2015 (7) TMI 1070 - AT - Income Tax

Stay of demand - selection of the tested party for determination of ALP of the international transaction with AE - Held that - Assessee has prima facie good case on merit. The colour of dispute would change, if the selection of the tested party for determination of ALP of the international transaction with AE is changed. No doubt in the order dated 25.3.2014, the learned AO while rejecting the application for stay of demand, moved under section 220 of the Income Tax Act has observed, as to why, the GMDAT cannot be taken as tested party, but, it is a debatable issue at this stage. The order of the Tribunal in the Asstt.Year 2006-07 and 2007-08 is in favour of the assessee on this issue. Therefore, taking into consideration, the facts and circumstances, we deem it appropriate to stay the outstanding demand subject to the following conditions (a) The outstanding demand shall remain stayed for a period of 180 days or till the disposal of the appeal, whichever event occurs first; (b) The assessee shall pay sum of ₹ 1,00,00,000/- (Rupees One Crore) on or before 30th August, 2015. (c) The assessee shall submit all necessary paper books before the date of hearing in the appeal. (d) The assessee shall not seek adjournment unless unavoidable circumstance warrants so.

Summary

Issues:
1. Stay petition for outstanding demand in Asstt. Year 2009-10.
2. Selection of tested party for determination of ALP of international transactions with AE.
3. Rejection of stay application by AO and subsequent appeal.

Analysis:
1. The Stay Petition was filed by the assessee seeking ad-interim stay of the outstanding demand amounting to Rs. 53,95,70,660/- for the assessment year 2009-10. The AO had raised a demand of Rs. 56,45,70,660/-, including interest of Rs. 32,85,159, out of which the assessee had already paid Rs. 2,50,00,000. The major addition to the demand was based on the recommendation of the Transfer Pricing Officer (TPO) regarding the Arm's Length Price (ALP) of international transactions with the associated enterprise (AE). The assessee argued that selecting GMDAT as the tested party would significantly reduce the demand, citing previous Tribunal decisions supporting this approach.

2. The main contention revolved around the selection of the tested party for determining the ALP of international transactions with the AE. The assessee advocated for using GMDAT as the tested party, emphasizing the reduction in demand if this approach was adopted. The AO, however, rejected this stance citing incomplete financial data of GMDAT provided by the assessee. The Tribunal referred to its previous decisions in the assessment years 2006-07 and 2007-08, where it directed the AO to adopt GMDAT as the tested party for analyzing inter-company transactions, leading to a favorable outcome for the assessee. The Tribunal considered this a debatable issue and granted the stay of the outstanding demand based on the merits of the case.

3. The AO had previously rejected the application for stay of demand, questioning the selection of GMDAT as the tested party. However, the Tribunal found the issue to be debatable, especially considering the favorable outcomes in previous years for the assessee. The Tribunal granted the stay of the outstanding demand subject to conditions, including payment of Rs. 1,00,00,000 by a specified date and submission of necessary documents before the appeal hearing. The Tribunal listed the appeal for an expedited hearing along with other similar cases involving identical issues, ultimately allowing the Stay Petition of the assessee.

This detailed analysis highlights the key legal arguments, decisions, and considerations made by the Tribunal in addressing the issues raised in the judgment.