2021 (7) TMI 1454 - AT - Income Tax

Stay of demand - predeposit of atleast 20% of disputed tax demand - assessee makes elaborate submissions on the proviso to Section 254(2A) to justify her claim that the payment of at least 20% of the disputed tax demands is not a condition precedent for the grant of stay - TP Adjustment - ALP adjustment on account of assignment of the call or put options - HELD THAT - We may state that on the face of it, while many of the facets of the main issue, i.e. ALP adjustment on account of assignment of the call or put options, raised in this appeal, so far as the ALP adjustment in respect of options rights are concerned, seem to be covered against by a decision of the coordinate bench, in assessee s own case for the assessment year 2012-13- 2018 (1) TMI 1302 - ITAT AHMEDABAD which was authored by one of us (i.e. the Vice President), there are many issues raised in the appeal which are prima facie worth serious consideration and the assessee thus has an arguable case in appeal. We have also noted that almost 98% of the impugned demand is in respect of this ALP adjustment. We have also taken note of learned counsel s submission that the assessee has already provided a corporate guarantee by its ultimate parent company, i.e. Vodafone International Holdings BV, for an amount of ₹ 3,538.48 crores for the assessment year 2008-09 and this guarantee is yet to be returned by the income tax department and that this guarantee adequately covers the amount disputed in the appeal. However, when we pointed out that the guarantee is specifically for the assessment year 2008-09 and so far as that assessment year is concerned, as things stand now, the matter is resolved in favour of the assessee by Hon ble jurisdictional High Court, learned counsel submits that as the matter is pending before Hon ble Supreme Court, the guarantee is very much alive and, being in possession of the income tax authorities anyway, it can very well be enforced by the income tax authorities. As for the issue being raised that there cannot be a substantive addition in this year as the original substantive addition was made in the assessment year 2008-09, which even though decided in favour of the assessee by Hon ble Bombay High Court, is now being pursued in appeal by the income tax authorities before Hon ble Supreme Court, all the subsequent years can only be treated as protective, and the collection of the tax levied on protective basis must therefore be kept in abeyance, we are unable to see merits in this plea either. When an income is added on a substantive basis in one year and on a protective basis in the other year, the year in which protective addition is made becomes the year of substantive assessment the moment the original substantive addition does not meet judicial approval. In any event, the triggers for taxation in the subsequent years are different. The impugned ALP adjustment, therefore, cannot be treated as merely on the protective basis, and, for this reason, the collection of disputed demands cannot be deferred till the Hon ble Supreme Court decides the matter for the assessment year 2008-09. All these factors taken together, in our considered view, this is not a case deserving a blanket stay by the Tribunal. On a careful consideration of all these factors, as also bearing in mind the entirety of the case, we deem it fit and proper to grant a stay on collection of the impugned tax and interest demands on the condition that (i) the assessee will pay ₹ 230 crores, which works out to approximately 20% of the disputed tax demand, within 30 days from today; (ii) the assessee will furnish a corporate guarantee from an associate company, which has unencumbered assets in India in excess of the balance disputed demands, i.e. ₹ 900 crores; and (iii) the assessee will fully cooperate in expeditious disposal of the appeal in question, as also other appeals which are tagged and clubbed with this appeal, and in case of any lapses on the part of the assessee in this regard, this stay shall stand vacated forthwith . This order shall remain in force for six months from today or till further orders- whichever is earlier.

Summary

Issues Involved:
1. Stay on collection/recovery of tax and interest demands.
2. Arm's Length Price (ALP) adjustment on account of assignment of call or put options.
3. Disallowance of depreciation on goodwill and expenses u/s 14A.
4. Relevance of corporate guarantee provided for assessment year 2008-09.
5. Applicability of proviso to Section 254(2A) regarding payment of disputed tax demands.

Summary:

1. Stay on Collection/Recovery of Tax and Interest Demands:
The assessee-applicant sought a stay on collection/recovery of tax and interest demands aggregating to Rs. 1128.46 crores for the assessment year 2014-15, pending the disposal of the related appeal before the Tribunal.

2. Arm's Length Price (ALP) Adjustment:
The assessee disclosed an international transaction involving a put option under a Framework Agreement dated 5 July 2007. The Transfer Pricing Officer found that the nomination of CGP India Investments Limited (CGPI-M) to purchase shares in Scorpio Beverages Pvt Ltd resulted in an undue advantage to CGPI-M, allowing it to buy shares at a price much below the market rate without any corresponding benefit to the assessee. An ALP adjustment was proposed, resulting in a substantive addition of Rs. 1967 crores and a protective addition of Rs. 317.77 crores.

3. Disallowance of Depreciation on Goodwill and Expenses u/s 14A:
The Assessing Officer disallowed depreciation on goodwill amounting to Rs. 10,99,11,067 and expenses u/s 14A amounting to Rs. 1,18,300. The assessee's grievances on these aspects were dismissed by the Dispute Resolution Panel (DRP).

4. Relevance of Corporate Guarantee Provided for Assessment Year 2008-09:
The assessee argued that a corporate guarantee provided by its ultimate parent company, Vodafone International Holdings BV, for Rs. 3,538.48 crores for the assessment year 2008-09 should cover the disputed amount. However, the Tribunal found this guarantee irrelevant as it was specific to the assessment year 2008-09 and the related litigation was already concluded.

5. Applicability of Proviso to Section 254(2A):
The Tribunal noted that the proviso to Section 254(2A) does not denude the Tribunal of the powers to direct part payment of demands even in excess of 20% before granting a stay. Given the factual matrix and the coordinate bench decision against the assessee on many facets of the main issue, the Tribunal did not find it a fit case for a blanket stay.

Conclusion:
The Tribunal granted a conditional stay on the collection of the impugned tax and interest demands, requiring the assessee to pay Rs. 230 crores (approximately 20% of the disputed tax demand) within 30 days, furnish a corporate guarantee from an associate company with unencumbered assets in India in excess of Rs. 900 crores, and cooperate in the expeditious disposal of the appeal. This order remains in force for six months or until further orders. The stay application was partly allowed.