm's Length Price (ALP). Consequently, the Tribunal directed the exclusion of GDL from the list of comparables.

4. Initiation of Penalty Proceedings under Section 271(1)(c):
The Tribunal did not specifically address the initiation of penalty proceedings under Section 271(1)(c) in the detailed analysis, indicating that this issue was not the primary focus of the appeal.

5. Admission of Additional Grounds of Appeal Arising from a Rectification Order under Section 154:
The Tribunal noted that the additional grounds of appeal arose from a rectification order passed by the AO under Section 154. The Tribunal held that such grounds should be challenged through a separate appeal against the Section 154 order. Therefore, the additional grounds were not admitted, but the assessee was allowed to file a separate appeal, with any delay to be considered sympathetically.

Conclusion:
The Tribunal allowed the appeal, directing the exclusion of M/s. Gateway Distriparks Ltd. as a comparable for computing the ALP, thereby addressing the primary contention of the assessee regarding the adjustment to international transactions with AEs. The Tribunal's decision was pronounced in the open court on 18th March 2020.

---