2018 (5) TMI 159 - HC - Income Tax

Transfer Pricing Adjustment made on account of the expenditure towards Advertisement, Marketing and Promotion (AMP ) - Stay against demand - Held that - As against the impugned demand of ₹ 22.17 crores, the Tribunal granted the stay with deposit of ₹ 2 crores in addition to ₹ 3.32 crores; and looking to the issues involved, as regards expenditure towards AMP, it is difficult to deduce that the writ petition was filed in an entirely irresponsible manner or that the authorities should be penalized in monetary terms on that count. In the totality of circumstances, we do not find it necessary to dilate further in this matter. In our view, interest of justice shall be served with the clarification that the observations occurring in the order impugned would only be considered as being relevant for the purpose of the consideration of the matter for interim relief and by waiving the costs imposed. It would, however, be expected of the authorities concerned to take necessary steps so as to guard against filing of frivolous petitions, as indicated and observed by the learned Single Judge.

Summary

Issues:
1. Imposition of costs in a writ petition challenging Tribunal's order.
2. Validity of the interim order passed by the Tribunal.
3. Concerns regarding indiscriminate filing of writ petitions.
4. Clarification on observations made in the impugned order.
5. Waiver of costs and considerations for the Department's case before the Tribunal.

Analysis:
1. The case involved an intra-Court appeal against an order that imposed costs of ?50,000 personally on officers involved in filing a writ petition challenging the Tribunal's order on Transfer Pricing Adjustment for Advertisement, Marketing, and Promotion expenses. The learned Single Judge dismissed the writ petition, deeming the Tribunal's interim order fair and reasonable, and not prejudicial to the Department, as the issue was debatable.

2. The Tribunal's interim order directed the assessee to pay ?2 crores in addition to the 15% of the demand already paid, staying the balance demand for 90 days or until the appeal's disposal. The High Court acknowledged the complexity of the AMP expenditure issue and found the writ petition not entirely irresponsible, leading to the waiver of costs and a clarification that the observations in the impugned order were relevant only for interim relief.

3. The High Court emphasized the need to avoid indiscriminate filing of writ petitions against interim orders and discouraged unnecessary escalation to higher courts. While agreeing with the Single Judge on this principle, the Court found the specific circumstances of the case did not warrant penalizing the authorities involved in filing the petition, considering the significant amount involved and the complexity of the issue.

4. The Court clarified that the observations in the impugned order were relevant only for interim relief and should not prejudice the Department's case before the Tribunal. The waiver of costs was granted, and the authorities were advised to prevent frivolous petitions in the future, as highlighted by the Single Judge.

5. The Court, after thoughtful consideration, concluded that justice would be served by clarifying the relevance of the impugned order's observations for interim relief, waiving the costs imposed, and leaving other aspects of the matter to be examined by the Tribunal in the pending appeal. The waiver of costs was granted, and the Court emphasized the need for authorities to guard against filing frivolous petitions in the future.