2019 (11) TMI 265 - AT - Income Tax

Tribunal Grants Stay on Tax Recovery & Adjusts Refund: Key Details & Caution

The tribunal granted a stay on the recovery of the outstanding demand for Assessment Years (AY) 2010-11 to 2012-13 for six months or until the disposal of ... Stay applications seeking stay of outstanding demand - HELD THAT:- Balance of convenience is in favour of the assessee, considering the facts brought to our notice on the financial hardship. If an order of stay is not granted, we are of the view that the assessee may be put to hardship. Even if adjustment of refund due to the assessee for earlier assessment years is against the outstanding demand for the aforesaid assessment years, which are subject matter of appeals before the Tribunal, that would also amount to recovery of outstanding demand as held by Hon’ble Delhi High Court in the case of Maruti Suzuki Ltd [2011 (11) TMI 312 - DELHI HIGH COURT] In coming to the conclusion that the assessee has a prima facie case, we have also kept in mind the observations of Hon’ble Delhi High Court that outstanding demand arising out of issues already decided in favour of the assessee by the Tribunal in the earlier assessment years cannot be recovered. We also notice from the chart of outstanding demand filed by the assessee before us, which has been extracted in the earlier part of the order, that more than 50% of the tax portion of the outstanding demand has been paid by the assessee in AY 2010-11 to 2012-13. We therefore grant stay of recovery of outstanding demand for these years for a period of six months from the date of this order; or till the disposal of appeals of these years, whichever period expires earlier. As far as AY 2013-14 is concerned, we find that only 35.48% of the outstanding tax portion has been paid by the assessee till date. We are of the view that it would meet the ends of justice, if the revenue is permitted to adjust a sum of ₹ 5.00 crores towards outstanding demand for AY 2013- 14 out of the refund arising to the assessee. Subject to the payment of tax by way of adjustment as aforesaid, there will be stay of recovery of outstanding demand for AY 2013-14 for a period of six months from the date of this order; or till the disposal of appeals of the Assessee, whichever period expires earlier. Issues Involved:1. Stay of outstanding demand for assessment years 2010-11 to 2013-14.2. Transfer pricing adjustments.3. Financial hardship.4. Adjustment of refunds against outstanding demand.Detailed Analysis:1. Stay of Outstanding Demand:The assessee sought a stay on the outstanding demand for AY 2010-11 to 2013-14. The assessee had already made significant payments towards the outstanding demand, amounting to more than 50% of the tax portion for AY 2010-11 to 2012-13 and 35.48% for AY 2013-14. The tribunal noted the financial hardship faced by the assessee due to the recession in the automobile industry and the liquidity crunch. The tribunal granted a stay on the recovery of the outstanding demand for AY 2010-11 to 2012-13 for six months or until the disposal of the appeals, whichever is earlier. For AY 2013-14, the tribunal allowed the revenue to adjust Rs. 5.00 crores from the refund arising to the assessee towards the outstanding demand, subject to which a stay was granted for six months or until the disposal of the appeals.2. Transfer Pricing Adjustments:The tribunal considered the assessee's arguments regarding transfer pricing adjustments in the manufacturing segment, IT-enabled services, and engineering design services. The assessee argued that the transfer pricing adjustments were not justified due to differences in import content of raw materials, the nature of the assembly function, and the inappropriate selection of comparables. The tribunal noted that these issues had already been decided in favor of the assessee in earlier assessment years and that no demand for recovery of taxes could be enforced for these issues.3. Financial Hardship:The assessee submitted that its financial position was tight due to a recession in the automobile industry, liquidity crunch, and significant outstanding working capital with the GST department. The tribunal acknowledged the financial hardship faced by the assessee, noting the substantial payments already made towards the outstanding demand and the tight financial position due to industry conditions. The tribunal considered these factors in granting the stay on the recovery of the outstanding demand.4. Adjustment of Refunds Against Outstanding Demand:The tribunal addressed the issue of the adjustment of refunds against the outstanding demand. The assessee argued that such adjustments would cause hardship and referred to the decision of the Hon'ble Delhi High Court in the case of Maruti Suzuki Ltd, which held that the term 'recovery' includes adjustment, and such adjustments should not be made if the issues are already decided in favor of the assessee. The tribunal agreed with this view, stating that the adjustment of refunds against the outstanding demand would amount to recovery and should be stayed in light of the financial hardship and the prima facie case in favor of the assessee.Conclusion:The tribunal granted a stay on the recovery of the outstanding demand for AY 2010-11 to 2012-13 for six months or until the disposal of the appeals, whichever is earlier. For AY 2013-14, the tribunal allowed the revenue to adjust Rs. 5.00 crores from the refund arising to the assessee towards the outstanding demand, subject to which a stay was granted for six months or until the disposal of the appeals. The tribunal also fixed the appeals for hearing on 27.01.2020 and cautioned the assessee against seeking adjournments without reasonable cause.