TaxTMI 
TaxTMI 
2019 (7) TMI 129
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....vised return on 26.2.2014, declaring total income of Rs. 22,91,83,000/- and book profits/(loss) under section 115JB of the Act at Rs. 9,94,13,659/-. Subsequently, pursuant to an Advance Pricing Agreement dated 27.2.2017 entered into by the petitioner with the Central Board of Direct Taxes, a modified return of income was filed by the petitioner. By an order dated 17.1.2017, assessment came to be framed by the third respondent under section 143(3) read with section 144C (13) of the Act resulting into additions aggregating Rs. 1617,23,67,987/-. 2.1 Being aggrieved, the petitioner went in appeal before the Income Tax Appellate Tribunal (hereinafter referred to as "the Tribunal"). By an order dated 23.1.2018, the Tribunal inter alia held as follows: "a) Purported compensation of Rs. 1478,92,93,304/- determined by the Transfer Pricing Officer to be receivable by the petitioner on transfer of options by virtue of a purported transfer pricing adjustment was upheld, and held taxable as capital gains after indexation benefit; b) Depreciation on goodwill claim of Rs. 19,53,97,454/- was remanded to Respondent No.3 for fresh adjudication; c) Disallowance under sec....
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....tional stay of the demand arising out of the penalty order dated 27.9.2018. By the impugned order dated 25.10.2018, the third respondent directed the petitioner to pay 20% of the demand of Rs. 326.38 crores within three days from receipt of the letter and rejected the petitioner's application for unconditional stay of the demand. 2.6 Being aggrieved, the petitioner filed a review application dated 26.10.2018 before the administrative head of the third respondent, that is, the Principal Commissioner/Commissioner of Income Tax (the second respondent herein). A copy of the review application was also endorsed to the third respondent. 2.7 By a letter dated 26.10.2018, the third respondent intimated the petitioner regarding adjustment of refund due to the petitioner for assessment year 2013-14 of Rs. 8,27,80,220/- against the demand of Rs. 326.38 crores. 2.8 Being aggrieved, the petitioner has filed the present petition seeking the relief noted hereinabove. 3. In response to the averments made in the petition, the third respondent has filed an affidavit-in-reply wherein various decisions of the Supreme Court and High Courts have been cited and more particularly, the deci....
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....rd of Direct Taxes (CBDT) with reference to section 220 of the Income Tax Act, 1961 wherein under paragraph 2. B. thereof instructions have been issued in respect of stay petitions and more particularly to clause (iii) thereunder which inter alia says that a higher superior authority should interfere with the decision of the AO/TRO only in exceptional circumstances e.g. where the assessment order appears to be unreasonably high-pitched or where genuine hardship is likely to be caused to the assessee. Referring to paragraph C which provides for guidelines for staying demand, it was pointed out that clause (i) thereof gives illustrations of cases where demand can be stayed, and the illustrative situation provided under sub-clause (a) thereof is if the demand in dispute relates to issues that have been decided in the assessee's favour by an appellate authority or court earlier. Reference was made to clause (v) thereof which says that while considering an application under section 220(6) of the Act, the Assessing Officer should consider all relevant factors having a bearing on the demand raised and communicate his decision in the form of a speaking order. 4.1 Reference was also ....
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....he order giving effect to the order dated 25.1.2018 of the Income Tax Appellate Tribunal as well as the assessment order, to point out that, in all, there are three additions on account of: (i) TP adjustments treating termination of option rights as capital gain, (ii) Club membership expenses; and (iii) depreciation on goodwill. It was submitted that insofar transfer pricing adjustment is concerned, the issue is covered in the petitioner's own case for the earlier year by the decision of the Bombay High Court in the case of Vodafone India Services Pvt. Ltd. v. Commissioner of Income Tax, [2016] 385 ITR 169 (Bom). Referring to the order of the Tribunal in the quantum appeal, it was submitted that the Tribunal has not considered the issue in proper perspective. Reference was made to the order dated 21st March, 2018 passed by this court in the quantum appeal to submit that considering the nature of the issues in the quantum matter no penalty be recovered at this stage. 4.3 Reliance was placed upon the decision of this court in Commissioner of Income Tax v. Prakash S. Vyas, [2015] 232 Taxman 352 (Gujarat), wherein the court held that the sole ground on which the Tribunal was persuad....
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....itioner is entitled to stay of recovery. It was submitted that the issues are highly disputed and contested and every facet would be required to be examined. It was submitted that even if the first two contentions are not accepted, the issues are highly contested and serious questions of law arise, therefore, there was no question of imposing penalty. It was urged that the order is bad as it is a non-speaking order without hearing the petitioner and, therefore, the whole order is bad and is required to be quashed and set aside. 4.6 It was pointed out that the initially against the impugned order, the petitioner had approached the Principal Commissioner of Income Tax in terms of the CBDT instructions, however, in view of the fact that by the impugned order dated 25.10.2018, the Assessing Officer rejected the stay petition granting three days time to make payment, and thereafter in undue haste, without even waiting for three days for the petitioner to make payment, on 26.10.2018, had recovered Rs. 8,27,80,220/- towards penalty by adjusting such amount from the refund due to the petitioner, the petitioner was constrained to approach this court by way of this petition. It was submit....
