Assessee's Stay Application Granted with Conditions: Bank Account Attachment Stays, Deposit 20% Demand.

The Tribunal granted the stay application of the assessee, allowing a conditional stay with the requirement that the current attachment of bank accounts remains in place. If the attachment is lifted, the assessee must deposit 20% of the disputed demand or provide security within two weeks. The stay order will be effective for 180 days or until the appeal is resolved.

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Issues Involved:

1. Stay of Outstanding Disputed Demand
2. Transfer Pricing Adjustments
3. Corporate Tax Additions
4. Provisional Attachment of Fixed Deposits
5. Compliance with Section 254(2A) of the Income Tax Act

Summary:

1. Stay of Outstanding Disputed Demand:
The assessee sought a stay on the disputed demand of Rs. 1833,22,78,898/- raised by the AO in the final assessment order dated 29.5.2023 under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 for the assessment year 2018-19. The demand included Rs. 1131,21,44,700/- as tax and Rs. 702,01,34,198/- as interest under sections 234B and 234C.

2. Transfer Pricing Adjustments:
The Ld. TPO made adjustments amounting to INR 16,83,24,13,391 to the ALP of the international transactions, including royalty payments to Xiaomi Mobile and Qualcomm, and AMP expenses. The TPO treated royalty payments as reimbursement receivables and imputed interest for delay in collection. The adjustments included:
- Xiaomi Mobile royalty: INR 4,46,87,38,377
- Qualcomm royalty: INR 10,84,46,87,209
- Interest on reimbursement of royalty: INR 74,17,76,605
- AMP brand promotion expenses: INR 77,72,11,200

3. Corporate Tax Additions:
The AO proposed corporate tax additions in the draft assessment order dated 28 September 2022, including:
- Disallowance of royalty paid to Qualcomm and Xiaomi Mobile: INR 15,24,29,14,504
- Testing and debugging expenses: INR 7,05,27,820
- Adhoc adjustment of purchase price of finished goods: INR 16,37,68,83,555

4. Provisional Attachment of Fixed Deposits:
The fixed deposits of the assessee totaling INR 3,700 crores were provisionally attached by the Deputy Director of Income Tax (Investigation) under section 132(9B) and section 281B of the Act. The Karnataka High Court set aside the order of provisional attachment dated 11 August 2022 but imposed certain conditions on the assessee. A subsequent order of provisional attachment was passed on 29 December 2022.

5. Compliance with Section 254(2A) of the Income Tax Act:
The Tribunal noted that as per section 254(2A), the Tribunal can only grant a stay subject to the deposit of not less than 20% of the disputed demand or furnishing security of equal amount. The Tribunal observed that the interest of the revenue is already protected by the attachment of the assessee's bank accounts. The Tribunal granted a conditional stay, directing that no further payment is required while the attachment continues. However, if the attachment is vacated, the assessee must deposit 20% of the disputed demand or furnish security within two weeks.

Conclusion:
The Tribunal allowed the stay application of the assessee, subject to the condition that the existing attachment of bank accounts continues. If the attachment is vacated, the assessee must comply with the requirement of depositing 20% of the disputed demand or furnishing security. The stay order will be in operation for 180 days or until the disposal of the related appeal.

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