Demand cannot be enforced by Revenue if refunds are due & substantial issues are covered in favour of Taxpayer

Samsung India Electronics Pvt. Ltd. Vs Additional CIT National E-Assessment Centre (ITAT Delhi)

From the report of the Assessing Officer as well as the clarification given by the ld. counsel it is seen that there are a huge refunds which are due to the assessee and as per the report of the Assessing Officer, substantial refund has been adjusted against the demand for Assessment Year 2010-11 for which already favourable order has been passed by this Tribunal order dated 4^th October, 2019, even when there was a stay on collection of tax during the pendency of the appeal. Looking to the entirety of the facts that, once a huge refund are due to the assessee the Revenue cannot enforce the payment of demand especially when substantial issues are covered in favour of the assessee. However, in line with the earlier stay orders for Assessment Year 2015-16 as pointed out by the ld. counsel and in all fairness, we direct the Assessing Officer to adjust amount of Rs.50 crore (fifty crore) from the refund due to the assessee, against the outstanding demand and the balance demand shall be stayed for a period of six months or till passing of the order, whichever is earlier. Registry is also directed to fix the appeal on priority basis on 10^th November, 2021.

FULL TEXT OF THE ORDER OF ITAT DELHI

By way of aforesaid Stay Application, the applicant-assessee seeks for stay of outstanding demand of Rs.2714.03 crore for the aforementioned assessment year which are arising out of various additions made in the final assessment order in pursuance of DRP direction.

2. Before us, ld. counsel has given detail of the issues involved, amount of tax determined on the adjustment/AMP made on whether it is a covered issue or whether the assessee has a strong prima facie case.

3. Apart from that, the ld. counsel pointed out that there are various refunds due to the assessee in the prior years based on the favourable order of the Hon’ble Tribunal. The details of which was given in the following manner:

4. In view of the aforesaid statement of the assessee, a report was called from the Assessing Officer through the office of the DR, wherein we had directed the Assessing Officer to give the status and the affect of appeal orders passed by the Tribunal in the preceding years and pending refunds which has been stated to be more than Rs. 741 crore. In compliance thereof, the Assessing Officer has submitted the following report.

F. No DCIT/Cir. 22(2)/ITAT/Samsung/2021-22/ Dated: 02.09.2021

To

The Senior Departmental

Representative ITAT,

Friday Bench, New Delhi

(Through Proper Channel)

Respected Sir,

Sub.: Stay in the case of M/s Samsung India Electronics Pvt

Limited (PAN AAACS5123K) vide S.A. No. 50/Del/2021 for the A.Y. 2016-17-Reg.

Ref: (i) Sr. (DR)/ITAT/Friday-Bench/2021-22/83 dated 02.07.2021

(ii) Sr. (DR)/ITAT/Friday-Bench/2021-22/83 dated 24.08.2021

Kindly refer to the above mentioned subject. The above mentioned letters have not been received at this office. However, the undersigned regrets the delay in the submission of report in the matter.

2. It is submitted that as per the direction of the Hon’ble ITAT, the requisite appeal effect orders are to be passed for AY. 2005-06 to 2011-1.2 and subsequently the status report of the actual demand for the AY 2016-­17 is to be informed accordingly to the Bench for deciding the aforesaid stay petition of the assessee company.

3. In view of the above, as per the direction of the Hon’ble ITAT in the case of the assessee company for AY 2005-06 to 2011-12, following appeal effects have been given to the combined orders passed the appeal effect:

4. Submitted for your kind consideration.

Regards,
Joint Commissioner of Income Tax (OSD)
Circle 22(2),
O/o Pr. CIT 7
New Delhi.

5. In response to the above said report, the ld. counsel on behalf of the assessee had stated that certain claims made by the Assessing Officer are incorrect and does not reflect true and pending refunds. Vide reply dated 21^st September, 2021, the assessee has filed following rejoinder to the said report.

