Case Law Details
Direct Stay Application filed before the Tribunal is maintainable and it is not the requirement of the law that assessee should necessarily approach the CIT before approaching the Tribunal for grant of stay.
Honeywell Automation India Limited Vs. DCIT (ITAT PUNE)
Stay Application No. 08/PN/2011
(Arising out of ITA No. 18/PN/2011)
(Asstt. Year : 2006-07)
ORDER
Per D. Karunakara Rao AM
This is the Stay Application filed by the assessee in connection with appeal ITA No. 18/PN/2011 for the A.Y. 2006-07. As per the application, assessee is in arrears of the demand to the tune of 28.15 Crores (rounded off). It includes tax component of Rs. 17.03 Crores and rest of it relates to the interest component. As per the stay application, the assessee filed separate application for stay of demand before the DCIT on 28.12.2010, before Additional CIT on 17.1.2011 and finally before the CIT on 17.1.2011. None of these officials disposed off the assessee’s applications for stay of demand. We noticed there is a letter from the CIT directing the AO or the Addl CIT to dispose off the stay applications pending before them. Otherwise, as per the annexure to the present stay application, the assessee is aggrieved with the high pitched assessment i.e. assessed income is Rs. 75 Crores (rounded) against returned income of Rs. 20.7 Crores. Further, the assessee is aggrieved the way the deduction claimed u/s. 10A(7) was denied. Further also, the assessee is aggrieved with the way the Transfer Pricing guidelines or laws were applied to the assessee’s case. Finally, assessee narrated the hardship in matters of paying the impugned arrears of demand and placed reliance on the written text as seen from para 6.3 of the annexure. The assessee also prayed for stay of demand till the appeal is decided by the Tribunal. The prayer of the assessee in brief as given in para no. 8 is as under :
“8. The Applicant, therefore, prays:
a) That the recovery proceedings should not be initiated against the Applicant till the receipt of the order of the ITAT with regard to the appeal filed against the order of the learned AO under section 143(3) read with section 144C(13) of the Act and for a period of 30 days thereafter;
b) That the learned AO, the Tax Recovery Officer, the Commissioner of Income-tax or their subordinates or their successors may be restrained from taking any action as regards recovery of tax, interest including interest under section 220(2) of the Act and penalty levied or leviable for the relevant AY; c)For any other relief which the Honorable members may deem fit and proper in the nature and circumstances of the case.”
2. During the proceedings before us, Sri Rajan Vora, Ld Counsel for the assessee filed a ‘summary highlighting the bifurcation of demand against the key disaiowance’. As per the said summary, Rs. 15.13 Crores of the demand is relatable to the decision relating to the denial of deduction u/s. 10A(7) of the Act and it includes tax component of Rs. 9.3 Crores. Further, Rs. 9.98 Crores relates to incorrect application of the principles relating to transfer pricing to non-A.E. Transactions i.e domestic transactions. The demand relatable to the T.P. adjustment of the A.E. Transactions and others is Rs. 2.12 Crores. Rs. 91 lakhs relate to the demand relatable to the disallowance of provision for expenses. Concluding from the above, as per assessee, Rs. 10.83 Crores is the tax component which is open for recovery notwithstanding the disputes attached with it as made out in the present appeal. Further, the interest levied under section 234 B & C in respect of the demand of Rs 10.83 crores is Rs. 6.79 Crores. Finally, the total demand which can be reasonably open for collection is Rs. 17.62 Crores as per the summary chart filed before us (Rs.10.83 + Rs. 6.79 Crores).
