9911796707
TMI Blog2016 (4) TMI 515X X X X Extracts X X X X X X X X Extracts X X X X ..... al ORDER PER G.S. PANNU,AM: The captioned Stay Application has been preferred by the assessee seeking stay on the recovery of outstanding demand of ₹ 423,88,61,110/- ( inclusive of interest of ₹ 157,58,37,025/- ), which had arisen consequent to an assessment order finalized by the Assessing Officer dated 30/01/2016 under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 ( in short the Act ). 2. At the time of hearing, the Ld. Representative for the assessee, at the very outset submitted that the disputed demand has arisen primarily on account of four additions made to the returned income, namely, (i) an addition of ₹ 1180,29,26,769/- in respect of assignment of call options under the Framework Agreements dated 05/07/2007 entered into between assessee company with Analjit Singh and Asim Ghosh ; (ii) an addition of ₹ 6,03,38,242/- on account of transfer pricing adjustment to the stated value of the international transaction of I.T. enabled services(ITes) rendered by assessee to its associated enterprise; (iii) a disallowance of ₹ 26,05,29,938/- being depreciation claimed by the assessee on goodwill relating to acquisition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share holding in Telecom Investments India Pvt. Ltd. from ND Callus Info Services Pvt. Ltd. vide a share purchase agreement dated 18/09/2009. In terms of such arrangement N.D Callus Info Services Pvt. Ltd. sold 6,25,003 equity shares of Telecom Investments India Pvt. Ltd. to CGP India Investment Ltd., Mauritius, which constitute 11.75% of total paid up share holding of Telecom Investments India Pvt. Ltd. As per Assessing Officer, this acquisition resulted in Vodafone Group Plc s indirectly acquiring a further 1.17% stake holding in VIL. At the time of hearing Ld. Representative for the assessee has explained the said transaction with the help of a pictorial ownership chart of the shareholding in VIL. The ownership structure chart reflects the stake held directly or indirectly in VIL by CGP Investment Holding Ltd., Mauritius, A.S Group and A.G Group. It is sought to be explained that pre-acquisition, CGP India Investment Ltd., Mauritius held 7.28% in VIL through Telecom Investments India directly; 2.29% by virtue of holding 49% in A.G Mercantile Ltd.; and 3.71% by virtue of holding 49% in Scorpio Beverages Pvt. Ltd, thereby enabling it to hold 13.28% in VIL, whereas, post-acquisitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxed in assessment year 2008-09. So, however, after passing of draft assessment order by the Assessing Officer, against which the assessee had raised objections before the DRP, the Hon ble Bombay High court vide its order dated 8/10/2015 set-aside the addition made by the Revenue on account of assignment of call options for assessment year 2008-09. Consequently, in the final assessment order passed under section 143(3) r.w.s. 144C(13) dated 30/01/2016 and in compliance of the directions of the DRP, the Assessing Officer taxed the amount of ₹ 11,80,29,26,796/- on substantive basis. 6. On the said aspect, Ld. Representative for the assessee vehemently pointed out that the lower authorities have misdirected themselves in making the impugned addition both in law and on facts. On facts, it was sought to be pointed out that the two transactions noted by the income tax authorities, namely, sale of shares of Telcom Investments India Limited by ND Callus Info Services to CGP India Investments Ltd. and sale of shares of AG Mercantile Company Pvt. Ltd. by the shareholders of such company to ND Callus Info Pvt. Ltd. were not connected whatsoever with the transfer or assigning of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f an identifiable transaction having taken place in the relevant financial, whereas in case of protective assessment, such a situation cannot be envisaged. It was, therefore, contended that the action of the Transfer Pricing Officer in making protective adjustment and subsequent action of the DRP in converting such protective addition into a substantive addition is illegal and bad in law. The jurisdiction of the DRP to convert a protective addition into substantive addition was also sought to be challenged on the ground that the proceedings before the DRP are only corrective mechanism operating in the course of the process of assessment and is not strictly an appellate proceedings. In this context, reference has been made to section 144C(5) r.w.s. 144C(8) of the Act to say that the DRP is empowered to enhance, reduce or confirm a variation proposed in the draft assessment order, but cannot alter the character of such variation. On this basis the invalidity of the impugned addition is sought to be brought out. On this aspect, Ld. Representative for the assessee has made varied arguments to say that the addition itself was unsustainable and, therefore, assessee had a good prima-fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act following the ratio of judgment of the Hon ble Delhi High Court in the case of Cheminvest Ltd. 378 ITR 33(Del). 9. Lastly, it is pointed out that on the issue of addition of ₹ 6,03,38,242/-, on account of transfer pricing adjustment to the stated value of the international transaction relating to Provision of I.T enabled services to the associated enterprise, the pertinent dispute relates to the inclusion/exclusion of certain concerns in the final set of comparables. On this aspect, the Ld. Representative for the assessee pointed out that in view of various decisions of the Co-ordinate Benches of the Tribunal, some of the comparables taken by the Transfer Pricing Officer are liable to be excluded and the assessee would be in a position to show that its margin in the IT es segment was within + 5% range of the average margin of the comparable concerns. 9.1 In nutshell, on each of the points, the Ld. Representative for the assessee has asserted that assessee has a good prima-facie case to succeed before the Tribunal. Emphasizing that the balance of convenience was in favour of the applicant, Ld. Representative for the assessee pointed out that a huge demand has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance under section 14A are concerned, prima-facie the assessee has a good case, in as much as the ratio of the Hon ble Supreme Court in the case of Smifs Securities Ltd.(supra) and that of the Hon ble Delhi High Court in the case of Cheminvest Ltd. (supra) respectively support the stand of the assessee. Even in relation to the addition made on account of adjustment to the stated value of the international transaction of Provision of I.T enabled services to the associated enterprise, we find that assessee has a good arguable case, in as much as, the income tax authorities have included/excluded certain concerns in the final set of comparables which is, contrary to the ratio of certain decisions of our Co-ordinate Benches. Be that as it may, having regard to the short facts pointed out by the assessee in column-8 of its stay application, we find that on the issue of the addition of ₹ 6,03,38,342/-, the assessee has a good arguable case. 11.1 Now, we may dwell upon the substantive dispute in this year, which relates to an addition of ₹ 1180,29,26,796/- on account of assignment of call options. On this aspect, we have heard the various contentions raised by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat assessee has operated impliedly and in tandem with CPG India Investment Ltd., Mauritius and N.D Callus Info Services P. Ltd. to facilitate the enhancement of stakeholding of Vodafone Group PLc in VIL. In our considered opinion, the aforesaid features certainly would be relevant factors to consider the efficacy of the addition made by income tax authorities. For the present, in our view, considering the ratio of the judgment of the Hon ble Bombay High Court in the case of assessee for assessment year 2008-09 and the facts asserted by the assessee, it can be inferred that assessee has a prima-facie case. 11.2 Considered in the aforesaid light as also the instructions of the CBDT, which has been relied upon before us, in our view, here is a case where applicant deserves to succeed in its application for stay on the recovery of the outstanding demand, especially considering that the assessed income is many times higher than the returned income. Be that as it may, in the overall analysis, in our view, the balance of convenience is in favour of the assessee for grant of stay. 11.3 In the aforesaid background, at the conclusion of the hearing on 11/03/2016, it was put across to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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