2019 (9) TMI 1579 - AT - Income Tax

Stay of recovery of outstanding demand - Addition of of transfer/assignment of call options under the frame work agreement - HELD THAT - The assessee cannot be faulted for non-disposal of the appeal. At the same time the contention of the learned Departmental Representative that identical issue relating to transfer/assignment of call option in the assessment year 2012-13 has been decided by the Tribunal Ahmedabad Bench against the assessee cannot be ignored altogether - contention of the learned Departmental Representative that the amount of income accruing to the assessee on account of transfer/assignment of call option has to be assessed in any one of the assessment years considering the fact that the assessee has already exercised its option to transfer/assign merits consideration. As mentioned earlier contention of learned Departmental Representative that the ITAT Ahmedabad Bench in assessee s own case for Assessment Year 2012-13 2018 (1) TMI 1302 - ITAT AHMEDABAD on similar facts has confirmed the transfer pricing adjustment on exercise of call option also has to be kept in perspective while considering assessee s prayer for grant of stay. Further it is seen from record the corresponding appeal of the assessee is now posted for hearing on 5th November 2019. Therefore considering the overall facts and circumstances prima facie case balance of convenience and without prejudice to the respective rights and contentions of the parties which will be duly considered at the time of hearing of the corresponding appeal we direct the assessee in the interregnum to pay a further sum of Rs. 25 crore in two equal instalments of Rs. 12-50 crore each by the end of September 2019 and October 2019 and furnish proof of such payment before the AO. Further the corporate guarantee furnished by the assessee as per the earlier direction of the Bench should also continue. Subject to fulfilment of the aforesaid conditions recovery of balance outstanding demand shall remain stayed for a period of six months from the date of this order or till disposal of the corresponding appeal of the assessee whichever is earlier.

Summary

Issues Involved:
1. Maintainability of the stay application for recovery of outstanding demand.
2. Substantive vs. protective addition of income due to transfer/assignment of call options.
3. Compliance with previous stay orders and security of Revenue's interest.
4. Changed circumstances affecting the grant of stay.
5. Conditions for granting stay of recovery of outstanding demand.

Issue-wise Detailed Analysis:

1. Maintainability of the Stay Application:
The Revenue raised a preliminary objection stating that the application filed by the assessee seeking an extension of stay is not maintainable as the previous stay had already expired. However, the assessee argued that the application was filed before the expiry of the last stay order and should be treated as a fresh stay application. The Tribunal, with the consent of both parties, agreed to treat the present stay application as a fresh stay application.

2. Substantive vs. Protective Addition of Income:
The major part of the demand relates to the addition of Rs. 1180,29,26,769 for the transfer/assignment of call options under an agreement dated 5 July 2007. The Transfer Pricing Officer had proposed this adjustment on a substantive basis for the assessment year 2008-09, but on a protective basis for the assessment year 2011-12. The Hon'ble Jurisdictional High Court had deleted the substantive addition for 2008-09, and the Revenue’s Special Leave Petition against this decision is pending. The Revenue reiterated that the addition should be on a substantive basis for 2008-09, and thus, the protective addition for 2011-12 should not be subject to recovery proceedings.

3. Compliance with Previous Stay Orders and Security of Revenue's Interest:
The Tribunal had previously directed the assessee to pay Rs. 50 crore and furnish a corporate guarantee, which the assessee complied with. The assessee argued that the facts and circumstances had not materially changed, and the Revenue's interest was well safeguarded by the conditional stay order. The Tribunal acknowledged that the stay was extended from time to time due to non-disposal of the appeal, mostly attributable to the Revenue.

4. Changed Circumstances Affecting the Grant of Stay:
The Revenue argued that there was a substantial change in circumstances, citing a Tribunal decision for the assessment year 2012-13, which confirmed the transfer pricing adjustment on the exercise of call options. The Revenue maintained that the income from the transfer/assignment of call options must be taxed in either 2008-09 or 2011-12. The Tribunal considered that the issue for 2008-09 is pending before the Supreme Court, and the appeal for 2011-12 was repeatedly adjourned due to reasons not attributable to the assessee.

5. Conditions for Granting Stay of Recovery of Outstanding Demand:
Considering the overall facts, prima facie case, balance of convenience, and without prejudice to the parties' rights, the Tribunal directed the assessee to pay an additional Rs. 25 crore in two equal installments by the end of September and October 2019. The corporate guarantee furnished earlier should continue. Subject to these conditions, the recovery of the balance outstanding demand shall remain stayed for six months or until the disposal of the corresponding appeal, whichever is earlier.

Conclusion:
The stay application was allowed under the terms indicated, with the assessee required to make further payments and maintain the corporate guarantee to secure the Revenue's interest. The order was pronounced in open court on 04.09.2017.