2019 (4) TMI 348 - AT - Income Tax

Stay of demand - ALP adjustment u/s. 92CA on the payment of corporate services, sales and marketing services and denial of benefit of deduction u/s. 80IB by holding that the activity of the appellant does not amount of manufacturing - HELD THAT - The assessee could not make out a strong prima facie case on the receipts of addition to the returned income. However, considering the fact that the appellant already paid ₹ 2 crores out of the original demand of ₹ 6,91,49,730/-, the balance demand will be stayed subject to payment of ₹ 1 crore on or before 31st March, 2019. This stay shall stand vacated, in case the assessee-company seeks any adjournment from hearing of appeal without any just and reasonable cause.

Summary

Issues: Stay of demand for Assessment Year 2014-15

Analysis:
The judgment revolves around a stay petition filed by the assessee to halt a demand of ?4,91,49,730 for the Assessment Year 2014-15. The demand primarily stemmed from an ALP adjustment under section 92CA of the Income Tax Act, 1961, related to payments for corporate services, sales, and marketing services amounting to ?9,88,26,319. Additionally, the denial of the benefit of deduction under section 80IB of the Act was contested by the appellant, arguing that their activities constituted manufacturing. The ALP adjustment was made using the cup method, contrary to the TNMM method preferred by the assessee. The appellant claimed that their manufacturing process resulted in distinct products, qualifying as manufacturing activity. Financial constraints were cited as a reason for seeking a stay on the disputed tax demand.

The Senior DR vehemently opposed the stay petition. After hearing both sides and examining the evidence, the Tribunal noted that the appellant failed to establish a strong prima facie case regarding the additions to the returned income. However, considering that the appellant had already paid ?2 crores out of the original demand, the Tribunal decided to grant a partial stay. The balance demand was stayed on the condition that the appellant pays ?1 crore by a specified date. It was explicitly stated that seeking adjournment from the appeal hearing without a justifiable cause would result in the vacation of the stay.

Ultimately, the Tribunal allowed the stay petition on the specified terms, with the order pronounced in Chennai on 27th March 2019. The judgment carefully balanced the interests of the appellant with the need to ensure compliance with the tax demand, providing a nuanced resolution to the issue at hand.