2018 (3) TMI 156 - HC - Income Tax

Rejection of stay application - demand on account of the adjustment of Royalty payment on the basis of Arm s Length Price (ALP) - Held that - It appears to this Court that since the difference between the cut off date for payment of ₹ 50 lakhs on 30.11.2017 and the date of hearing on 14.12.2017 of the appeal itself is bare minimum of 15 days, an indulgence can be granted to the petitioner though not as a matter of right. The observation of the Tribunal that the other incidental grounds may result in substantial reduction in demand raised, though indicates that a prima-facie case of the assessee exists but the extent of that could not naturally have been deferred and computed precisely by the learned Tribunal. The adjudication and determination of such incidental grounds would also depend upon the final decision of the learned Tribunal itself after hearing both the sides. Since the gap of time period between the two dates as aforesaid is only about 15 days, this Court is inclined to grant indulgence to the petitioner-assessee, as this Court feels that the interest of revenue will not be seriously prejudiced, if the payment of balance amount may await the final decision of the Tribunal for a period of 15 days more. This petition is disposed of with a slight modification in the impugned interlocutory order passed by the learned Tribunal by substituting the amount of ₹ 30 lakhs in place of ₹ 50 lakhs in the order dated 06.11.2017 passed by the learned Tribunal. No further modification is required or made in the said order.

Summary

Issues:
Challenge to interlocutory order of Income Tax Appellate Tribunal regarding stay application for Assessment Year 2013-14.

Analysis:
The petitioner, an assessee, challenged an interlocutory order of the Income Tax Appellate Tribunal ('the Tribunal') 'C' Bench, Bengaluru, which rejected their stay application related to a demand on account of adjusting Royalty payment based on Arm's Length Price (ALP) for the Assessment Year 2013-14. The Tribunal granted relief by not recovering the remaining amount of the demand, subject to the petitioner paying ?50 lakhs by a specified date. The Tribunal observed that the main issue had been decided against the petitioner in the preceding assessment year, and the petitioner had appealed that decision, which was pending. The petitioner argued that incidental grounds raised for the current assessment year could lead to a substantial reduction in the demand. The petitioner contended that the appeal before the Tribunal was the first appeal, and they were willing to deposit ?30 lakhs instead of the directed ?50 lakhs, subject to the final decision of the appeal. The Court acknowledged the Tribunal's discretion in directing the deposit but allowed the petitioner's request to reduce the amount to ?30 lakhs due to the short gap between the payment date and the hearing date.

The Court noted that while the Tribunal's observation suggested a prima facie case for the petitioner, the exact extent of relief could not be determined precisely at that stage. The determination of incidental grounds would rely on the Tribunal's final decision after hearing both parties. Given the minimal time gap between the payment date and the appeal hearing, the Court granted indulgence to the petitioner, considering that the revenue's interest would not be significantly prejudiced by waiting an additional 15 days for the balance payment. Consequently, the Court disposed of the petition with a modification to the Tribunal's order, substituting the payment amount to ?30 lakhs instead of ?50 lakhs. It was clarified that this modification would not set a precedent for this case or any other case. No costs were awarded in this matter.