Income Tax Appellate Tribunal - Bangalore
Google India P Ltd, Bangalore vs Assistant Commissioner Of Income Tax, ... on 22 March, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
"B" BENCH : BANGALORE
BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER
AND SHRI LALIET KUMAR, JUDICIAL MEMBER
SP No. 45/Bang/2017
(In IT(TP)A No. 387/Bang/2017)
Assessment year : 2012-13
M/s. Google India Vs. The Assistant
Private Limited, Commissioner
No. 3, RMZ Infinity, of Income tax,
Tower E, Circle 3(1)(2),
4th Floor, Old Madras Bangalore.
Road,
Bangalore - 560 016.
PAN: AACCG 0527D
APPELLANT RESPONDENT
Appellant by : Shri K.P. Kumar, Senior Counsel
Respondent by : Shri G. Kamaladhar, Standing Counsel
Date of hearing : 17.03.2017
Date of Pronouncement : 22.03.2017
ORDER
Per Laliet Kumar, Judicial Member
SP No. 45/Bang/2016
Page 2 of 13
2. This stay application is filed by the assessee for grant of stay of demand of Rs. 486,46,79,020/- u/s. 254(1) of the IT Act. The ld. Senior Advocate for the assessee submitted that in the demand of Rs.486,46,79,020/-, the principal tax amount is s. 308,57,01,483/- and the remaining amount is for interest element. It was submitted by the assessee that an application for stay dated 13.02.2017 was filed with the ld. AO on 15.02.2017 and it was orally communicated that AO is unwilling to grant the stay on demand of tax and, therefore, it was submitted that this Tribunal has powers to grant stay of demand u/s. 254 of the Income-tax Act. To buttress his argument for grant of stay, the ld. Senior Advocate relied upon the Office Memorandum dated 29.12.2016 issued by CBDT whereby it is provided that in case the demand is disputed by the assessee before the CIT(A) then the AO shall grant stay of demand till disposal of the appeal on payment of 15% of tax demand. Relying upon the said office memorandum, the ld. Senior Advocate submitted that the assessee is ready and willing to pay the 15% of the impugned demand in two installments. In addition to that the ld. Senior Advocate has drawn our attention to the order passed in the assessee's own case SP No. 45/Bang/2016 Page 3 of 13 for assessment year 2011-12, wherein the demand of Rs.30 crores was directed to be paid against the demand of Rs.178,24,27,530/-. On merit, it was submitted that the ld. AO in the assessment order has disallowed the amount payable as consideration for purchase of advertisement space by the applicant to Google Ireland Ltd., to the extent of Rs.570,74,19,173/- u/s. 40(a)(i) of the Act. It was further submitted that the amount payable by the company to Google Ireland Ltd., are not chargeable to tax in India and accordingly, it was submitted that the demand with respect to disallowance u/s 40(a)(i) should be stayed. It was also submitted by the ld. Senior Advocate that appeal has been preferred by the assessee for the current assessment year on 20th February 2017 and it is to be listed in due course of time.
3. The ld. Senior Advocate further relies upon the judgment of the Hon'ble Madras High Court in the matter of N. Jegatheesan Vs DCIT [2015] 64 taxmann.com 339(Madras) which is to substantiate that the CBDT Circular bounds the Revenue during the pendency of the appeal and, therefore, the Revenue should SP No. 45/Bang/2016 Page 4 of 13 not insist upon the recovery of the dues more than 15% as indicated in the Circular dated 29.02.2016.
4. On the other hand, the learned DR has submitted that the AO has rightly held that an amount paid by the assessee to Google Ireland Ltd., constitute the depending agent's permanent establishment and it was in the nature of royalty, therefore, the demand raised was in accordance with the section 40(a)(i) of Act. Further, it was submitted that the Transfer Pricing adjustment made during the assessment proceedings were in accordance with law and, therefore, entire amount is payable. With respect to Circular dated 29.02.2016, it was submitted by the ld. DR that the said Circular is not applicable to the present case as no appeal is pending adjudication before the CIT(A) and, therefore, grant of stay by the AO on payment to the extent of 15% was not warranted. Moreover, it was pointed out by the ld. DR that vide order dated 10.03.2017, the AO has directed the assessee to pay 25% of the outstanding demand i.e. Rs.121,61,69,755/- immediately and remaining 25% in installments for a period of 180 days. It was submitted that the SP No. 45/Bang/2016 Page 5 of 13 assessee was not satisfied with the condition laid down by the by the AO, and therefore, insisted for grant of stay. At this stage, the Bench enquired about the status of stay petition pending before AO. In response to that the ld. Senior Advocate fairly submitted that the order was passed on 10.03.2017 in the above terms by AO. He further submitted that the order passed by the AO is contrary to the Departmental Instruction dated 29.02.2016 and, therefore, the present application is being insisted upon.
