2023 (8) TMI 1016 - AT - Income Tax

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

M/s. Xiaomi Technology India Pvt. Ltd. Versus Deputy Commissioner of Income-tax Central Circle-2 (1) Bengaluru

The Tribunal granted the stay application of the assessee, allowing a conditional stay with the requirement that the current attachment of bank accounts ... Stay of demand - Outstanding disputed demand of tax - Attachment of bank accounts - HELD THAT:- The power of this Tribunal to grant stay u/s 254(2A) is to be read with 254(1) of the Act and either of the section cannot be read on standalone basis, otherwise it would make these provisions redundant. This principle as been discussed in the case of Hindustan Lever Ltd. [2023 (3) TMI 188 - ITAT MUMBAI]It is further held in the decision of Hindustan Lever Ld. cited (supra) that even though all the issues are covered by the binding judicial precedents in favour of the assessee, a conditional stay may be granted directing the AO to grant stay on collection/recovery of the demand impugned in the appeal. Thus, it is discernable that it is not be open to this Tribunal to grant a blanket stay as argued by the ld. Senior Counsel, as it would be contrary to the scheme of Act as visualized under the first proviso to section 254(2A) of the Act. Thus, provision of the law should not be interpreted to make other statutory provision within the same section, ineffective and nugatory. However, that will precisely be the outcome if we are to hold that the Tribunal's powers of granting the stay, even after the enactment of the first proviso to Section 254(2A), are unfettered inasmuch as a stay can indeed be granted even in clear disharmony with the statutory conditions set out under the first proviso to Section 254(2A). The requirement with respect to the partial payment of demand or furnishing of security in respect thereof will thus be redundant. The law as it stood at the point of time when in the case of ITO Vs. M.K. Mohd Kunhi [1968 (9) TMI 5 - SUPREME COURT]the judgment was delivered has undergone significant change vis-à-vis the position prevailing as of now, and, therefore, the observations made by the Hon'ble Supreme Court are now to be read in the light of the subsequent enactment of the law. Unlike the Hon'ble Constitutional Courts above, it is not for this forum, i.e. the Income Tax Appellate Tribunal, to sit in judgment over the reasonableness of the legal provisions; when the remedies lie elsewhere. We have to perform the role assigned to us within the framework of the law as it exists; whether made by the lawmakers or as interpreted by the Hon'ble judges above. When the statute does not give this Tribunal the power to grant blanket stay, nor the Hon'ble Courts above hold so, it cannot be open to this Tribunal to hold that a blanket stay can be granted which is clearly contrary to the scheme of the law under the first proviso to Section 254(2A) of the Act. We are, thus, not inclined to hold that we have the powers to grant any stay on collection/recovery of demands impugned in the appeal before us, in violation of the first proviso to Section 254(2A) of the Act. As rightly pointed out by the ld. Senior Counsel, out of total attachment of Rs. 5551,27,15,824/- by Enforcement Directorate as well as by Income Tax authorities, an amount of Rs. 3700 Crores has been attached by both authorities and there was overlapping attachment. In our opinion, as of now, the interest of the revenue is fully secured against quantified demand of Rs. 1833,22,78,898/- for the present assessment year i.e. 2018-19. Being so, till this attachment continues, the assessee is not required to make any further payment and/or furnish any further securities. However, in the event the attachment of above Bank Accounts as mentioned in earlier para stands vacated or revoked or disturbed or modified by any orders of Court or authorities, the assessee then shall deposit not less than 20% or furnish security amounting to not less than 20% of the outstanding liability within two weeks from the date of such removal or vacating or revoking or modifying the attachment of the bank accounts mentioned in earlier para of this order. Issues Involved:1. Stay of Outstanding Disputed Demand2. Transfer Pricing Adjustments3. Corporate Tax Additions4. Provisional Attachment of Fixed Deposits5. Compliance with Section 254(2A) of the Income Tax ActSummary: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 77,72,11,2003. 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 16,37,68,83,5554. 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.