2014 (3) TMI 15 - AT - Income Tax

Stay application - Transfer pricing adjustment u/s 92 of the Act Assignment of call option on shares - Call centre business Held that - As made abundantly clear during the course of the hearing, it is not inclined to dwell on the merits of the case at any length, and the objective in the instant hearing was to have a snap shot of the case - This is purview at the stage of the proceedings is only to balance the conflicting interests of the opposite sides - even as explained there expressing a view either way may cause prejudice to either or even both the parties besides also raise jurisdictional issues inasmuch as here the decision in regarding the stay application thus, prima facie view, the assessee appears to have a good case - Though no case of financial hardship stands made out, the tax demand raised is itself at 22600% of the returned income of ₹ 10.65 crores, assessee directed to deposit ₹ 200 crores in two installments - stay granted partly.

Summary

Issues:
Stay petition by the Assessee against assessment u/s. 143(3) r.w.s. 144C (13) of the Income Tax Act, 1961 for A.Y. 2008-09 raising a net demand of Rs.3738.49 crores.

Issue (a) - Assignment of call option on shares:
The Assessee argued against the adjustment u/s. 92 of the Act made on account of assignment of call options. The Assessee contended that there was no assignment, as claimed by the Revenue, and highlighted the absence of jurisdictional facts for the adjustment. The Assessee referred to agreements and court decisions, particularly the Vodafone case, to support its position. The Assessee also argued that the Finance Act, 2012 amendment did not apply due to the lack of assignment. The Assessee challenged the assessment before the high court, which upheld the apex court's findings on the matter.

Issue (b) - Call centre business:
The Assessee disputed the adjustment related to the transfer of its call center business, arguing that it was not an associated enterprise. The Assessee relied on statutory provisions and the deeming of section 92A(2) to support its case. The Assessee pointed out the findings of the DRP in this regard.

Issues (c & d) - IT enabled services & unabsorbed depreciation:
These issues were briefly discussed, with the Assessee acknowledging that they were partly covered by earlier tribunal orders. The discussion was limited due to the relatively small demand involved.

The Tribunal heard arguments from both sides and emphasized the need to balance conflicting interests. The Tribunal refrained from delving into the merits of the case extensively, as it was deciding on the stay application. Despite the absence of financial hardship, the Tribunal noted the substantial tax demand in relation to the returned income. Consequently, the Tribunal granted a stay on specified terms, requiring payment and guarantees from the Assessee. Any adjournment without just cause would lead to the vacation of the stay. The decision was made in favor of the Assessee, allowing the stay petition on the specified terms.