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2024 (6) TMI 814 - AT - Income TaxStay of demand - Attachment orders - TP Adjustment - MAM - adjustment in accordance with TNMM - as argued TPO adopted inconsistent approach on year-on-year basis by computing adjustments under a transaction-by-transaction approach as well as under the entity-wide TNMM approach and cherry-picking the approach which yields the higher adjustment HELD THAT - Once a statutory provision specifically provides that the Tribunal can only grant a stay subject to deposit of not less than 20% of disputed demand or furnishing of security of equal amount thereof it is not open to this Tribunal to grant stay in violation of those basic provisions as the Tribunal being a creation of the statute and we are not in a position to question the provisions of this section 254(2A) of the Act. At this point it is pertinent to mention ratio laid down in the case of CIT Vs Hindustan Bulk Carriers 2002 (12) TMI 10 - SUPREME COURT A construction which reduces the statute to a futility has to be avoided. A statute or any enacting provision therein must be so construed as to make it effective and operative on the principle expressed in maxim ut res magis valeat quam pereat i.e. a liberal construction should be put upon written instruments so as to uphold them if possible and carry into effect the intention of the parties. The power of this Tribunal to grant stay u/s 254(2A) of the Act is to be read with 254(1) of the Act and either of the section cannot be read on standalone basis otherwise it would make these provisions redundant. his principle has been discussed in the case of Hindustan Lever Ltd. 2023 (3) TMI 188 - ITAT MUMBAI It is further held in the decision of Hindustan Lever Ltd. cited (supra) that even though all the issues are covered by the binding judicial precedents in favour of the applicant/assessee a conditional stay may be granted directing the AO to grant stay on collection/recovery of the demand impugned in the appeal. Thus it is discernible that it is not open to this Tribunal to grant a blanket stay as argued by the Ld.Senior Counsel as it would be contrary to the scheme of Act as visualized under the first proviso to section 254(2A) of the Act. In the present facts of the case out of total attachment of Rs. 5551, 27, 15, 824/- by Enforcement Directorate as well as by Income Tax authorities an amount of Rs. 3700 Crores has been attached by Income tax authorities. In our opinion as of now the interest of the revenue is fully secured against quantified demand of INR 19, 95, 68, 06, 291/- and INR 17, 36, 59, 96, 491/- respectively for the present assessment year i.e. 2020-21 2021-22 under consideration. Being so till this attachment continues the applicant/assessee is not required to make any further payment and/or furnish any further securities. I n the event the attachment of above Bank Accounts as mentioned in earlier para stands vacated or revoked or disturbed or modified by any orders of Court or authorities the applicant/assessee then shall deposit not less than 20% of INR 19, 95, 68, 06, 291/- for AY 2020-21 and INR 17, 36, 59, 96, 491/- for AY 2021-22 or furnish security amounting to not less than 20% of the outstanding liability within two weeks from the date of such removal or vacating or revoking or modifying the attachment of the bank accounts mentioned in earlier para of this order. Assessee shall fully cooperate in speedy disposal of appeal before this Tribunal and will not seek any unnecessary adjournments of the hearing before the bench at any point of time and the applicant/assessee shall not resort to any dilatory tactics in such event the stay will be automatically vacated forthwith. This stay order will be in operation for 180 days from the date of this order or till the disposal of related appeal or till further orders of this Tribunal whichever is earlier as the case may be. The Registry is directed to post related appeal for hearing in due course. No further notice of hearing be issued to both the parties.
Issues Involved:
1. Stay of outstanding tax demand for AY 2020-21 and AY 2021-22. 2. Transfer Pricing Adjustments. 3. Disallowance of Royalty and Debugging Expenses. 4. Alleged Bill of Material (BoM) Cost Inflation. 5. Provisional Attachment of Bank Accounts. Detailed Analysis: 1. Stay of Outstanding Tax Demand: The assessee filed stay petitions seeking the stay of outstanding tax demands of INR 19,95,68,06,291/- for AY 2020-21 and INR 17,36,59,96,491/- for AY 2021-22, which include disputed tax and interest under sections 234B & 234C. The Tribunal granted the stay, noting that the revenue's interests were already protected by the provisional attachment of the assessee's bank accounts totaling INR 3,700 crores. The Tribunal ordered that no further payment or security was required as long as the attachment continued. 2. Transfer Pricing Adjustments: The adjustments were made by the Transfer Pricing Officer (TPO) using both the Transaction Net Margin Method (TNMM) and a transaction-by-transaction approach. The TPO proposed adjustments of INR 1841,61,19,170 for AY 2020-21 and INR 2202,48,64,440 for AY 2021-22. The Tribunal noted inconsistencies in the TPO's approach, as the TPO cherry-picked methods to maximize adjustments. The Tribunal upheld the use of TNMM but criticized the TPO for not granting adjustments in accordance with TNMM. 3. Disallowance of Royalty and Debugging Expenses: The TPO and AO disallowed royalty payments to Qualcomm and Xiaomi Mobile, as well as debugging expenses, arguing they were not for business purposes. The Tribunal noted that the assessee provided detailed explanations and documentation to support these expenses. The Tribunal found that the AO's disallowances were duplicative, as the TPO had already tested these expenses during transfer pricing proceedings. 4. Alleged Bill of Material (BoM) Cost Inflation: The AO proposed adjustments for alleged BoM cost inflation, claiming that component costs supplied by overseas AEs were marked up. The Tribunal noted that this adjustment was duplicative, as the TPO had already tested the distribution segment, including purchase costs. The Tribunal found that the AO's adjustment was based on surmises and conjectures and ordered a reduction in the disallowance. 5. Provisional Attachment of Bank Accounts: The Tribunal noted that the assessee's bank accounts totaling INR 3,700 crores were provisionally attached by the Income Tax Authority and Enforcement Directorate. The Tribunal found that this attachment was sufficient to protect the revenue's interests and granted the stay based on this security. The Tribunal also noted that the Karnataka High Court had set aside a previous provisional attachment order, but a new attachment order was issued, which was also under challenge. Conclusion: The Tribunal granted the stay of outstanding tax demands for AY 2020-21 and AY 2021-22, noting that the revenue's interests were already protected by the provisional attachment of the assessee's bank accounts. The Tribunal criticized the TPO's inconsistent approach in transfer pricing adjustments and found that the AO's disallowances were duplicative and based on conjectures. The Tribunal ordered a reduction in the BoM cost inflation adjustment and upheld the provisional attachment as sufficient security for the outstanding demands.
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