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2016 (4) TMI 515 - AT - Income TaxStay Application on the recovery of outstanding demand - Held that - Applicant shall deposit a sum of ₹ 50.00 crores on or before 31/03/2016 and recovery of balance of the demand shall be stayed. For the balance of the outstanding demand, the applicant shall provide a corporate guarantee to the satisfaction of the Assessing Officer within four weeks. The Registry shall list the appeal of the assessee on an out of turn basis before the Regular Bench on 08/08/2016. Since the aforesaid date of hearing was announced in the open court, the requirement of issuance of a formal notice of hearing is hereby dispensed with; and, The aforesaid stay shall operate for a period of six months from today or the date of disposal of appeal by the Tribunal, whichever is earlier.
Issues Involved:
1. Addition of ?1180,29,26,769/- in respect of assignment of call options. 2. Addition of ?6,03,38,242/- on account of transfer pricing adjustment. 3. Disallowance of ?26,05,29,938/- being depreciation claimed on goodwill. 4. Disallowance of ?7,61,91,250/- under section 14A of the Income Tax Act. Issue-wise Detailed Analysis: 1. Addition of ?1180,29,26,769/- in respect of assignment of call options: The disputed demand arose from the addition related to the assignment of call options under Framework Agreements dated 05/07/2007 between the assessee and two individuals. The Assessing Officer concluded that Vodafone Group Plc's indirect stake in Vodafone India Ltd. (VIL) increased by 2.31% due to two transactions involving share acquisitions, interpreting these transactions as an exercise of call options by the assessee. The Transfer Pricing Officer valued this stake increase at ?1180,29,26,796/-, treating it as an 'international transaction' under section 92B of the Income Tax Act. The assessee argued that these transactions were unrelated to the call options and that call options, pending exercise, are not 'property rights' and thus not 'capital assets' under section 2(14) of the Act. The assessee also contended that the lower authorities misdirected themselves in making the addition both in law and on facts, citing precedents from the Hon'ble Supreme Court and the Hon'ble Bombay High Court. 2. Addition of ?6,03,38,242/- on account of transfer pricing adjustment: The dispute involved the inclusion/exclusion of certain comparables in the final set used for transfer pricing adjustments related to IT-enabled services provided by the assessee to its associated enterprise. The assessee argued that, based on various decisions of the Tribunal's Co-ordinate Benches, some of the comparables used by the Transfer Pricing Officer should be excluded, which would show that the assessee's margin was within the permissible range. 3. Disallowance of ?26,05,29,938/- being depreciation claimed on goodwill: The assessee claimed depreciation on goodwill amounting to ?26,05,29,938/- following the acquisition of a Call Centre business from Vodafone Essar Gujarat Limited as a going concern. The income tax authorities denied this claim, but the assessee cited the Supreme Court's decision in Smifs Securities Ltd., arguing that goodwill is an 'intangible asset' under section 32(1)(ii) of the Act and thus eligible for depreciation. The Tribunal found that the assessee had a good prima-facie case based on this precedent. 4. Disallowance of ?7,61,91,250/- under section 14A of the Income Tax Act: The assessee contended that no exempt income was earned during the year under consideration, and thus, no disallowance under section 14A should be made. The Tribunal noted that this argument was supported by the Delhi High Court's decision in Cheminvest Ltd., which held that no disallowance is warranted if no exempt income is earned. Tribunal's Decision: The Tribunal concluded that the assessee had a good prima-facie case on all issues. It directed the assessee to deposit ?50.00 crores by 31/03/2016 and provide a corporate guarantee for the balance demand. The recovery of the outstanding demand was stayed, and the appeal was scheduled for an out-of-turn hearing on 08/08/2016. The stay would operate for six months or until the disposal of the appeal, whichever is earlier. The stay application was allowed accordingly.
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