2024 (6) TMI 900 - HC - Income Tax

Rejection of seeking a blanket unconditional stay on collection/recovery of tax and interest demands by Tribunal - Interim order passed by the Tribunal on the stay application - Tribunal instead granted a conditional stay requiring the petitioner to pay Rs. 230 crores furnish a corporate guarantee from an associate company with unencumbered assets in India exceeding Rs. 900 crores and cooperate in the expeditious disposal of the appeal - HELD THAT - We are not persuaded to accept the petitioner s contention that in the facts of the case the recovery being in the nature of a protective recovery it was not permissible for the Tribunal to pass the impugned order considering the decisions of the orders passed for assessment year 2008-09 as substantive year. The contention is that assessment year 2014-15 cannot be treated to be substantive as there is no finality of adjustment - Although the Tribunal has made the observations as noted by us above however considering the orders passed on the subsequent assessment years (A.Ys. 2010-11 2011-12 2012-13) we are of the opinion that it would not be correct for the petitioner to raise a contention that the recovery as sought to be made for assessment year 2014-15 would be in the nature of a protective recovery. If such argument is accepted orders that have been accepted by the petitioner in depositing the demands for the assessment years 2011-12 and 2012-13 (which is Rs. 50 crores and Rs. 100 crores respectively) could not have been passed. Moreover such orders are accepted by the petitioner. Petitioner s contention that the assessment for the year in question being a high-pitched assessment such a demand would warrant a blanket stay - In the facts of the case we are not inclined to accept such contention considering as to what has transpired for the previous years i.e. A.Ys. 2008-09 2010-11 2011-12 and 2012-13. In such context the petitioner s reliance on the decision of Valvoline Cummins Ltd. 2008 (5) TMI 20 - HIGH COURT OF DELHI would also not assist the petitioner as the facts are completely distinct from the facts in hand. In the present proceedings we are concerned with the interim order passed by the Tribunal on the stay application as filed by the petitioner which is purely a discretionary order. We do not find that the discretion has been exercised by the Tribunal perversely or in the manner which the law would palpably not recognize. Referring to partial interference in condition no. (ii) as Tribunal has directed the petitioner to furnish a corporate guarantee from an associate company which has unencumbered assets in India in excess of the balance disputed demands i.e. Rs. 900 crores we are of the opinion that such condition ought not to have been directed by the Tribunal in the facts and circumstances of the case and more particularly considering the interim orders passed for the prior years based on the same triggers of exercise of options. Such condition therefore is hereby substituted by directing the petitioner to furnish a corporate guarantee of its ultimate parent namely Vodafone International Holdings BV Netherlands as accepted by the revenue in the assessment year 2008-09. In the light of the above discussion except what has been modified by us in relation to condition no. (ii) as imposed by the impugned order we are not inclined to interfere in the impugned order.

Issues Involved:
1. Challenge to the Tribunal's order rejecting a blanket unconditional stay on tax and interest demands.
2. Evaluation of the Tribunal's conditions for granting a conditional stay.
3. Consideration of the petitioner's arguments based on previous assessment years.
4. Tribunal's discretion and legal principles applied in the interim order.

Summary:

1. Challenge to the Tribunal's Order:
This petition u/s Articles 226 and 227 of the Constitution challenges the Tribunal's order dated 19 July 2021, which rejected the petitioner's application for a blanket unconditional stay on tax and interest demands amounting to Rs. 1128.46 crores for the assessment year 2014-15. The Tribunal instead granted a conditional stay requiring the petitioner to pay Rs. 230 crores, furnish a corporate guarantee from an associate company with unencumbered assets in India exceeding Rs. 900 crores, and cooperate in the expeditious disposal of the appeal.

2. Tribunal's Conditions for Conditional Stay:
The Tribunal's order specified that the stay would remain in force for six months or until further orders, whichever is earlier. The petitioner was directed to provide details of all related appeals to ensure holistic hearing. The Tribunal's decision was based on the facts of the case and the application of settled legal principles, deeming it appropriate to grant a conditional stay rather than a blanket stay.

3. Petitioner's Arguments Based on Previous Assessment Years:
The petitioner argued that similar demands for previous assessment years (2008-09, 2010-11, 2011-12, and 2012-13) were treated differently, with corporate guarantees being accepted without additional deposits. The petitioner contended that the Tribunal should have considered the security already available with the department and not insisted on further deposits for the assessment year 2014-15. The petitioner highlighted that the percentage of transactions for the assessment year 2014-15 was lower compared to previous years and argued for a consistent approach.

4. Tribunal's Discretion and Legal Principles:
The Tribunal observed that the triggers for taxation in subsequent years were different and that the impugned ALP adjustment could not be treated as merely on a protective basis. The Tribunal's discretionary order was found to be in line with the provisions of Section 254 (2A) of the Act. The High Court noted that the Tribunal's observations and the conditions imposed were appropriate, except for condition no. (ii). The High Court modified this condition, allowing the petitioner to furnish a corporate guarantee from its ultimate parent company, Vodafone International Holdings BV, Netherlands, instead of an associate company with unencumbered assets in India.

Conclusion:
The High Court upheld the Tribunal's order with a modification to condition no. (ii), directing compliance within four weeks. The petition was disposed of with no costs.

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