5. We have heard the rival submissions of the parties and perused the material on record. At the first instance, without going into the merits of the matter, the Bench has offered to grant stay subject to the payment of 30% of the total tax demand to which the ld. Senior Advocate has refused, therefore, the bench is left with no other option but to decide the matter on merit.
6. For the purposes of grant of stay three cordial principles are very much essential they are, prima facie case, irreparable loss and balance of convenience are required to be established by the assessee.
7. In the present case, the assessee admitted that the it is having financial ability to pay the tax demand, however if the assessee SP No. 45/Bang/2016 Page 6 of 13 is directed to pay any sum over and above 15% then the assessee will land up in commercial hardship and will not be able to discharge its day-to-day functions.
In respect of the prima facie case, the assessee has payment of royalty/disallowance u/s 40(a)(i) was already heard by the other Bench for earlier assessment years but thereafter the matter has been released by the Bench and it was further submitted that the addition on account of royalty will lead to double additions as the addition was also for the said sum while calculating the ALP u/s 92C.
8. The assessee raised the grounds of disallowance of payment made to Google Ireland Ltd. by invoking provision u/s 40(a)(i) and also to the TP addition.
9. In our view, for the grant of stay, the assessee is required to make out a prima facie case to show that the demand raised by the Revenue was not in accordance with law. On prima facie examination of the disallowance made u/s 40(a)(i), we are of the opinion that the assessee has not been able to make out a case for SP No. 45/Bang/2016 Page 7 of 13 grant of stay. In our view, the payment was made by the assessee to its AE and the same has been rightly disallowed by the AO considering the activities of the assessee as well as the AE and treating the assessee as a dependent/agent of permanent establishment. Further, for the purposes of adjudication, the transfer pricing adjustment detail, factual and legal analysis of documents and the legal submission is required. The assessee has not filed the paper book along with the appeal and, therefore, in the absence of availability of complete paper book, it is not possible for the Tribunal to prima facie examine the case of the assessee. Even otherwise, the case of the assessee is not covered by its own case for the earlier assessment years or otherwise.
10. The assessee has not been able to make out the prima facie case of high pitched assessment by the AO and was only contending that there was an element of double additions u/s 40(a)(i) as well as in ALP adjustment. In our view, disallowance u/s 40(a)(i) and computation of income from international transaction regarding to ALP under Chapter X of the Income-tax Act operates in two different fields and the computation of income under Chapter X has no co-relation with disallowances under sec. SP No. 45/Bang/2016 Page 8 of 13 40(a)(i). Therefore, the argument of double additions by the ld Sr. Advocate has no legs to stand and is not prima facie sustainable in the eyes of law. Thus, the assessee has failed to establish the prima facie case in its favour for grant of stay.
11. The assessee is also required to prove the balance of convenience in his favour for grant of stay. As the assessee has fail to prove the prime facie case, there is no balance of convenience in his favour.
12. The assessee is also required to establish the irreparable loss and injury in its favour for the grant of stay. In our view, the assessee is in a position to make payment of tax amount raised by the Revenue in case the appeal of the assessee is allowed on merit and in such case, the assessee shall be liable to get back the refund of the entire amount along with interest. Therefore, in our view, the assessee shall not suffer any irreparable loss or injury in case the stay is not granted to the assessee.
