2014 (3) TMI 1021 - AT - Income Tax

Transfer pricing adjustment - Held that - The demand is mainly due to the Transfer Pricing Adjustment made by the AO. We further find that most of the issues agitated before the Tribunal have been decided in favour of the assessee, that adjustment of 7.5 Crores has to be carried out by the AO.Considering the facts and circumstances of the case we are of the opinion that it is a fit case for staying the demand.Accordingly, demand is stayed till the disposal of appeal by the Tribunal or for a period of six months whichever is earlier. AO is directed not to make any adjustment except for the amount of 7.5 Crores for which proceedings are pending before him till today. Registry is directed to fix the hearing of the case on 16.06.2014 as early hearing matter.As both the parties have been informed about next date of hearing in the court room no separate notice of hearing will be issued.

Summary

Issues:
1. Stay of outstanding demand due to Transfer Pricing Adjustment.

Analysis:
The assessee-company requested a stay of the outstanding demand of Rs. 189.62 Crores, which arose from the Transfer Pricing Adjustment made by the Assessing Officer (AO) following a reference to the Transfer Pricing Officer (TPO) under section 92C of the Act. The TPO had made an adjustment of Rs. 190.37 Crores. The assessee had filed objections against the Draft Assessment Order to the Dispute Resolution Panel (DRP). The AO then passed an order determining the total income of the assessee at Rs. 353.30 Crores, with an additional demand of Rs. 116.27 Crores. Notably, adjustments were made in respect of advertising, marketing, promotion (AMP), and royalty expenditure. Previous Tribunal orders had favored the assessee on similar issues for other assessment years.

During the hearing, the Authorized Representative (AR) argued that if the appeal effect was given to earlier orders, the assessee would be entitled to a refund of over Rs. 105 Crores. Most issues in the appeal were already decided in favor of the assessee in previous years. On the other hand, the Departmental Representative (DR) contended that the decision on staying the demand should be based on merits.

After considering the submissions and evidence, the Tribunal found that the demand primarily stemmed from the Transfer Pricing Adjustment. It was noted that many issues raised before the Tribunal had been resolved in favor of the assessee. The Tribunal directed the AO to carry out an adjustment of Rs. 7.5 Crores. Given the circumstances, the Tribunal deemed it appropriate to stay the demand until the appeal's disposal or for six months, whichever is earlier. The AO was instructed not to make any further adjustments except for the pending Rs. 7.5 Crores. The case was scheduled for an early hearing on 16.06.2014, with no separate notice to be issued to the parties. Consequently, the stay application filed by the assessee was allowed, providing relief in the matter of the outstanding demand.

In conclusion, the Tribunal granted the stay application, acknowledging the assessee's arguments and the favorable outcomes of previous orders on similar issues. The decision aimed to address the undue financial hardship the tax liability would impose, ensuring a fair resolution pending the final appeal determination.