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....hen 20% of the disputed amount is a benchmark. There can be a variation on the higher side or lower side. In either eventuality, the petitioner is required to refer to the case to the PCIT who will then review the order. It was emphatically argued that in this case the assessee moved the review application before the PCIT and thereafter straight away came before this court by way of this writ petition. Therefore either the petitioner seeks the benefit of the circular or it wants to invoke the writ jurisdiction of this court under article 226 of the Constitution. If it seeks the benefit of the circular, it has to follow the spirit of the circular. It was submitted that the Assessing Officer has granted relief and the petitioner has gone to the PCIT and then abandoned that procedure and has come to this court. If the petitioner does not want the benefit of the circular then under section 220(6) of the Act, it would be the discretion of the Assessing Officer and would not be a jurisdictional issue as it would amount to supplementing the discretion exercised by the Assessing Officer. It was contended that if the petitioner wants the benefit of the circular it has to go to the PCIT and ....
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....es approximately and such payment will not cause any financial hardship or otherwise prejudice the petitioner. It was urged that the petitioner is not affected liquidity wise and at best there is a fair chance of succeeding even as per the version of the petitioner. 5.5 In support of his submission, the learned counsel placed reliance upon the decision of this court in Jagdish Gandabhai Shah v. PCIT, [2017] 247 Taxman 414 (Gujarat) wherein the court has held thus: "8.2 In case, the Assessing Officer is of the view that any deviation from clause 4 [A] is warranted ie., if the Assessing Officer is of the opinion that case falls within parameters of Clause 4 [B](a) ie., the Assessing Officer is of the opinion that the nature of addition resulting in the disputed demand is such that payment of a lump sum amount higher than 15% is warranted, in that case, the Assessing Officer is required to refer the matter to the administrative Principal CIT/CIT, who shall, after considering the relevant facts, decide the quantum/proportion of demand to be paid by the assessee as lump sum payment for granting a stay of the balance demand. In case the Assessing Officer is of the opinion tha....
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....he merits of the submissions advanced by the counsel for the respective parties reduced the amount to 7.5% of the demand with a further condition that the petitioner shall offer immoveable security for the remaining 7.5% to the satisfaction of the assessing authority. It was submitted that thus the court has safeguarded the interest of the revenue by providing a condition of security. It was submitted that if at all the court is inclined to interfere with the impugned order some reasonable amount may be ordered to be paid and the department may be put to terms that the amount be forthwith paid back in case the petitioner succeeds. In conclusion, it was submitted that the petitioner has sufficient liquidity and the three criteria for grant of relief, namely, prima facie case, balance of convenience and irreparable injury are not made out and hence, no case is made out for grant of any relief and that the petition deserves to be dismissed. 6. In rejoinder, Mr. Soparkar submitted that in the application under section 220(6) of the Act, the petitioner had pleaded hardship if it is directed to make payment of any amount under the penalty order. Reliance was placed upon the decision o....
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....e present purpose, reads thus: "C. GUIDELINES FOR STAYING DEMAND. (i) A demand will be stayed only if there are valid reasons for doing so. Mere filing an appeal against the assessment order will not be sufficient reason to stay the recovery of demand. A few illustrative situations where stay could be granted are- (a) If the demand in dispute relates to issues that have been decided in assessee's favour by an appellate authority or court earlier; or (b) if the demand in dispute has arisen because the Assessing Officer had adopted an interpretation of law in respect of which there exist conflicting decisions of one or more High Courts (not of the High Court under whose jurisdiction the Assessing Officer is working); or (c) if the High Court having jurisdiction has adopted a contrary interpretation but the Department has not accepted that judgment. It is clarified that in these situations also, stay may be granted only in respect of the amount attributable to such disputed points. Further, where it is subsequently found that the assessee has not cooperated in the early disposal of appeal or where a subsequent pronouncement by ....
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....16 be revised to 20% of the disputed demand, where the demand is contested before CIT(A). 11. The impugned order dated 25.10.2018 has been made by the third respondent Deputy Commissioner of Income tax, Circle-4(1)(2), Ahmedabad, on the application made by the petitioner requesting to stay demand of Rs. 326,38,45,396/- arising out of penalty order dated 27.9.2018 under section 271(1)(c) of the Income Tax Act, 1961 for assessment year 2012-13. By the said order, the application has been rejected on the ground that it is not accompanied by any scheme for payment of demand and no reasons other than pendency of appeal are mentioned in the same. Another reason is that the additions have been confirmed by the ITAT. However, keeping in view the CBDT's Office Memorandums dated 29.2.2016 and 31.7.2017, the Assessing Officer has directed the petitioner to pay 20% of the demand immediately and has further recorded that from the ITD system and record available it is seen that the petitioner has not made any payment of demand in dispute and has therefore, requested it to pay at least 20% of the demand and produce the copy of challan to him within three days of receipt of the letter. The appl....
