Income Tax Appellate Tribunal - Delhi
Sony India (P) Ltd. vs Commissioner Of Income Tax (Appeals) on 22 March, 2007
Equivalent citations: (2007)109TTJ(DELHI)413
ORDER
Deepak R. Shah, A.M.
1. By this stay petition, the petitioner desires that this Tribunal may grant stay of recovery of outstanding demand pertaining to asst. yr. 2003-04.
2. The petitioner desires that the tax demand due after giving effect to the order of learned CIT(A) is Rs. 5,09,35,197 which be stayed from recovery proceedings.
2.1 The demand outstanding is calculated as under:
Particulars Asst. yr. 2003-04 Income as per assessment order 87,36,40,944 Less : Relief by CIT(A) order 25,40,20,351 Income under Section 250 of the Act 61,96,20,593 Tax at the rate of 35% 21,68,67,208 Surcharge 1,08,43,360 Tax as per CIT(A) order 22,77,10,568 Tax paid as per returned income 7,68,87,505 Balance tax 15,08,23,063 Less: Payments as per the instalments granted basis 14,00,00,000 Tax payable 1,08,23,063 Add : interest under Section 234B of the Act 2,94,81,661 Add : Interest under Section 220(2) of the Act 1,06,30,472 Total tax demand due after giving effect to the CIT(A) 5,09,35,197 Order
2.2 The demand has arisen in view of the various adjustments made in respect of international transactions by the petitioner with its associated enterprises. The adjustments made have resulted into addition to the income declared by sum of Rs. 56.70 crores.
2.3 Learned senior counsel Shri M.S. Syali contended that the stay is requested on the basis that the assessee has a prima facie case in its favour. It will create undue hardship if such amount is not stayed from recovery proceedings. Though the financial hardship is not questioned yet it will have a repetitive effect year after year. He accordingly pleaded that since the balance of convenience lies in favour of petitioner, the demand be stayed. He submitted that by making certain adjustments in the arm's length price (ALP) under Section 92C of the IT Act, correct comparable method has not been selected. Even while making adjustments, correct set of comparables has not been used. The comparable case selected is that of Videocon International Ltd. but the same is not truly comparable. Even as per proviso to Section 92C(2), the margin of 5 per cent has not been allowed. Two cases cannot be strictly comparable and hence, legislature has provided that when ALP is determined, margin of 5 per cent has to be given. He accordingly pleaded that if such margin is also given, the demand will not survive as it will result into adjustment to the income which will wipe out the outstanding demand. He accordingly pleaded that since the tax demand outstanding is only Rs. 1.08 crores and balance refers to interest, the assessee having a prima facie case, be protected by way of stay of recovery of outstanding demand. He also pleaded that even if the Tribunal is not willing to grant absolute stay, the assessee may be asked to pay demand to the extent of tax liability and liability towards interest may be stayed. He also pleaded that the hearing may be taken up at an early date on out of turn basis.
2.4 Learned Addl. CIT Shri Subrat Mishra, appearing for the Revenue, submitted that the outstanding demand has been reduced in view of the refund available to the assessee. Now the demand outstanding is only Rs. 4.29 crores. When the assessee moved the petition before the CIT, the CIT had granted stay subject to payment of a sum of Rs. 3 crores before 12th March, 2007 and has also promised to review the situation after such payment is made. He further submitted that since the demand has been confirmed even by learned CIT(A) and in absence of any prima facie case, no absolute stay of recovery of outstanding demand be granted. The assessee is not pleading financial hardship. The public interest takes precedence over assessee's interest. He accordingly submitted that the petition may be dismissed.
3. We have considered relevant facts and arguments advanced. We find that out of the total demand of Rs. 15.08 crores, the assessee has paid Rs. 14 crores. Even the refund, pertaining to earlier year has been adjusted towards the outstanding demand. The three factors which have resulted into demand if considered in proper perspective are stated to have effect of reducing demand considerably. As per learned Counsel if proviso to Section 92C(2) is applied, the demand likely to be reduced is Rs. 7.18 crores. If adjustment for advertisement reimbursement is considered, the payment is likely to be reduced by Rs. 9.06 crores. If correct set of comparables is used, the demand is likely to be reduced by sum of Rs. 18.63 crores. This will result into combined tax effect for asst. yrs. 2002-03 and 2003-04 of a sum exceeding Rs. 35 crores. As rightly contended by learned Counsel for assessee, two cases cannot be identical and difference in estimate may vary, if not more, at least by 5 per cent. We accordingly think it fit that the assessee has a prima facie case for stay of outstanding demand. At the same time, it is also clear that the entire demand cannot be stayed from recovery proceedings. Considering the facts and circumstances of the case, we order as under:
(1) That demand against tax payable outstanding is Rs. 1.08 crores. The assessee shall pay sum of Rs. 100 lakhs by two equal monthly instalments of Rs. 50 lakhs each before 15th April, 2007 and 15th May, 2007. If the demand is paid accordingly, balance demand is stayed from recovery proceedings till the appeal is disposed of by the Tribunal or for a period of six months, whichever is earlier.
(2) The assessee shall furnish necessary guarantee to the satisfaction of the AO.
(3) Since the issue involved is subject-matter of appeal to be decided by a Special Bench of the Tribunal and since the decision is yet to be rendered, the date of hearing is not to be fixed up. However, immediately after the decision is rendered by Special Bench of the Tribunal in the case of Aztech Software & Technology Services Ltd., the appeal will be taken up for hearing.
We accordingly grant conditional stay of recovery of outstanding demand.
4. The petition is disposed of accordingly.