Tribunal Grants Stay of Recovery, Assessee to Pay Outstanding Demand in Installments

The Tribunal granted a stay of recovery for 6 months or until the disposal of appeals, whichever is earlier. The Assessee was directed to pay Rs. 350 Crores by 31.3.2019 and Rs. 125 Crores in installments for the outstanding demand related to various assessment years. The appeals were set for an expedited hearing on 03.07.2019 without further notice to parties.

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Issues Involved:
Stay petitions filed by Assessee for recovery of outstanding demand arising from assessment orders and first appellate authority decisions for AY 2014-15, 2016-17 & 2013-14; Disallowance of payments to Google Ireland Ltd. (GIL) as royalty; Determination of Arm’s Length Price (ALP) for international transactions; Attribution of profits to Google Ireland Ltd. (GIL).

Analysis:

Issue 1: Outstanding Demand and Royalty Disallowance
The outstanding demand pertains to additions made by the Assessing Officer (AO) / Transfer Pricing Officer (TPO) confirmed by CIT(Appeals) and Disputes Resolution Panel (DRP). The demand in AY 2016-17 arose from failure to deduct tax at source on payments to GIL. The Assessee contended that the payments were not royalty under the Act or the India-Ireland DTAA. The authorities held the payments as royalty, disallowed the sums, and treated Assessee as Assessee in default under section 40(a)(ia) in AYs 2014-15 & 2013-14. The Assessee appealed against these orders.

Issue 2: Arm’s Length Price Determination
The second addition leading to the outstanding demand in AYs 2014-15 & 2013-14 involved determining the Arm’s Length Price (ALP) under section 92 for international transactions of IT and IT enabled services and Marketing and Distribution services by Assessee to Associated Enterprises (AE).

Issue 3: Profits Attribution to Google Ireland Ltd. (GIL)
The third addition causing the outstanding demand in AYs 2014-15 & 2013-14 was due to attributing profits to GIL. The AO found that profits from AdWords program attributable to GIL were untaxed. The issue had been previously adjudicated by ITAT and sent back to AO for reconsideration.

The Tribunal considered the earlier orders, balance of convenience, and the Assessee's offer to pay. It granted a stay of recovery for 6 months or till disposal of appeals, whichever is earlier. The Assessee was directed to pay Rs. 350 Crores by 31.3.2019 and Rs. 125 Crores in installments for outstanding demand. The appeals were scheduled for an expedited hearing on 03.07.2019 without further notice to parties.

In conclusion, the stay petitions were allowed, and the detailed payment schedule was provided for the outstanding demand across the assessment years.

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