Tribunal Partially Allows Assessee's Appeals on Transfer Pricing, Excludes Comparables

The Tribunal partly allowed the assessee's appeals for AY 2010-11 and 2011-12, directing the exclusion of certain comparables in transfer pricing adjustments. The addition of undisclosed receipts and disallowance of professional fees were set aside for verification. The Tribunal did not address the penalty under Section 271(1)(c) specifically. Separate judgments were delivered for the appeals, upholding DRP's directions on TP adjustment. The delay in pronouncing the order due to COVID-19 lockdown justified an extension of the limitation period. The revenue's appeals and cross-objections for AY 2011-12 were dismissed.

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Issues Involved:
1. Transfer Pricing Adjustments
2. Addition of Undisclosed Receipts
3. Disallowance of Professional Fees
4. Penalty under Section 271(1)(c)

Issue-Wise Detailed Analysis:

1. Transfer Pricing Adjustments:
- The assessee challenged the transfer pricing adjustments made by the TPO and upheld by the CIT(A), specifically the inclusion and exclusion of certain comparable companies.
- Mahindra Consulting Engineers Ltd.: The Tribunal found that Mahindra Consulting Engineers Ltd. (MCEL) is functionally dissimilar, engaged in diversified services without segmental data, and fails the export filter. The Tribunal directed the exclusion of MCEL from the final set of comparables.
- WAPCOS Ltd.: The Tribunal noted that WAPCOS Ltd. is a government undertaking with a different risk profile and high turnover, making it functionally dissimilar. The Tribunal directed the exclusion of WAPCOS Ltd. from the final set of comparables.
- Engineers India Limited: The Tribunal found Engineers India Limited to be a government undertaking with a different risk profile and significantly higher turnover. The Tribunal directed the exclusion of Engineers India Limited from the final set of comparables.
- Rites Ltd.: The Tribunal noted that Rites Ltd. is a government undertaking with a different risk profile and high turnover. The Tribunal directed the exclusion of Rites Ltd. from the final set of comparables.
- Chemtex Global Engineers Pvt. Ltd.: The Tribunal upheld the exclusion of Chemtex Global Engineers Pvt. Ltd. due to abnormal financial results and a significant decrease in industrial sales.

2. Addition of Undisclosed Receipts:
- The assessee contended that the addition of Rs. 40,16,243 as undisclosed receipts was erroneous as the income had already been offered to tax in AY 2009-10. The Tribunal set aside the issue to the AO for verification and directed the deletion of the addition if the income was already offered to tax in AY 2009-10.

3. Disallowance of Professional Fees:
- The assessee argued that the disallowance of Rs. 31,48,179 for non-deduction of TDS pertained to bad debts written off, not professional fees. The Tribunal set aside the issue to the AO for verification and directed the AO to consider the amount in accordance with the law applicable to bad debts.

4. Penalty under Section 271(1)(c):
- The Tribunal did not specifically address the penalty under Section 271(1)(c) in the detailed analysis, indicating that the issue might not have been pressed or was resolved in favor of the assessee.

Separate Judgments Delivered:
- The Tribunal delivered a separate judgment for the appeal filed by the assessee for AY 2011-12 and the revenue's appeal for the same year, reiterating the exclusion of certain comparables and upholding the DRP's directions to limit the TP adjustment to the value of international transactions.

Procedural Aspect:
- The Tribunal acknowledged the delay in pronouncing the order due to the nationwide lockdown imposed because of the COVID-19 pandemic and justified the extension of the limitation period based on the decision in DCIT vs. JSW Limited.

Conclusion:
- The appeals filed by the assessee for AY 2010-11 and 2011-12 were partly allowed, while the appeals and cross-objections filed by the revenue for AY 2011-12 were dismissed.

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