Case Law Details

Case Name : Abacus Distribution System (India) Pvt. Ltd. Vs ACIT (ITAT Mumbai)
Appeal Number : SA No. 133/Mum/2013
Date of Judgement/Order : 26/04/2013
Related Assessment Year : 2008-09

Abacus Distribution System (India) Pvt. Ltd. Vs ACIT (ITAT Mumbai)

The ld. Counsel has pointed out that for assessment years 2004-05 to 2007-08 the service charges paid to the AE have been accepted by the department and only for the year under consideration, the TPO held the ALP of service charges at nil and consequently the entire service charges have been added to the income of the assessee. He has further submitted the claim of brought forward unabsorbed depreciation Rs.6,52,65,858/- has been denied by the Assessing Officer by relying upon the decision of the Special bench of the Tribunal in the case of Times Guarantee Ltd.(2010) 40 SOT 14(Mum.) whereas this issue now settled by the decision of the Hon’ble High Court of Gujarat in the case of General Motors India Pvt. Ltd. vs. DCIT (210 Taxmann 20), whereby the Hon’ble High Court has held that unabsorbed depreciation available to the assessee on 1st April 2002 will be dealt with in accordance with the provisions of section 32(2) as amended by the Finance Act, 2001. Accordingly the addition made by the Assessing Officer is not justified. The ld. Counsel has also relied upon various decisions on the issue of TP adjustment and submitted that the addition on account of TP adjustment in respect of the service charges as well as brought forward unabsorbed depreciation are uncalled for and, therefore, the assessee has a good prima facie case. The ld. Counsel has thus pleaded that the balance demand of Rs.6,61,95,368/- may be stayed till the disposal of the assessee of the assessee. On the other hand the ld. DR had vehemently opposed the application of the assessee.

Having considered the rival submissions as well as debatable nature of issues we are of the view that the assessee has made out prima facie a good case for grant of stay of demand subject to further part payment of demand.

The first instalment of Rs.40.00 lacs shall be paid on or before 15th May 2013 and the second instalment shall be paid on or before 15th June 2013. Subject to the above payment the recovery of the outstanding demand is stayed till the disposal of the appeal or 180 days, whichever is earlier.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

This stay application by the assessee for seeking stay of demand arising from assessment order passed under section 143(3) r.w.s. 144C(13) of the Income tax Act, 1961 for the assessment year 2008-09.

2. We have heard the ld. Counsel Shri Girish Dave as well as Shri Mohit Jain, the ld. DR and considered the rival material on record. The ld. Counsel for the assessee has submitted that the total demand raised by the department is Rs.8,81,95,368/- out which the assessee has already paid Rs.2,20,00,000/- which is 25% of the gross demand. He has further submitted that the demand of tax in the case arises due to the addition made by the Assessing Officer mainly on account of transfer pricing adjustment of Rs.10,34,55,593/- and disallowance of brought forward unabsorbed depreciation of Rs.6,52,65,858/-. The ld. Counsel has pointed out that the TP adjustment has been made in respect of two international transactions namely marketing expenses to the tune of Rs.5,89,53,367/- and secondly service charges to the tune of Rs.4,40,00,000/-. The issue of TP adjustment in respect of marketing expenses is pending for adjudication before the Tribunal since assessment year 2004-05 to 2008-09. Whereas adjustment made on account of service charges is for the first time and neither in the past nor in the subsequent years the department has made the addition on account of service charges which is purely reimbursement of expenses. The ld. Counsel has pointed out that for assessment years 2004-05 to 2007-08 the service charges paid to the AE have been accepted by the department and only for the year under consideration, the TPO held the ALP of service charges at nil and consequently the entire service charges have been added to the income of the assessee. He has further submitted the claim of brought forward unabsorbed depreciation Rs.6,52,65,858/- has been denied by the Assessing Officer by relying upon the decision of the Special bench of the Tribunal in the case of Times Guarantee Ltd.(2010) 40 SOT 14(Mum.) whereas this issue now settled by the decision of the Hon’ble High Court of Gujarat in the case of General Motors India Pvt. Ltd. vs. DCIT (210 Taxmann 20), whereby the Hon’ble High Court has held that unabsorbed depreciation available to the assessee on 1st April 2002 will be dealt with in accordance with the provisions of section 32(2) as amended by the Finance Act, 2001. Accordingly the addition made by the Assessing Officer is not justified. The ld. Counsel has also relied upon various decisions on the issue of TP adjustment and submitted that the addition on account of TP adjustment in respect of the service charges as well as brought forward unabsorbed depreciation are uncalled for and, therefore, the assessee has a good prima facie case. The ld. Counsel has thus pleaded that the balance demand of Rs.6,61,95,368/- may be stayed till the disposal of the assessee of the assessee. On the other hand the ld. DR had vehemently opposed the application of the assessee.

3. Having considered the rival submissions as well as debatable nature of issues we are of the view that the assessee has made out prima facie a good case for grant of stay of demand subject to further part payment of demand. On the query from the Bench the ld. Counsel for the assessee has agreed for further payment of Rs.80.00 lacs in two instalments of Rs.40.00 lacs each. Therefore, in view of the facts and circumstances of the case the balance demand is stayed subject to payment of Rs.80.00 lacs by the assessee in two instalments of Rs.40.00 each. The first instalment of Rs.40.00 lacs shall be paid on or before 15th May 2013 and the second instalment shall be paid on or before 15th June 2013. Subject to the above payment the recovery of the outstanding demand is stayed till the disposal of the appeal or 180 days, whichever is earlier.

4. The appeal of the assessee is directed to be listed for out of turn hearing on 8th July 2013. It is clarified that this stay as well as out of turn hearing are subject to the payment as directed by us failing which the stay granted shall get vacated and the matter shall be taken out from out of turn category. The assessee has to produce payment challan on or before next date of hearing. Since the date of hearing of the appeal is pronounced in presence of both parties therefore, no separate notice of hearing will be issued.

5. The stay petition is allowed subject to payment as directed.

Order pronounced in the open court on 26th April, 2013.

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