M/S. KAYPEE ELECTRONICS V. THE DEPUTY COMMISSIONER OF INCOME TAX

WP/52737/2017

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The case involves M/s. Kaypee Electronics & Associates Pvt Ltd, the petitioner, challenging an interlocutory order of the Income Tax Appellate Tribunal (ITAT), which partially granted a stay on the demand raised by the Deputy Commissioner of Income Tax for the Assessment Year 2013-14. The Tribunal had required the petitioner to deposit Rs.50 lakhs against a demand of approximately Rs.95 lakhs, which was based on the adjustment of a royalty payment under the Arm's Length Price (ALP) principle. The petitioner contested the amount required for deposit, arguing that under CBDT instructions, only 20% of the demand should be deposited pending the appeal, and offered to deposit Rs.30 lakhs instead. The High Court, considering the minimal time gap between the deposit deadline and the hearing date, modified the Tribunal's order to reduce the deposit amount to Rs.30 lakhs.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 761257 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 21-11-2017
• Assessment Year: misc
• Laws Referred To: Articles 226 & 227 of the Constitution of India, Section 260A of the Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: JEEVAN NEERALGI
• Assessee Lawyers: CHYTHANYA
• Keywords: Arm's Length Price; Assessment Year 2013-14; Income Tax; Royalty Payment; Stay Application; Transfer pricing
• Section: 260A; 226; 227

