Tribunal's conditional stay on tax recovery upheld with modified corporate guarantee requirement

The Bombay HC rejected the petitioner's challenge to the Tribunal's conditional stay order on tax recovery demands. The petitioner sought an unconditional blanket stay but the Tribunal imposed conditions including payment of Rs. 230 crores and furnishing corporate guarantee from an associate company with unencumbered assets exceeding Rs. 900 crores. The HC upheld the Tribunal's discretionary order, rejecting arguments that the recovery was protective in nature or that high-pitched assessments warranted blanket stays, citing petitioner's acceptance of similar orders in previous years. However, the HC modified condition (ii), substituting the corporate guarantee requirement with a guarantee from the ultimate parent company Vodafone International Holdings BV, Netherlands, as previously accepted by revenue.

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Issues Involved:
1. Challenge to the Tribunal's order rejecting a blanket unconditional stay on tax and interest demands.
2. Evaluation of the Tribunal's conditions for granting a conditional stay.
3. Consideration of the petitioner's arguments based on previous assessment years.
4. Tribunal's discretion and legal principles applied in the interim order.

Summary:

1. Challenge to the Tribunal's Order:
This petition u/s Articles 226 and 227 of the Constitution challenges the Tribunal's order dated 19 July 2021, which rejected the petitioner's application for a blanket unconditional stay on tax and interest demands amounting to Rs. 1128.46 crores for the assessment year 2014-15. The Tribunal instead granted a conditional stay requiring the petitioner to pay Rs. 230 crores, furnish a corporate guarantee from an associate company with unencumbered assets in India exceeding Rs. 900 crores, and cooperate in the expeditious disposal of the appeal.

2. Tribunal's Conditions for Conditional Stay:
The Tribunal's order specified that the stay would remain in force for six months or until further orders, whichever is earlier. The petitioner was directed to provide details of all related appeals to ensure holistic hearing. The Tribunal's decision was based on the facts of the case and the application of settled legal principles, deeming it appropriate to grant a conditional stay rather than a blanket stay.

3. Petitioner's Arguments Based on Previous Assessment Years:
The petitioner argued that similar demands for previous assessment years (2008-09, 2010-11, 2011-12, and 2012-13) were treated differently, with corporate guarantees being accepted without additional deposits. The petitioner contended that the Tribunal should have considered the security already available with the department and not insisted on further deposits for the assessment year 2014-15. The petitioner highlighted that the percentage of transactions for the assessment year 2014-15 was lower compared to previous years and argued for a consistent approach.

4. Tribunal's Discretion and Legal Principles:
The Tribunal observed that the triggers for taxation in subsequent years were different and that the impugned ALP adjustment could not be treated as merely on a protective basis. The Tribunal's discretionary order was found to be in line with the provisions of Section 254 (2A) of the Act. The High Court noted that the Tribunal's observations and the conditions imposed were appropriate, except for condition no. (ii). The High Court modified this condition, allowing the petitioner to furnish a corporate guarantee from its ultimate parent company, Vodafone International Holdings BV, Netherlands, instead of an associate company with unencumbered assets in India.

Conclusion:
The High Court upheld the Tribunal's order with a modification to condition no. (ii), directing compliance within four weeks. The petition was disposed of with no costs.

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