“The Report was received by SIEL on September 10, 2021. Relevant extract of the AO report is as under:

In his Report, the Ld. AO has made certain claims which are incorrect and does not reflect true and fair picture of the pending refunds. For instance, the AO has claimed that he has issued refunds amounting to Rs. 234.69 crores (approx.) for three (3) assessment years i.e. 2005-06, 2006-07 and 2009-10. However, refunds determined for these years have not been issued to SIEL but instead illegally adjusted against AY 2010-11. Moreover, the AO has not made any comments on the refund status of AY 2012-13, 2013-14 and 2014-15. A table summarizing the refund status and SIEL’s comments is summarized below:

As evident from the above table, we have received refund only for AY 2011-12. In respect of AY 2005-06, 2006-07 and 2009-10, AO has determined refund of Rs. 234.69 crores against actual refund of Rs. 385.76 (plus interest) which is due to SIEL. Moreover, the refund which has been determined has been illegally adjusted against the alleged demand for AY 2010-11 (for which a favourable order has been passed by the Hon’ble ITAT on October 4, 2019 and there was a stay on the collection of demand during the pendency of the appeal).

It is also important to note that AO did not issue notice u/s 245 of the Act before adjusting the alleged outstanding demand for AY 2010-11. Thus, the adjustment made by the AO in AY 2010- 11 is completely illegal and contrary to the principles of judicial discipline since it is against the binding order of the Hon’ble Tribunal and Transfer Pricing Officer.

In view of the above, we pray before this Hon’ble ITAT to take our submissions on record, pass appropriate orders and grant stay for AY 2016-17.”

6. Ld. Counsel further submitted that in the Assessment Year 2015-16, wherein the similar issues were involved wherein almost demand of more than Rs.3000 crore was created, this Tribunal had granted stay looking to the prima facie case and directed the assessee to deposit Rs. 40 crore. This year also despite most of the issues are either covered or assessee has a very strong prima facie case, similar direction can be given. Apart from that, he submitted that in so far as AMP adjustment in manufacturing segment, networking segment and on account of royalty payment, even if one comparable is excluded out of many, then there would be no adjustment at all and even for exclusion of such comparable there are various judgments in favour of the assessee that on FAR analysis same are likely to be rejected.

7. On the other hand, ld. DR strongly opposing the granting of stay and submitted that here in this case there is a substantial demand which are arising out of uncovered issues, also i.e., they are not directly covered by the decision of the Tribunal in assessee’s own case, therefore, in so far as uncovered issues are concerned, assessee should be directed to pay 20% of the demand.

8. After considering the aforesaid submission and the prima facie issues involved in the appeal, we find that in so far as TP adjustment on account of AMP expenses and corporate tax addition on account of EXPAT salaries disallowed u/s. 37(1) are concerned, same are covered by the decision of the Tribunal in favour in assessee’s own case in the preceding years.

9. In so far as TP adjustment on account of manufacturing segment and networking segment, the ld. counsel has pointed out that even if one comparable are removed out of various comparables chosen by the TPO, then there would be no ALP adjustment. Similarly with regard to royalty adjustment on account of royalty payment, we find that the applicant has consistently aggregating the payment of royalty with its manufacturing functions under TNNM which has been accepted by the TPO in the earlier years. Thus, prima facie assessee does have a balance of convenience in favour for granting of stay.

10. Moreover from the report of the Assessing Officer as well as the clarification given by the ld. counsel it is seen that there are a huge refunds which are due to the assessee and as per the report of the Assessing Officer, substantial refund has been adjusted against the demand for Assessment Year 2010-11 for which already favourable order has been passed by this Tribunal order dated 4^th October, 2019, even when there was a stay on collection of tax during the pendency of the appeal. Looking to the entirety of the facts that, once a huge refund are due to the assessee the Revenue cannot enforce the payment of demand especially when substantial issues are covered in favour of the assessee. However, in line with the earlier stay orders for Assessment Year 2015-16 as pointed out by the ld. counsel and in all fairness, we direct the Assessing Officer to adjust amount of Rs.50 crore (fifty crore) from the refund due to the assessee, against the outstanding demand and the balance demand shall be stayed for a period of six months or till passing of the order, whichever is earlier. Registry is also directed to fix the appeal on priority basis on 10^th November, 2021. Both the parties informed.

11. In the result, the Stay Application of the assessee is partly allowed.

Order pronounced in the open Court on 24th September, 2021.