2019 (6) TMI 50 - HC - Income Tax

High Court Adjusts Stay Order, Balances Revenue & Assessee Interests

The Joint Commissioner of Income Tax, Special Range-3 Versus M/s. Google India Pvt. Ltd.,

The High Court modified the Tribunal's interim stay order to ensure a balanced approach, safeguarding both the Revenue's interest and providing relief to ... Stay petition - Transfer pricing and attribution issues as well as confirmation of royalty - HELD THAT:- The issue contested before the Tribunal by the revenue in the present proceedings (stay application) was only relating to the royalty issue and the same is further substantiated in the pleadings of the revenue before this Court This Court is astound by the stand of the revenue insisting for consideration of the entire demand including the transfer pricing and attribution, the same relating to the other assessment years being set aside by the Tribunal. On the remand order challenged before this Court, this Court has directed that no final order shall be passed by the TPO without obtaining special leave of the Court during the pendency of the appeals. The arguments of the revenue requires to be negated insofar as the entire demand to be considered for deciding the stay application. It is clear that the demand relating to the royalty issue alone requires to be considered while adjudicating upon the stay application and the same cannot be enlarged at this stage to include the demand raised on transfer pricing and attribution. This Court is of the considered opinion that no arbitrariness or perversity is found in the interim order of the Tribunal as regards the quantifying the sum of ₹ 475 crores to be paid by the assessee as a condition for grant of stay. However, the split-up of payment directed by the Tribunal warrants interference to balance the equities on both the sides. Considering the totality of circumstances of the case, this Court deems it appropriate to direct the assessee to pay a sum of ₹ 400 Crores on or before 31.03.2019. The balance amount of ₹ 75 Crores shall be paid in two installments Issues Involved:1. Consistency in the Tribunal's orders with the High Court's previous orders.2. Consideration of the entire tax liability versus specific issues (royalty, transfer pricing, and attribution) in the stay application.3. Adequacy of the interim order by the Tribunal in safeguarding the interest of the Revenue.Detailed Analysis:1. Consistency in the Tribunal's Orders:The primary contention of the Revenue is that the Tribunal's order should align with the High Court's previous orders. The High Court emphasized the necessity of maintaining consistency in judicial orders. The Tribunal's interim stay order was deemed inconsistent with the High Court's order dated 28th August 2018, which had specific directions regarding the recovery of tax, interest, and penalty. The High Court had previously directed that approximately 90% of the tax and interest part of the demand had been paid by the assessee, and the remaining balance recovery should be stayed, safeguarding the Revenue's interest with a Bank Guarantee.2. Consideration of Entire Tax Liability:The Revenue argued that the Tribunal should consider the entire tax liability, including issues of royalty, transfer pricing, and attribution, while disposing of the stay application. However, the High Court noted that the Tribunal's focus was primarily on the royalty issue, as substantiated by the Revenue's own pleadings. The High Court found that the demand related to transfer pricing and attribution was set aside by the Tribunal and remanded to the TPO for fresh consideration. Therefore, the High Court concluded that only the demand related to the royalty issue should be considered in the stay application, not the entire tax liability.3. Adequacy of the Interim Order by the Tribunal:The High Court examined whether the Tribunal's interim order adequately protected the Revenue's interest. The Tribunal had directed the assessee to pay Rs. 350 crores by 31.3.2019 and additional installments totaling Rs. 125 crores by 30.6.2019. The High Court found no arbitrariness or perversity in the Tribunal's quantification of Rs. 475 crores as a condition for granting the stay. However, the High Court modified the payment schedule to balance the equities, directing the assessee to pay Rs. 400 crores by 31.03.2019 and the remaining Rs. 75 crores in two installments by 31.05.2019.Conclusion:The High Court disposed of the writ petitions by modifying the Tribunal's order to ensure a balanced approach, safeguarding both the Revenue's interest and providing relief to the assessee. The High Court emphasized the need for consistency in judicial orders and clarified that the stay application should focus on the royalty issue, not the entire tax liability. The Tribunal's interim order was modified to direct the assessee to pay Rs. 400 crores by 31.03.2019 and the remaining Rs. 75 crores in two installments by 31.05.2019.