13. Last submission made before us was in respect of applicability of Circular dated 29/02/2016. In our view, the CBDT instructions dated 29.02.2016 is not applicable to proceedings pending before the Tribunal. Even otherwise, the instructions of the Department SP No. 45/Bang/2016 Page 9 of 13 are not binding on the Tribunal. The Tribunal is duty bound to decide the interim application for grant of stay on the basis of the parameters laid down by the Hon'ble Supreme Court in the matters of ITO Vs. M.K Mohammad Kunhi (1969) 71 ITR 855 and Asst. Collector of Central Excise Vs. Dunlop India Ltd. AIR 1985 SC 330.
14. In the present case, the Draft order was issued by TPO and thereafter assessee filed objection against the draft order before the DRP consisting of three Commissioners instead of filling the appeal before Commissioner (Appeal) and thereafter the directions were issued by DRP under section 144C of the Act. In our view, the proceedings before the DRP are in the nature of appellate proceedings and appeal filed challenging the order of the DRP before the Tribunal are in the nature of second appeal, therefore, the Circular cited by the learned Senior Advocate is not applicable to the proceedings pending before the Tribunal. Even otherwise by virtue of scheme of Act, the case of the assessee was examined at two stages by the AO/TPO as well as by the DRP and thereafter the additions were made.
SP No. 45/Bang/2016Page 10 of 13
15. The Hon'ble jurisdictional High Court recently vide order dated 23.02.2017 and petition no. 1339-1342/2017 in the matter of Flipkart India Private Ltd., Vs ACIT has elaborately discussed the scope of the Circular Instruction No. 1914 dated 02.02.1993 and Circular dated 29.02.2016. In view of the above, authoritative pronouncement of the jurisdictional High Court is clear with regard to Circular dated 29.02.2016 and is only applicable to the proceedings pending before the CIT(A). In our view, the mechanism for dealing with the order passed by the AO on the stay application is also provided in the Circular dated 29.02.2016. In case, the assessee have any grievance against the order passed by the AO, then the assessee may approach to the administrative Pr.CIT/CIT for getting its redressal . If the present Circular is made applicable to the Tribunal proceedings pending before the Tribunal then in that case the Tribunal will be considered to be equivalent to the CIT(A) and it will lead to absurd result, as administrative Pr.CIT will be redressing the grievance against the order of the Tribunal. In our view, it is neither intended by the Circular nor it is provided under the IT Act, the power of the Tribunal for grant of stay is governed SP No. 45/Bang/2016 Page 11 of 13 by the IT Act and it is further guided by the various jurisdictional pronouncement in this regard. Therefore, the circular dated 29/2/2016 is not applicable for the grant of stay on deposit of 15% of tax demand .
16. The reliance on the judgment, of the Madras High Court in our view is not correct as the facts in the said matter and in the present case are entirely different.
17. In our view, the payment of the tax in demand is required to be stayed only for valid reasons and not merely because the appeal has been preferred by the assessee against the assessment order before the Tribunal. The financial position of the assessee is required to be seen along with the satisfaction of the ingredients for the grant of stay i.e whether the assesses is having a good prima facie case for grant of stay and further whether assessee is able to establish the balance of convenience lies in its favour and also whether the assessee shall suffer irreparable loss which cannot be compensated in terms of money. In our view, the assessee has sound financial position to pay the tax demand and further the assessee has not been able to establish the prima facie SP No. 45/Bang/2016 Page 12 of 13 case for non-recovery of the tax demand or to show that the tax demand raised pursuant to the assessment order was not payable.
18. In view therefore, we are left with no other option but to grant stay of demand subject to deposit 50% of the tax demand. Out of the said 50% of the tax demand, the petitioner shall deposit 20% of the tax demand within 7 days of this order and the balance amount shall be paid by the petitioner within 180 days in six equal installments.
19. Let the appeal be listed on 25/4/2017 for hearing, the appellant is directed to file the advance copy of paper book in the matter.
20. In the result, the stay application of the assessee is disposed of in the light of above directions.
Pronounced in the open court on 22 March, 2017.
Sd/- Sd/-
(INTURI RAMA RAO) (LALIET KUMAR )
Accountant Member Judicial Member
Bangalore,
Dated, the 22 March, 2017.
Vms/Ms
Copy to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
SP No. 45/Bang/2016
Page 13 of 13
5. DR, ITAT, Bangalore.
6. Guard file
By order
Assistant Registrar,
ITAT, Bangalore.