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2024 (6) TMI 814 - AT - Income TaxIssues Involved: 1. Stay of outstanding demand for AY 2020-21 and AY 2021-22. 2. Transfer Pricing Adjustments. 3. Disallowance on account of alleged BoM cost inflation. 4. Provisional attachment of bank accounts and fixed deposits. 5. Compliance with section 254(2A) of the Income Tax Act. Summary of Judgment: 1. Stay of Outstanding Demand: The assessee filed stay petitions seeking stay of outstanding demand of INR 19,95,68,06,291/- for AY 2020-21 and INR 17,36,59,96,491/- for AY 2021-22, which includes disputed tax and interest u/s 234B & C. The Tribunal granted stay, noting that the interest of the revenue is fully secured by the provisional attachment of fixed deposits totaling INR 3,700 crores. 2. Transfer Pricing Adjustments: The assessee, a subsidiary of Xiaomi Singapore Pte. Ltd., engaged in the distribution of Xiaomi products in India, faced adjustments proposed by the TPO. The TPO used a transaction-by-transaction approach and TNMM, resulting in significant adjustments for both years. The Tribunal noted the inconsistency in the TPO's approach and the cherry-picking of methods to maximize adjustments. 3. Disallowance on Account of Alleged BoM Cost Inflation: The AO proposed adjustments on account of alleged BoM cost inflation, which the assessee argued was a duplicate adjustment since the TPO had already tested the distribution segment. The DRP upheld the disallowance, but the Tribunal noted that the AO's remand report admitted that any disallowance should be restricted to the actual material cost. 4. Provisional Attachment of Bank Accounts and Fixed Deposits: The Tribunal noted that the assessee's fixed deposits totaling INR 3,700 crores were provisionally attached by the Income Tax Department and the Enforcement Directorate. The Tribunal observed that this attachment secures the interest of the revenue against the quantified demand for the assessment years under consideration. 5. Compliance with Section 254(2A): The Tribunal emphasized that as per section 254(2A), it can grant a stay subject to the deposit of not less than 20% of the disputed demand or furnishing of security of equal amount. The Tribunal granted stay till the attachment continues, and directed that if the attachment is vacated or modified, the assessee shall deposit 20% of the outstanding demand or furnish equivalent security within two weeks. Conclusion: The Tribunal granted stay of the outstanding demands for AY 2020-21 and AY 2021-22, subject to the continuation of the provisional attachment of fixed deposits. The Tribunal directed the assessee to cooperate in the speedy disposal of the appeal and not seek unnecessary adjournments. The stay order will be in operation for 180 days or till the disposal of the related appeal, whichever is earlier.
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