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....e not following the said decisions, whereas the learned counsel for the revenue has taken pains to point out that the Tribunal has duly considered both the decisions and found that they are not applicable to the facts of the present case. 16. Insofar as the distinction sought to be drawn between the facts of the case before the Supreme Court in Vodafone International Holdings B.V. v. Union of India and another (supra) and before the Bombay High Court in Vodafone India Services Pvt. Ltd. v. Commissioner of Income Tax (supra), and the facts of the present case is concerned, all these questions arise in the quantum appeal wherein the court has admitted the appeal on substantial questions of law and has granted stay on the application for stay of recovery subject to the petitioner depositing a further amount of Rs. 23.13 crores so that the total amount comes to approximately 20% of the demand. This court after bipartite hearing, while granting stay against recovery has observed thus: "Tax Appeal arises out of judgment of the Income Tax Appellate Tribunal, Ahmedabad ["Tribunal" for short] concerning taxing the assessee for capital gain applying transfer pricing provisions co....
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....e company is an incident of ownership of shares in a company, something which flows out of the holding of shares. A controlling interest is, therefore, not an identifiable or distinct capital asset independent of the holding of shares. The control and management is a facet of the holding of shares. The Court held that the case on hand concerns straightforward share sale. The Court further observed that the Bombay High Court failed to notice that till the date call options [which are not transferred in the present case] had remained unencashed, and therefore, even if it is assumed that such options under the frame work agreement could be considered to be property rights, there had been no transfer or assignment of options till the date. Even if, it is assumed that the High Court was right in holding that the options constitute capital assets, even then Section 9 [1](ii) of the Income-tax Act was not applicable, as these options had not been transferred till then. As is well-known, this judgment of the Supreme Court gave rise to certain amendments in the Income-tax Act, 1961. Revenue would heavily rely on amendment in Section 2 [14] of the Act where the term, "Capital Asset"....
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....judgment of the Tribunal would be stayed on condition that the applicant deposits a further sum of Rs. 23.13 Crores with the Department latest by 20th April 2018. This would make the total deposit by the applicant including so far made, to Rs. 100 Crores which would be approximately 20% of the outstanding tax demand. Application stands disposed of accordingly." 17. In the opinion of this court, while considering the merits of the order of the third respondent on the stay application filed by the petitioner against the order imposing penalty under section 271(1) (c) of the Act, it may not be necessary to go into the merits of the order of the Tribunal in the quantum appeal for the reason that a co-ordinate bench of this court in the above order dated 21.3.2018 passed in the stay application filed in the quantum appeal, has duly taken into consideration the Supreme Court decision in the assessee's own case as well as the decision of the Bombay High Court rendered after the coming into force of the amendments in section 2(14) and Explanation 2 added thereto. 18. It may further be noted that insofar as the stay against recovery in the quantum appeal is concerned, it was a case wh....
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.... the quantum appeal, and the appeal is pending at the stage of the first appellate authority, the petitioner has made out a strong case for grant of the relief as prayed for in the petition. Apart from the fact that in this case the petitioner seeks stay of recovery of penalty and not tax as was the case in the stay application filed in the quantum appeal, in that case the assessee had lost before three authorities, whereas in this case the petitioner has preferred appeal before the first appellate authority, and hence, on this count also this case cannot be considered on a par with the stay order granted in the quantum appeal. 20. On behalf of the respondents, it has been contended that the Assessing Officer having exercised discretion and ordered stay of recovery on condition that the petitioner deposits 20% of the disputed amount in terms of the benchmark laid down by the CBDT in the instructions referred to hereinabove, this court would not interfere with such discretion and substitute its own opinion in place of that of the Assessing Officer. In this regard it may be germane to refer to the impugned order, a perusal whereof shows that the third respondent has made a short s....
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....he Assessing Officer had started making recovery without giving any time till the application for review filed by the petitioner before the PCIT could be heard, the petitioner approached this court by way of this petition. 22. In the opinion of this court, considering the conduct of the third respondent and the urgency of the matter, no fault can be found in the conduct of the petitioner in invoking the writ jurisdiction of this court. The third respondent, by his very conduct in not waiting for even three days in terms of the order passed by him and making coercive recovery, has created a situation which has compelled the petitioner to discard the remedy of review before the PCIT and approach this court for relief. Considering the totality of the facts as emerging from the record, in the opinion of this court, this petition under article 226 of the Constitution of India is maintainable. Besides, in the light of the statement made before this court, the petitioner has withdrawn the review application filed before the PCIT. 23. Insofar as the contention that if the petitioner wants to avail of the benefit of the Instructions issued by the CBDT, it has to avail of the remedy be....