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2018 (2) TMI 738 - AT - Income TaxSeeking stay of demand - Held that - We direct the assessee-company to pay 50% of the demand in question on or before 28/02/2018 and furnish bank guarantee for balance demand for a period of 6 months before the Assessing Officer on or before 28/02/2018. The stay order is valid for a period of six months from the date of the order or till disposal of the appeal whichever is earlier. The matter is already listed for hearing for 17/05/2018. However, we direct the registry to advance the hearing date to 09/04/2018. The stay order is subject to condition that the assessee- company shall not seek adjournment of the appeal without any just and reasonable.
Issues Involved:
1. Stay of demand for the assessment year 2005-06. 2. Treatment of business loss as capital expenditure. 3. Application of transfer pricing principles on transactions with unrelated parties. 4. Rejection of books of account by AO. 5. Denial of depreciation on intangibles by CIT(A). 6. Financial hardship claimed by the assessee-company. 7. Balance of convenience and irreparable injury. Issue-wise Detailed Analysis: 1. Stay of Demand for Assessment Year 2005-06: The assessee-company filed a stay petition seeking to stay the demand of ?109,52,32,984/- for the assessment year 2005-06. The Tribunal analyzed whether the stay could be granted based on the existence of a prima facie case, financial hardship, and irreparable injury and balance of convenience. 2. Treatment of Business Loss as Capital Expenditure: The AO treated the business loss incurred due to discounts offered to customers as capital expenditure aimed at building brand value, thus capitalizing the loss and allowing depreciation at 25% as an intangible asset. This resulted in a significant addition to the returned loss. 3. Application of Transfer Pricing Principles on Transactions with Unrelated Parties: The AO applied transfer pricing principles to compute notional income by estimating the turnover without rejecting the books of account. The assessee-company argued that the AO had no authority to substitute the market price for the agreed transaction value unless the transaction was shown to be sham or not valued in the books of account. 4. Rejection of Books of Account by AO: The assessee-company contended that the AO made additions based on perceived market conditions without rejecting the books of account, which is against the legal precedents. The Tribunal noted that the AO had not rejected the books of account but used a methodology to arrive at the value of realization had the products been sold with a profit motive. 5. Denial of Depreciation on Intangibles by CIT(A): The CIT(A) denied depreciation on intangibles without granting an opportunity of being heard to the assessee-company. The Tribunal observed that the CIT(A) had not rejected the depreciation on intangibles granted by the AO, and the issue was not part of the appeal before the Tribunal. 6. Financial Hardship Claimed by the Assessee-Company: The assessee-company claimed financial hardship due to incurred losses, stating it could not afford to pay the disputed tax liability. However, the Tribunal found no material evidence, such as bank statements, to support this claim and noted the possibility of liquidity due to receipt of huge share capital and share premium. 7. Balance of Convenience and Irreparable Injury: The Tribunal referred to the Supreme Court's decision in Asst. Central Excise vs. Dunlop India Ltd., emphasizing that interim orders should not be granted merely because a prima facie case is shown. The balance of convenience and irreparable injury must also be considered. The Tribunal found that the assessee-company did not meet these criteria and failed to demonstrate gross violations of law or irreparable loss. Conclusion: The Tribunal dismissed the stay petition, directing the assessee-company to pay 50% of the demand and furnish a bank guarantee for the balance demand. The stay order was valid for six months or until the disposal of the appeal, whichever was earlier. The Tribunal also advanced the hearing date to ensure a timely resolution.
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