2015 (1) TMI 48 - AT - Income Tax

Stay of demand - Disallowance u/s 40(a)(i) - disallowance u/s 14A - Held that - there is a direct decision given by the Tribunal in assessee s own case for the assessment year 2006-07 deleting similar disallowance u/s 40(a)(i). The amendment to sec. 40(a)(i), brought to our notice by the ld. DR, became effective from the assessment year 2005-06 and as such was impliedly not absent for consideration from the tribunal at the time of deciding this issue in favour of the assessee for the assessment year 2006-07 - Respectfully following the judgment of the Hon ble High Court and the fact that the Tribunal for the assessment year 2006-07 has deleted such disallowance made by the A.O. u/s 40(a)(i), we are of the considered opinion that, at least prima-facie, the assessee has made out a case for stay of demand on this issue. - Stay granted.

Summary

Issues involved:
1. Stay application for demand of Rs. 621,18,79,951 for A.Y. 2009-10.
2. Components of the demand: Rs. 6.69 crore TP addition, Rs. 614.47 crore disallowance u/s 40(a)(i), Rs. 1.25 lakh disallowance u/s 14A.

Analysis:
1. TP Addition Component:
The TP addition of Rs. 6.69 crores was challenged by the assessee, arguing that the TPO's computation included the cost base of the associated enterprise, leading to an unwarranted addition. The Tribunal noted the reversal of a similar Tribunal order by the jurisdictional High Court and granted a full stay on this component, finding a prima-facie case that the addition was unjustified.

2. Disallowance u/s 40(a)(i) Component:
The disallowance of Rs. 614.47 crores under section 40(a)(i) was contested by the assessee, citing a previous Tribunal order deleting a similar disallowance for A.Y. 2006-07. The Revenue argued that the amended position of law was not presented during the earlier hearing. However, the Tribunal found in favor of the assessee, considering the previous Tribunal decision and the non-consideration of the amendment during the earlier hearing, granting a stay on this component as well.

3. Disallowance u/s 14A Component:
The last component of the demand, a meager sum of Rs. 1.25 lakh resulting from a disallowance under section 14A, was also granted a full stay due to the smallness of the demand. The assessee was directed to provide an undertaking not to alienate any immovable assets until the appeal's disposal.

In conclusion, the Tribunal allowed the stay application for the entire demand of Rs. 621.18 crores, considering the prima-facie cases made by the assessee in challenging the TP addition and the disallowance u/s 40(a)(i). The Tribunal set a date for an early hearing and imposed conditions to maintain the stay, emphasizing that any violation would result in the vacation of the stay and removal from the priority list for hearing.