TMI Blog2016 (9) TMI 808X X X X Extracts X X X X X X X X Extracts X X X X ..... not granted. The revenue is at liberty to appropriate the adjustment of refunds due to the Assessee as agreed by the learned counsel for the Assessee. We therefore grant an order of stay of recovery of outstanding demand arising out of the Assessment for AY 2009-10 & 2011-12 for a period of 6 months from this day or till disposal of the Appeals of the Assessee, whichever is earlier. The appeal of the Assessee is directed to be fixed out of turn for hearing on 29.9.2016 - S.A.Nos 33&.15/Kol/2016 (A/o I.T.A Nos. 1141 & 539/Kol/2016) - - - Dated:- 22-7-2016 - Sri N.V.Vasudevan, JM Shri Waseem Ahmed, AM For The Appellant : Shri Arvind Sonde, Advocate Shri Gunjan Khanna, AR For The Respondent : Shri G.Mallikarjun, CIT(DR). ORDER Per N.V.Vasudevan, JM S.P.No.33/Kol/2016 is a petition filed by the Assessee praying for grant of an order of stay of recovery of outstanding demand of ₹ 42,71,97,219/- arising out of the order of assessment dated 29.4.2016 passed u/s.143(3) read with Sec.144C of the Income Tax Act, 1961 (Act). 2. S.P.No.15/Kol/2016 is a petition filed by the Assessee praying for grant of an order of stay of recovery of outstanding deman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Assessee filed its objections with the Hon ble Dispute Resolution Panel ( DRP ) as per the provisions of section 144C of the Act against the draft assessment order. Regarding corporate tax, the Hon ble DRP granted relief in respect of adjustments/disallowances made by the Assessing Officer ( AO ) on account of payments to clubs, lease rent on motor vehicle and loan waived off. The DRP confirmed the disallowance on account of depreciation on moulds. Further, relief was granted by the DRP in relation to AMP Expenses and in relation software services amount were substantially reduced to INR 16,27,69,727. Additionally in relation to MSSA and IT Services DRP confirmed the adjustments made by the TPO. Giving effect to the DRP s direction, the transfer pricing adjustments was revised as under :- Sl.No. Transfer Pricing Adjustments Amount (Rs.) 1. Management Support Services 2,02,71,59,953 2. IT Charges 3,55,26,652 3. Rendering of Software Development Services 16,27,69,727 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed its objections with the Hon ble Dispute Resolution Panel ( DRP ) as per the provisions of section 144C of the Act against the draft assessment order. The Hon ble DRP confirmed the aforesaid adjustments/disallowances made by the Assessing Officer ( AO ). The only relief given by the DRP was excluding IT charges from the cost of Philips Software Centre ( PSC ). This resulted in higher margin earned by PSC and reduction in adjustment amounting to ₹ 96,900,000. Giving effect to the DRP s direction, the transfer pricing adjustments was revised to Sl.No. Transfer Pricing Adjustments Amount (Rs.) 1. Management Support Services 1,252,730,863 2. IT Charges 239,351`,529 3. Rendering of Software Development Services 302,3000,000 Total 1,794,382,392 10. Based on the directions issued by the Hon ble DRP the final assessment order was passed by the AO under section 143(3) r.w.s 144C of the Act dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipt of service by the Assessee. 13. It was brought to our notice by the learned counsel for the Assessee that prior to AY 2008-09 payment for similar services to KPNV were accepted and not questioned by the Revenue. However in AY 2008-09, the TPO for the first time held that the services rendered by KPNV were in the nature of stewardship and shareholder services leading to direct and proximate benefit to the AE i.e., KPNV and therefore the Arm s Length Price (ALP) for services provided by the AE to the Assessee. The same stand was taken in AY 2009-10 as well. The Hon ble ITAT in AY 2009-10, ultimately set aside the order of the AO on this issue and remanded to the DRP the issue for re-adjudication. On such remand proceedings, the DRP held that the service received by the Assessee from AE was not in the nature of stewardship services. The DRP however held that the Assessee has not established the benefit it received from the services claimed to have been provided by the AE and therefore the benefit test was not satisfied and therefore the ALP determined by the TPO at nil was to be upheld. 14. The learned counsel brought to our notice the voluminous evidence filed by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices such as the Assessee in several decisions. These decisions are referred in page-9 of the petition in support of the stay application. It was submitted that if those decisions are applied and comparable companies retained by the DRP are drawn up, then the operating margin of the Assessee and the arithmetic mean of the comparables ultimately retained will be at ALP and no addition can be made. According to him the position would be the same in AY 2009-10 in so far as it relates to adjustment on account of ALP for software development services. 18. The learned counsel for the Assessee submitted that the Assessee has made out a prima facie case. With regard to the balance of convenience the learned counsel brought to our notice the following facts with regard to the payment of taxes for both the AYs which is as follows: 19. The learned counsel submitted that the Assessee will have no objection if the adjustments available are also made. His submission was that more than 50% of the outstanding tax demand has already been paid by the Assessee and therefore the balance of convenience is in favour of granting an order of stay. It was highlighted that the Assessee would be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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