2018 (12) TMI 693 - AT - Income Tax

Transfer Pricing adjustment in respect of software development services - Stay petition - Held that - We are of considered opinion that applicant has made out a prima-facie case on merits. The balance of convenience shifts in favour of assessee and, therefore, we are inclined to grant stay to assessee for year under consideration for a period of 6 months (180 days), or till the passing of the order whichever is earlier subject to making payment of ₹ 1.5 crores on or before 15/12/18. On making aforestated payment within stipulated time, Registry is directed to fix the appeal for hearing on 24/12/2018. Needless to say that assessee shall not seek any adjournment unless there being a cogent reason, otherwise this stay shall stand automatically vacated. In the result stay application filed by assessee stands allowed.

Issues involved:
1. Extension of stay of outstanding demand of ?11,96,68,110.
2. Transfer Pricing adjustment in relation to software services.
3. Transfer Pricing adjustment in relation to notional interest on outstanding receivables.
4. Corporate Tax adjustment in relation to TDS Reconciliation.
5. Non-grant of additional TDS credit.
6. Levy of interest under sections 234A and 234B of the Act.
7. Initiation of penalty proceedings.

Issue 1: Extension of stay of outstanding demand
The applicant sought an extension of stay of an outstanding demand of ?11,96,68,110, which was determined as payable by the assessee in the final assessment order passed by the Ld.AO. The applicant appealed against this order, citing violations of natural justice and jurisdictional errors. The applicant made submissions regarding Transfer Pricing adjustments and requested a stay of the demand, which was granted by the Tribunal for a period of 6 months subject to a partial payment.

Issue 2: Transfer Pricing adjustment in relation to software services
The Transfer Pricing Officer (TPO) made adjustments to the total income of the appellant concerning international transactions related to software services. The appellant contested these adjustments on various grounds, including the economic analysis undertaken, the use of multiple-year data, the selection of comparable companies, and the treatment of foreign exchange gains/losses. The Tribunal considered the arguments presented by both sides and granted a stay on the outstanding demand based on the merits of the case.

Issue 3: Transfer Pricing adjustment in relation to notional interest on outstanding receivables
The TPO made adjustments to the total income of the appellant regarding notional interest on outstanding receivables from associated enterprises. The appellant challenged these adjustments, arguing against the method used, re-characterization of receivables, and the determination of the arm's length interest rate. The Tribunal reviewed the submissions and granted a stay on the outstanding demand, considering the appellant's arguments on the merits of the case.

Issue 4: Corporate Tax adjustment in relation to TDS Reconciliation
The Ld.AO made an addition to the appellant's income on account of differences in TDS reconciliation. The appellant disputed this adjustment, highlighting discrepancies in the income credited and offered for tax. The Tribunal considered these discrepancies and granted a stay on the outstanding demand, taking into account the appellant's arguments and the facts of the case.

Issue 5: Non-grant of additional TDS credit
The Ld.AO did not grant additional TDS credit to the appellant, leading to a dispute over the amount. The appellant argued for the grant of the additional credit, emphasizing that the corresponding income had been offered for tax. The Tribunal reviewed the case and granted a stay on the outstanding demand, considering the appellant's submissions and the legal aspects involved.

Issue 6: Levy of interest under sections 234A and 234B of the Act
The Ld.AO levied interest under sections 234A and 234B of the Act, which was contested by the appellant. The appellant objected to the levy of interest, and the Tribunal considered this issue while granting a stay on the outstanding demand, taking into account the appellant's arguments and the legal provisions cited.

Issue 7: Initiation of penalty proceedings
The Ld.AO initiated penalty proceedings under section 271(1)(c) of the Act, which was challenged by the appellant. The appellant objected to the initiation of penalty proceedings, and the Tribunal considered this aspect while granting a stay on the outstanding demand, based on the merits of the case and the arguments presented.

Overall, the Tribunal granted a stay on the outstanding demand to the appellant for a specified period, subject to partial payment, considering the prima facie case on merits and the balance of convenience in favor of the appellant. The Tribunal's decision was based on a thorough review of the submissions made by both parties and the legal aspects involved in each issue raised.

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