CISCO SYSTEMS INTERNATIONAL B.V.,NETHERLANDS V. DEPUTY COMMISSIONER OF INCOME TAX, INTERNATIONAL TAXATION, CIRCLE 1(1), BENGALURU

SA 12/BANG/2025

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The case involves M/s. Cisco Systems International B.V. seeking a stay on the outstanding tax demand for the Assessment Years 2020-21 and 2021-22, amounting to approximately Rs. 496 crores. The demand was primarily based on transfer pricing adjustments. The assessee argued that the adjustments were erroneous and that similar issues had been ruled in their favor in previous years by the Tribunal. The Departmental Representative contended that the assessee had not complied with the statutory requirement of paying 20% of the outstanding demand. The Tribunal considered the principles of stay of demand, including the existence of a strong prima facie case, financial hardship, and the balance of convenience, and decided in favor of the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 714521 (ITAT-BANGALORE)
• Appeal Type: Stay Application
• Pronouncement Date: 08-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2021-2022
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N. BALUSAMY
• Assessee Lawyers: NAGESHWAR RAO
• Keywords: Transfer pricing; Reasonable cause; TDS; Application of stay

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH : BANGALORE BEFORE SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER S.A. Nos. 11 & 12/Bang/2025 (in ITA Nos. 1743 & 2527/Bang/2024) Assessment Years : 2020-21 & 2021-22 M/s. Cisco Systems International B.V., C/o Ernst & Young LLP, (Authorized Representative) “Divyasree Chambers”, First Floor, ‘A’ Wing, #11 O’ Shaughnessy Road, Langford Gardens, Bengaluru – 560 025. PAN: AADCC9201D Vs. The Deputy Commissioner of Income Tax (IT), Circle – 1(1)(1), Bengaluru. APPELLANT RESPONDENT Assessee by : Shri Nageshwar Rao, Advocate Revenue by : Shri N. Balusamy, JCIT-DR Date of Hearing : 08-08-2025 Date of Pronouncement : 08-08-2025 ORDER PER WASEEM AHMED, ACCOUNTANT MEMBER The assessee has filed the present stay applications under section 254(2A) of the Income-tax Act, 1961, seeking stay of the outstanding demand for the Assessment Years 2020-21 and 2021-22. 2. The total demand raised by the Revenue amounts to 294,43,37,188.00 and 201,9092,638.00 aggregating to Rs. 496,34,29,826.00 for the AYs 2020-21 and Printed from counselvise.com Page 2 of 4 S.P. Nos. 11 & 12/Bang/2025 (in ITA Nos. 1743 & 2527/Bang/2024) 2021-22 respectively, out of which the TDS amount pertaining to the AY 2020-21 amounting to Rs. 215,49,00999.00 has already been withheld by the Revenue against the outstanding amount stated above which is more than 20% of the total outstanding demand for both the AYs. 3. It was contended by the learned counsel for the assessee that the transfer pricing adjustment resulting in the demand is erroneous and based on a wrong appreciation of facts. Specifically, it was argued that the issues raised in both the appeals filed by the assessee for the impugned assessment years are covered in favour of the assessee by the order of this Tribunal. It was also submitted that there was no change in the facts and circumstances for the years under dispute viz a viz the earlier assessment years. Accordingly, it was contended that a strong prima facie case exists on merits. 4. The ld. AR further submitted that continued recovery measures is causing severe business disruption and financial hardship, despite substantial payment already made. Hence, a stay of the balance, demand is sought. 5. On the other hand, the learned Departmental Representative opposed the stay application by contending that the amount of TDS has already been adjusted against the outstanding demand and therefore, the assessee is required to pay 20% of the balance amount outstanding as on date, which is as per the provisions of law. 6. We have considered the rival contentions and perused the records. The well- established principles governing stay of demand include the existence of a strong prima facie case, financial hardship, and the balance of convenience. In the present case, we find that the assessee has already paid a substantial portion of the demand (more than 20%) by way of TDS adjustment. Accordingly, we are of the opinion that the balance of convenience lies in favour of the assessee. Printed from counselvise.com Page 3 of 4 S.P. Nos. 11 & 12/Bang/2025 (in ITA Nos. 1743 & 2527/Bang/2024) 7. Regarding the contention of the learned DR that the assessee is required to pay 20% of the outstanding demand, we find that the entire amount of demand raised against the assessee arises from additions which are under dispute before the Tribunal. In such circumstances, it would be incorrect to compute the 20% threshold on the balance outstanding demand, as contended by the Revenue. As per the third proviso to section 254(2A) of the Act, the Tribunal may grant stay of demand subject to the condition that the assessee has paid not less than 20% of the amount of tax, interest, fee, penalty, or any other sum payable under the provisions of the Act, or such other amount as the Tribunal may deem fit. The intent of the legislature, in our view, is to ensure a reasonable safeguard for the interests of the Revenue, while balancing the right of the assessee to seek appellate remedy. 8. In the present case, since the entire demand arises from additions, which are under challenge, we are of the considered opinion that the 20% parameter, if invoked, must be applied on the disputed additions and not on the net outstanding demand after adjustment of taxes paid or TDS. 9. Accordingly, we hold that for the purpose of granting stay under section 254(2A), the requirement of paying 20% shall be computed with reference to the disputed amount of addition alone, and not on the reduced balance or net demand. The contention of the Revenue, is therefore not acceptable and is hereby rejected. 10. Thus, we direct the Revenue not to enforce recovery of the balance outstanding demand for a period of 6 months or till the disposal of the appeal, whichever is earlier. 11. The assessee shall not seek adjournment on the date of hearing of the appeal without reasonable cause, failing which these stay orders shall stand vacated automatically. Printed from counselvise.com Page 4 of 4 S.P. Nos. 11 & 12/Bang/2025 (in ITA Nos. 1743 & 2527/Bang/2024) 12. In the result, both the stay applications are allowed in the terms indicated above. Order pronounced in the open court on 08th August, 2025. Sd/- Sd/- (NARENDER KUMAR CHOUDHRY) (WASEEM AHMED) Judicial Member Accountant Member Bangalore, Dated, the 08th August, 2025. /MS / Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Bangalore 5. Guard file 6. CIT(A) By order Assistant Registrar, ITAT, Bangalore Printed from counselvise.com "