3. During the proceedings, in the context of filing of the present SA before us without awaiting the decision of the revenue, an issue of maintainability of the such SA came up. In this regard, Ld Counsel demonstrated the necessity of such an application at this point of time and mentioned the inaction of the revenue for nearly two months considering the 28th December 2010 the date of filing of the application before the AO. Ld Counsel also demonstrated the way similar issue came up before the this and other benches of the Tribunal and upheld the maintainability of the Stay application, which were filed before the Tribunal. In this regard, Shri Vora, the Ld Counsel for the assessee filed capies of various decisions and they are:
1) KEC International Limited, V/s. Addl CIT Stay Petition No. 13/Mum/2010, ‘A’ Bench (Mum) dt. 12th Feb. 2010, A.Y 2006-07
2) Vodafone Essar Limited v/s. DCIT (TDS), Stay Application Nos. 224 to 226/Mum2009,A.Ys. 2007-09, 2008-09 & 2009-2010 (Mum)
3) Taneja Developers & Infrastructure Ltd. vs. ACIT & Ors. (2009), Writ Petn. No. 6956 of 2009 & CM No. 2320 of 2009, 222 CTR (Del) 521
4) Reuters India (P) Ltd. vs. DCIT, ITAT, Delhi ‘D” Bench, Stay Petition No. 157/Del 2004 in ITA No. 1089/DEL?2004
The above decision were cited to indicate that the Tribunal has power to stay the demand in cases of high pitched assessments, the Tribunal has a jurisdiction in respect of the stay applications even if assessee did not file stay application before the revenue authorities (para 8 & 9 of the order in the case of Vodafone Essar Limited dated 11.12.2009 is relevant).
4. Further, Ld. Counsel fairly mentioned that there is no judgment of any High Court on this issue of maintainability of the directly filed stay application before the Tribunal. Further, he mentioned that there exists decision of the Tribunal of Pune Bench in favour of the assessee’s contention that Tribunal has jurisdiction in such matters and filed copy of our decision in the case of M/s. Kumar Company, S.A. Nos. 44 to 46/PN/2009, order dated 12th May 2009. It is the case, where the assessee did not even filed the stay application before the Revenue before approaching the Tribunal. Further, the Ld. Counsel brought to our notice the understanding between the Bar and ITAT in matters of Stay Applications and read out para 10 of the said understanding. Further, Ld Counsel filed letter of the Commissioner dated 18.1.2011 which contains a direction to the A.O/ Additional DCIT to dispose off the stay application pending before them. The fact is that he did not dispose off the stay application filed before him.
Another fact is that none of the Departmental Official decided the request for the stay of demand till the date of hearing before us.
Notwithstanding, the request for stay of demand outright, the Ld. Counsel Mr. Vora referred to the fact of huge refunds pending for issue by the department. In this regard, Ld Counsel mentioned that assessee filed return for A.Y. 2007-08 to 2009-10 (FBT & I.T) and as per the said returns, Rs. 11.3 Crores is refund pending with the Department for the issue and the same has not been issued till date. On enquiry from the bench on the readiness of the assessee to pay any of arrears, the Ld. Counsel mentioned that the Bench may consider giving directions to the A.O. to adjust the said refunds towards the arrears to the extent of Rs. 5 Crores and rest of the refunds may be withheld by them till the disposal of the appeal by the Tribunal. Ld counsel requested for grant of early hearing. Further, Ld AR brought our notice the cases approved by the DRPs, where similar stay application were disposed off by various benches of the Tribunal of Delhi Bench either granting complete stay of demand in some cases and granting stay of demand subjected to payment of 10 % of the demand.
5. On the other hand, the Ld. D.R for Revenue argued stating that the assessee has to pay the whole of the arrears immediately. Ld DR took objection to the way the assessee filed of the present Stay Application before the Tribunal ie prior to the date of filing of the stay applications before the Addl. CIT and CIT. On the issue of collectible undisputed demand, DR demonstrated the existence of Rs. 17.62 Crores free from any prima facie disputes. Regarding the refunds, the Ld. D.R. stated that even if the refunds amount to Rs. 11.3 Crores is considered, the assessee is still to pay Rs. 6.3 Crores i.e. Rs.11.32 Crores minus Rs. 7.6 Crores. DR underlined the need for payment of the arrears.
