Tribunal grants stay extension, deletes income addition for call options transfer, directs additional payments.

The Tribunal treated the stay application as a fresh one, allowing the extension of stay. The substantive addition of income for the transfer/assignment of call options was deleted for the assessment year 2008-09. The Tribunal directed the assessee to make additional payments and maintain the corporate guarantee to secure the Revenue's interest, staying the recovery of the outstanding demand for six months or until the appeal's disposal.

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Issues Involved:
1. Maintainability of the stay application for recovery of outstanding demand.
2. Substantive vs. protective addition of income due to transfer/assignment of call options.
3. Compliance with previous stay orders and security of Revenue's interest.
4. Changed circumstances affecting the grant of stay.
5. Conditions for granting stay of recovery of outstanding demand.

Issue-wise Detailed Analysis:

1. Maintainability of the Stay Application:
The Revenue raised a preliminary objection stating that the application filed by the assessee seeking an extension of stay is not maintainable as the previous stay had already expired. However, the assessee argued that the application was filed before the expiry of the last stay order and should be treated as a fresh stay application. The Tribunal, with the consent of both parties, agreed to treat the present stay application as a fresh stay application.

2. Substantive vs. Protective Addition of Income:
The major part of the demand relates to the addition of Rs. 1180,29,26,769 for the transfer/assignment of call options under an agreement dated 5 July 2007. The Transfer Pricing Officer had proposed this adjustment on a substantive basis for the assessment year 2008-09, but on a protective basis for the assessment year 2011-12. The Hon'ble Jurisdictional High Court had deleted the substantive addition for 2008-09, and the Revenue’s Special Leave Petition against this decision is pending. The Revenue reiterated that the addition should be on a substantive basis for 2008-09, and thus, the protective addition for 2011-12 should not be subject to recovery proceedings.

3. Compliance with Previous Stay Orders and Security of Revenue's Interest:
The Tribunal had previously directed the assessee to pay Rs. 50 crore and furnish a corporate guarantee, which the assessee complied with. The assessee argued that the facts and circumstances had not materially changed, and the Revenue's interest was well safeguarded by the conditional stay order. The Tribunal acknowledged that the stay was extended from time to time due to non-disposal of the appeal, mostly attributable to the Revenue.

4. Changed Circumstances Affecting the Grant of Stay:
The Revenue argued that there was a substantial change in circumstances, citing a Tribunal decision for the assessment year 2012-13, which confirmed the transfer pricing adjustment on the exercise of call options. The Revenue maintained that the income from the transfer/assignment of call options must be taxed in either 2008-09 or 2011-12. The Tribunal considered that the issue for 2008-09 is pending before the Supreme Court, and the appeal for 2011-12 was repeatedly adjourned due to reasons not attributable to the assessee.

5. Conditions for Granting Stay of Recovery of Outstanding Demand:
Considering the overall facts, prima facie case, balance of convenience, and without prejudice to the parties' rights, the Tribunal directed the assessee to pay an additional Rs. 25 crore in two equal installments by the end of September and October 2019. The corporate guarantee furnished earlier should continue. Subject to these conditions, the recovery of the balance outstanding demand shall remain stayed for six months or until the disposal of the corresponding appeal, whichever is earlier.

Conclusion:
The stay application was allowed under the terms indicated, with the assessee required to make further payments and maintain the corporate guarantee to secure the Revenue's interest. The order was pronounced in open court on 04.09.2017.

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