Tribunal allows late Cross Objection due to Covid, excludes comparables, directs limited transfer pricing adjustment.

The Tribunal accepted the late filing of Cross Objection due to the Covid pandemic, admitted it for disposal on merits, excluded Gorani Industries Limited and Butterfly Gandhimathi Appliances Limited from the list of comparables for transfer pricing, and directed a proportionate adjustment limited to international transactions. The appeal of the Revenue was allowed, the cross objection of the assessee was partly allowed, and the matter of transfer pricing adjustment was remitted for fresh determination with the assessee granted a reasonable opportunity of hearing.

---

---

Issues:
1. Time bar for filing Cross Objection due to Covid pandemic.
2. Inclusion of Gorani Industries Limited in the list of comparables.
3. Inclusion of Butterfly Gandhimathi Appliances Limited in the list of comparables.
4. Proportionate adjustment in transfer pricing.

Issue 1: Time bar for filing Cross Objection due to Covid pandemic
The Cross Objection was filed 14 days late, citing the Covid pandemic as the reason for the delay. The Tribunal accepted the reason, referring to the Supreme Court's cognizance of the challenges faced by litigants due to Covid-19 and extended the time limit for filing appeals. Consequently, the delay was condoned, and the Cross Objection was admitted for disposal on merits.

Issue 2: Inclusion of Gorani Industries Limited in the list of comparables
The dispute arose from the inclusion of Gorani Industries Limited (GIL) in the list of comparables for determining the Arm's Length Price (ALP) of international transactions. The Tribunal analyzed the revenue streams of the companies and concluded that GIL, with a significantly different revenue mix compared to the assessee, could not be considered comparable. Therefore, the Tribunal directed the exclusion of GIL from the list of comparables.

Issue 3: Inclusion of Butterfly Gandhimathi Appliances Limited in the list of comparables
The Tribunal examined the merger of Gangadharam Appliances Limited with Butterfly Gandhimathi Appliances Limited (BGAL) and found that the financial figures of BGAL for the relevant assessment year were influenced by the merger, making it incomparable. Consequently, the Tribunal ordered the exclusion of BGAL from the list of comparables.

Issue 4: Proportionate adjustment in transfer pricing
Regarding the proportionate adjustment in transfer pricing, the Tribunal referred to previous judgments, including those of the jurisdictional High Court, emphasizing that the adjustment should be restricted to international transactions and not entity-level transactions. Citing relevant case laws, the Tribunal set aside the previous order and directed that the transfer pricing adjustment should be limited to the extent of international transactions only.

In conclusion, the Tribunal allowed the appeal of the Revenue and partly allowed the cross objection of the assessee. The matter of transfer pricing adjustment was remitted to the Assessing Officer/Transfer Pricing Officer for a fresh determination following the directives provided in the judgment. The assessee was granted a reasonable opportunity of hearing in the fresh proceedings.

---