5. We have heard the parties and perused the orders of the Revenue on the Stay Application with its Annexures. We have also gone through various citations relied upon by the assessee’s Counsel in support of the said arguments that the Tribunal has jurisdiction in respect of the Direct Stay Applications (DSA) before the Tribunal (those stay applications without going to the Revenue authorities or without waiting for the decision of the Revenue authorities). On the issue of maintainability of the DSAs, we find that it is a settled issue at the level of Tribunals that the DSAs are maintainable as held by various Benches of the Tribunal viz. Pune (M/s. Kumar and Company & Starent Networks I. Pvt. Ltd.), Delhi (Reuters India (P) Ltd., Mumbai and Vodafone Essar Limited & M/s. KEC International Limited). In our opinion, these are the cases, were the assessee never filed a stay application before the AO or any other IT authorities. For the sake of completeness of the order, we reproduce para 8 and 9 of the decision of the Tribunal in the case of Vodafone Essar Limited dated 11.12.2009 and the same read as under.
“8. Having heard both the parties, we find that the following points fall for our consideration in this application for stay of recovery of demand for all the three years –
1) Whether the assessee was in any way prohibited from approaching this Tribunal for stay of recovery of demand without first approaching the revenue authorities<
….
9. As regards point No.(1) above, we find that this issue is covered by the judgment of the Calcutta High Court in the case of Susanta Kumar Nayak [cited supra], wherein the Hon ’ble High Court has held that the authority which is vested with the power to exercise discretion must do so either in favour of the assessee or against him and it cannot refuse to exercise discretion on the ground that the assessee has alternative remedies. Respectfully following the aforesaid decision of the Calcuitta High Court, the Tribunal at Hyderabad in the case of Nagarjuna Fertiisers & Chemicals Ltd., k[cited supra], has also held that it is not necessary that assessee should necessarily approach the Commissioner of Income Tax before approaching the Tribunal for grant of stay. Similar view has been expressed by the Tribunal at Delhi in the case of Reutes India (P) Ltd. 3 SOT 886 [Del]. Hence the objection of the revenue is rejected and the point is answered in favour of the assessee.”
6. Income tax Act has conferred certain powers on the Income tax Authorities for discharging and one such power relates the matters of stay of the demand. Assessee filed the stay application before the AO on 28th December 2010 and the AO did not take any action, be it a case of rejection or otherwise. Same is the fate of the application lying with the Addl CIT. CIT merely passed on the responsibility to his deputies vide the letter dated 18.1.2011 instead of either staying the demand or rejecting the request for stay of the same or otherwise. While there is inaction with the Revenue on the applications for stay, the assessee is busy in making application for stay of demand from time to time fearing of ultimate coercive action by the AO and its likely adverse effects on the business operations of the assessee. Therefore, the Calcutta High court’s observations has application to the facts of this case. Regarding the DSAs by the assessee before the Tribunal, the decisions of the tribunal are in favour of the assessee for the proposition that the ‘it is not necessary that assessee should necessarily approach the Commissioner of Income Tax before approaching the Tribunal for grant of stay’ Nagarjuna Fertilisers & Chemicals Ltd [supra]. Further, we have also perused the understanding between the BAR and the Tribunal in matters of demands covered by the DRP’s decisions and not insisting of the rejection of stay applications filed before the CIT. Relevant issue 10 is reproduced as follows.
“10. The Dispute Resolution Panel constituted under the Income tax Act comprises of officers of the rank of Commissioners of Income Tax. The orders passed by them are directly appealable before the Honourable Tribunal. Very often when the applications for stay are made before the Honourable Tribunal, it is insisted that the rejection of stay application by the Commissioner of Income Tax be obtained before the petition for stay is to be proceeded with by the Tribunal. Since after the passage of orders by the DRP, Commissioners are functus officio as far as stay of demand is concerned very often they go ahead with the recovery of tax even while the stay applications are pending before the Tribunal. It is requested that in respect of orders passed by DRP the rejection of stay application before the Commissioner’s as a condition precedent may not be insisted upon and the Department be instructed not to undertake any recovery action till the application for stay before the Tribunal is disposed off.
