2014 (2) TMI 367 - AT - Income Tax

Stay of demand - Held that - The outstanding demand stayed on certain terms and conditions - The revenue proposed to pay a sum of Rs. 5 crores in two equal installments of Rs. 2.5 crores each on or before 28th February, 2014 - The assessee agreed for the same - The assessee is directed to pay Rs. 2.5 crores on or before 14th February, 2014 and another amount of Rs. 2.5 crores on or before 28th February, 2014 - The remaining outstanding demand is stayed for 180 days or till the disposal of the appeal preferred by the assessee in IT(TP) No. 1/JP/2013 - The registry is also directed to fix the above said appeal of the assessee out of turn on priority basis - Decided in favour of petitioner.

Summary

Issues:
1. Stay of outstanding demand of Rs. 61,91,39,940/- comprising tax and interest.
2. Adjustment under section 92C(3) on transactions including AMP expenses.
3. Disallowance of inventories written off.
4. Disallowance of restructuring expenses.
5. Adjustment on account of deemed interest on delays in collection from Associated Enterprises.

Issue 1: Stay of outstanding demand
The assessee requested a stay of the outstanding demand of Rs. 61,91,39,940/- pending the disposal of the appeal before the ITAT, Jaipur Bench. The Tribunal considered the merits of the case and the balance of convenience, directing the assessee to pay Rs. 5 crores in two installments and staying the remaining outstanding demand for 180 days or until the appeal's disposal.

Issue 2: Adjustment under section 92C(3) on transactions including AMP expenses
The Transfer Pricing Officer (TPO) proposed adjustments on Advertisement, Marketing Promotional (AMP) & Selling Expenses based on a bright-line test. The assessee argued that the adjustments were not supported by direct or indirect evidence and referenced the L.G. Electronics India Pvt. Ltd. case. The Tribunal found the assessee had a prima facie good case for deletion of the adjustments.

Issue 3: Disallowance of inventories written off
The assessee contested the disallowance of inventories written off, citing a favorable decision by the ITAT, Jaipur Bench. The department's appeal to the Rajasthan High Court was noted as the reason for the disallowance.

Issue 4: Disallowance of restructuring expenses
The disallowance of restructuring expenses was challenged by the assessee, arguing that the expenses were towards employees' separation, relocation, and related costs, which should be allowable under section 37 and not considered capital expenditure.

Issue 5: Adjustment on account of deemed interest on delays in collection from Associated Enterprises
The adjustment for deemed interest on delays in collection from Associated Enterprises was contested by the assessee, emphasizing that the company was a zero-debt company and did not charge interest on receivables from local customers. The Tribunal found the assessee's arguments strong and likely to result in the deletion of the adjustment.

The Tribunal granted the stay application, allowing the outstanding demand to be stayed for 180 days or until the appeal's disposal, with the assessee required to make partial payments in two installments. The Tribunal considered the merits of each adjustment, finding the assessee had arguable cases on the merits, leading to the stay being granted.