Judgement Text

" 1/7 IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 21st DAY OF NOVEMBER 2017 BEFORE THE HON'BLE Dr.JUSTICE VINEET KOTHARI WRIT PETITION No.52737/2017 (T-IT) BETWEEN: M/S. KAYPEE ELECTRONICS & ASSOCIATES PVT LTD PLOT No.302 & 303 SOMPURA INDUSTRIAL AREA 1ST STAGE, NIDAVANDA VILLAGE SOMPURA HOBLI, NELAMANGALA TALUK BENGALURU RURAL DISTRICT - 562111 (REPRESENTED BY ITS MANAGING DIRECTOR SHRI. N.V. RAMANA MURTHY AGED ABOUT 52 YEARS S/O SRI KOTILINGAM NAIDU) ... PETITIONER (BY SRI. CHYTHANYA K.K. ADV.,) AND: THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE -4 (1) (1), 2ND FLOOR BMTC BUILDING, 80 FEET ROAD KORAMANGALA, BENGALURU – 560095. ... RESPONDENT (BY SRI. JEEVAN J. NEERALGI, ADV.,) THIS W.P. IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH AS FAR AS THE PETITIONER IS CONCERNED BY AN APPROPRIATE WRIT OR ORDER IN THE NATURE OF CERTIORARI OR OTHERWISE IMPUGNED ORDER OF STAY, DTD.6.11.2017 OF THE HON'BLE TRIBUNAL IN SP NO.239/BANG/2017 (IT(TPA Date of Order 21-11-2017 W.P.No.52737/2017 M/s. Kaypee Electronics & Associates Pvt. Ltd. Vs. The Deputy Commissioner of Income Tax 2/7 NO.2063/BANG/2017) FOR THE ASSESSMENT YEAR 2013-14 VIDE ANNEX-A & ETC., THIS W.P. COMING ON FOR ORDERS THIS DAY, THE COURT MADE THE FOLLOWING:- ORDER Mr. Chythanya K.K. Adv. for Petitioner Mr. Jeevan J. Neeralgi, Adv. for Respondent 1. The petitioner-assessee has filed this petition against the interlocutory order passed by the Income Tax Appellate Tribunal (‘the Tribunal’ for short) ‘C’ Bench, Bengaluru, rejecting the stay application filed by the petitioner in the pending appeal before it for the Assessment Year 2013-14. 2. The learned Tribunal by its impugned order dated 06.11.2017 against the Demand of Rs.95,04,375/- on account of the adjustment of Royalty payment of Rs.2,29,39,967/- on the basis of Arm’s Length Price (ALP) has granted the relief to the extent of remaining amount of the said Demand of Rs.95 lakhs not been recovered, subject to the payment Date of Order 21-11-2017 W.P.No.52737/2017 M/s. Kaypee Electronics & Associates Pvt. Ltd. Vs. The Deputy Commissioner of Income Tax 3/7 of Rs.50 lakhs by the petitioner-assessee on or before 30.11.2017 fixing the final hearing of the appeal itself on 14.12.2017 which falls shortly hereafter. 3. While passing the said interlocutory order, allowing the stay application of assessee to a partial extent, the learned Tribunal has observed in para-1 of the order itself that the main issue involved in the said appeal has already been decided against the petitioner- assessee for the preceding assessment year and learned counsel for the petitioner also fairly submitted that the appeal against that order for preceding year has already been preferred before this Court under Section 260A of the Income Tax Act, 1961, which is pending. 4. However, what the learned counsel for the petitioner-assessee Mr.Chythanya urged before the Court is that in paragraph-2 of the impugned order, the learned Tribunal itself observed that besides the main ground already decided against the petitioner-assessee Date of Order 21-11-2017 W.P.No.52737/2017 M/s. Kaypee Electronics & Associates Pvt. Ltd. Vs. The Deputy Commissioner of Income Tax 4/7 in the previous year there, “there are incidental grounds raised for this assessment year. If these grounds of appeal are allowed in favour of the assessee-company, there may be substantial reduction in the demand raised. Keeping in view this submission, we stay collection of stay of demand, subject to demand of Rs.50 lakhs on or before 30th November 2017”. 5. The learned counsel for the petitioner therefore submitted that the appeal before the learned Tribunal being directed against the order passed by the Transfer Pricing Officer (TPO) is the first appeal and the first appeal lies before the ITAT directly and not before the CIT (Appeals), where as per the CBDT Instructions, the usual norms is that only 20% of the demand is allowed to be paid subject to the final decision of the appeal itself. Therefore, he submitted that the petitioner- assessee would be ready and willing to deposit even more at Rs.30 lakhs on or before 30.11.2017 as Date of Order 21-11-2017 W.P.No.52737/2017 M/s. Kaypee Electronics & Associates Pvt. Ltd. Vs. The Deputy Commissioner of Income Tax 5/7 against Rs.50 lakhs directed by the learned Tribunal, subject to final decision of the appeal itself and the petitioner-assessee would cooperate and will not seek any adjournment before the Tribunal on 14.12.2017, the date fixed for final hearing of the appeal itself. 6. Normally this Court would not like to interfere with the exercise of discretion by the learnted Tribunal while passing the interlocutory order and the direction of the learned Tribunal to deposit Rs.50 lakhs against the demand of Rs.95 lakhs approx, cannot be said to be unfair use of exercise of its discretion, even if the payment of the said amount, going by the thumb rule of 50% is adopted. However, it appears to this Court that since the difference between the cut off date for payment of Rs.50 lakhs on 30.11.2017 and the date of hearing on 14.12.2017 of the appeal itself is bare minimum of 15 days, an indulgence can be granted to the petitioner though not as a matter of right. Date of Order 21-11-2017 W.P.No.52737/2017 M/s. Kaypee Electronics & Associates Pvt. Ltd. Vs. The Deputy Commissioner of Income Tax 6/7 7. The observation of the learned Tribunal that the other incidental grounds may result in substantial reduction in demand raised, though indicates that a prima-facie case of the assessee exists but the extent of that could not naturally have been deferred and computed precisely by the learned Tribunal. The adjudication and determination of such incidental grounds would also depend upon the final decision of the learned Tribunal itself after hearing both the sides. 8. Therefore, as of now, it is in the realm of only guess work as to how much relief the assessee will or will not ultimately get when the learned Tribunal decides the appeal only on 14.12.2017. Since the gap of time period between the two dates as aforesaid is only about 15 days, this Court is inclined to grant indulgence to the petitioner-assessee, as this Court feels that the interest of revenue will not be seriously prejudiced, if the payment of balance amount may await Date of Order 21-11-2017 W.P.No.52737/2017 M/s. Kaypee Electronics & Associates Pvt. Ltd. Vs. The Deputy Commissioner of Income Tax 7/7 the final decision of the Tribunal for a period of 15 days more. 9. Accordingly, this petition is disposed of with a slight modification in the impugned interlocutory order passed by the learned Tribunal by substituting the amount of Rs.30 lakhs in place of Rs.50 lakhs in the order dated 06.11.2017 passed by the learned Tribunal. No further modification is required or made in the said order. It is made clear that this will not be of any kind of precedent for the case of the petitioner- assessee himself or any other case. No order as to costs. Sd/- JUDGE Srl. "