Reply-10. I have issued detailed instructions in Mumbai in 2007 when I was the Vice-President there. These instructions outlined the procedure to be followed both by the Department and the assessee when the application for stay of demand had been filed before the Tribunal. The said instructions had been issued after a meeting with the CCIT’s in Mumbai. I will be holding a similar meeting with CCIT in Delhi and will try to implement these instructions in Delhi as well.”
7. Therefore, Direct Stay Application filed before us is maintainable and it is not the requirement of the law that assessee should necessarily approach the Commissioner of Income Tax before approaching the Tribunal for grant of stay. It does not make any difference whether the assessee filed any application before the Revenue and not awaited their decisions before filing application before the Tribunal or directly approaching the Tribunal without even filing the applications before the Revenue authorities, when there exists threat of coercive action by the AO. Thus, therefore, the objections raised by the Revenue in this regard are dismissed.
8. Coming to the merit of the additions, we find that the demand raised by the Revenue is certainly in higher side considering the invoking of the transfer pricing provisions to the Non-AE transactions. It is the law of the land that Transfer Pricing provisions apply to the AE transactions. Therefore, the demand relatable to the non-AE transactions amounting to Rs. 9.98 Crores as highlighted by assessee may not be a collectible demand. In any case, as per the summary chart prepared by the assessee, Rs. 17.62 Crores is not a high-pitched demand and hence it is collectible demand and the tax component of the same is determined at Rs 10.83 Crores.
9. Further, we have examined the general issues to be considered for deciding the stay applications. It is the operating guidelines in matters relating to the Stay Matters and the following aspects have to be considered for deciding the stay applications and they are: (i) liquidity of the funds of the assessee to clear the tax arrears out of own funds at the relevant point of time based on the assessee’s financial status at the time of the stay petition hearing; (ii) credit¬worthiness of the assessee to outsource the funds to clear the departmental dues; (iii) prima facie views on the likely decision of the Tribunal on the issues raised in the appeal; (iv) departmental urgencies in matters of collection and recovery; (v) guarantees provided by the assessee to safe guard the interest of the revenue etc.
10. In the light of the above facts of the case as well as the philosophy relating to the matters on granting of the stay, we find the assessee’s refund amounts to the tune of more than Rs 11 crore is still with the department and it is undisputed. In so far as the merits of the issue are concerned, the issue in question revolves around ‘transfer pricing’ issues and without hearing the parties in dispute, no prima facie view can be expressed on merits favoring the either side of the dispute. The arguments raised by the Ld. Counsel cannot be brushed aside summarily as the said arguments are backed by the extensive citations of several of the judicial fora. Ld Counsel for the assessee also requested for grant of early hearing. Further, it is fact that similar stay application were disposed off by various benches of the Tribunal granting complete stay of demand in some cases and granting stay of demand subjected to payment of 10 % of the demand. In these circumstances, we are of the opinion, the stay application filed by the assessee must be allowed conditionally for a period of six months so that coercive action if any from the Revenue side may not hamper the functioning of the assessee’s business.
11. The conditions in this regard are:-
(i) Out of the total demand of Rs 28.15 crores, only the demand of Rs 17.62 crores is the collectible demand and it includes Rs 10.83 crores of tax component. The assessee shall pay 50% of the sum of Rs 10.83 crores ie Rs 5.42 crores immediately either by way of adjustment of refunds or otherwise at the option of the assessee.
(ii) Revenue shall hold on to the balance of refunds (if assessee chooses for adjustment as mentioned in (i) above as the guarantee till the disposal of the appeal by the Tribunal.
(iii) Assessee’s request for early hearing of the appeal is allowed favorably and the appeal shall be heard on the date as pronounced in the open court ie 06th April, 2011. The parties are informed to not seek frivolous adjournments. Thus, the Registry is directed to post the appeal accordingly.
12. In the result, the stay application is allowed pro-tanto.
Order pronounced in the open court on 24th day of February, 2011.
