OUTOTEC GMBH & CO. KG,GERMANY V. ASSISTANT COMMISSIONER OF INCOME-TAX, (INTERNATIONAL TAXATION), INDIA

SA 9/KOL/2025

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Outotec GMBH & Co. KG, a German LLP and tax resident, filed a stay petition against a demand raised following a scrutiny assessment for the assessment year 2022-23. The demand included tax, interest, and penalties totaling \\u20b92,33,93,593/-. The Tribunal considered the merits of the case, previous judicial decisions favoring the assessee, and the financial implications of the demand on the assessee. The Tribunal noted that the assessee had a strong prima facie case based on past rulings and the nature of income from designs and drawings, which was contested as royalty/fee for technical services. The Tribunal also considered the public interest and the assessee's financial hardship, given the refunds due from the Direct Tax Vivad se Vishwas Scheme, which exceeded the demand.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 653007 (ITAT-KOLKATA)
• Appeal Type: Stay Application
• Pronouncement Date: 17-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2022-2023
• Other Referred Cases: ITO vs. M. K. Mohammed Kunhi [1969] 71 ITR 815, Asian Hotels v. MCD [1988] 171 ITR 116
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Application of stay
• Section: 143(3)

Judgement Text

"आयकर अपीलीय अधिकरण कोलकाता 'सी' पीठ, कोलकाता में IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘C’ BENCH, KOLKATA श्री प्रदीप क ुमार चौबे, न्याधयक सदस्य एवं श्री राक ेश धमश्रा, लेखा सदस्य क े समक्ष Before SHRI PRADIP KUMAR CHOUBEY, JUDICIAL MEMBER & SHRI RAKESH MISHRA, ACCOUNTANT MEMBER S.A. No.: 9/KOL/2025 Arising out of I.T.A. No.: 635/KOL/2025 Assessment Year: 2022-23 Outotec GMBH & Co. KG Vs. Assistant Commissioner of Income-tax, (International Taxation) (Appellant) (Respondent) PAN: AAEFO1973C Appearances: Assessee represented by : K.M. Gupta, AR. Department represented by : S.B. Chakraborthy, Addl. CIT, Sr. DR. Date of concluding the hearing : 13-June-2025 Date of pronouncing the order : 17-June-2025 ORDER PER RAKESH MISHRA, ACCOUNTANT MEMBER: The assessee has filed the present Stay Petition SA No. 9/GTY/2025 in ITA No. 635/KOL/2025 dated 28.05.2025 requesting for stay of demand of ₹2,33,93,593/- which comprises of tax of ₹1,66,60,493/-, interest of ₹65,21,120/-, fee for default in furnishing the return of income of ₹5,000/- and refund already issued of Page | 2 S.A. No.: 9/KOL/2025 AOO I.T.A. No.: 635/KOL/2025 Assessment Year: 2022-23 Outotec GMBH & Co. KG. ₹2,06,980/-. It is stated that security as may be deemed fit in the circumstances of the case and in the interest of justice is willing to be offered by the applicant; however, the assessee holds a sanguine belief that from a perusal of the appeal documents and the stay application, the Hon'ble Tribunal shall grant stay without any security. In the prayer it is stated that the disputed outstanding demand of ₹2,33,93,593/- may be stayed until the disposal of the appeal by the Hon'ble Tribunal and during the pendency of the appeal, the Ld. AO, the jurisdictional Commissioner of Income-tax and or/his subordinates and the Centralised Processing Centre be restrained from taking coercive steps for recovery of the demand and the assessee may kindly not be considered as an \"assessee-in-default\" for the outstanding tax demand. 2. Brief facts of the case are that the assessee is a Limited Liability Partnership Firm (\"LLP\") incorporated in Germany and is a tax resident thereof. The assessee is a worldwide leader in providing innovative and environmentally sound solutions for a wide range of customers in metal processing industries. For the year under consideration, the assessee had filed its return of income u/s 139(1) of the Act declaring taxable income of ₹1,29,60,220/- (₹1,26,76,160/- from manpower and other services, and ₹2,84,063/- from interest on income-tax refund). The resulting tax liability of ₹12,96,022/- was offset against credit for taxes deducted at source amounting to ₹15,05,954/-, resulting in a refund of ₹2,09,932/-. The return of income filed by the assessee was picked up for scrutiny assessment and following the filing of submissions in connection with the assessment proceedings, a draft assessment order dated 28.03.2024 was passed by the Ld. AO u/s 144C of the Act, wherein the following additions were proposed: Page | 3 S.A. No.: 9/KOL/2025 AOO I.T.A. No.: 635/KOL/2025 Assessment Year: 2022-23 Outotec GMBH & Co. KG. S.No. Particulars Amount (in INR) (i) Returned income 1,29,60,220 Additions proposed in the draft assessment order (ii) Income from sale of designs and drawings taxed as royalty/fee for technical services (“FTS”) 8,34,17,585 (iii) Income on account of unexplained money under section 69A of the Act 88,61,476 (iv) Assessed income (rounded off) 10,52,39,281 2.1. Subsequently, the Ld. AO passed the final assessment order dated 21.01.2025 u/s 143(3) r.w.s. 144C(13) of the Act, assessing the total income at ₹10,52,39,281/-. While doing so, the Ld. AO had overlooked the assessee’s submissions before the Hon'ble DRP on the addition u/s 69A of the Act. Consequently, a demand of ₹2,33,93,593/- was raised vide notice of demand dated 21.01.2025 u/s 156 of the Act. The assessee vide application dated 26.02.2025 filed before the Ld. AO, had prayed for a stay on demand, which is currently pending for disposal. Furthermore, being aggrieved by the addition made in the final assessment order, the assessee has filed an appeal before the Hon'ble Tribunal u/s 253 of the Act (ITA No. 635/KOL/2025) and the same is currently pending for adjudication. 3. It is stated on the merits of the case that the issue relating to taxable income earned from supply of design and drawings is squarely covered in favour of the assessee by the order of the Ld. CIT(A) and of the Hon'ble Tribunal for the AY 2013-14 to AY 2015-16 in the case of the assessee’s predecessor i.e. Outotec GMBH vide orders dated 26.04.2016, 24.10.2019 and 23.02.2018 and assessee’s own case for AY 2015-16 and AY 2016-17 vide orders dated 24.10.2019. 4. It is submitted that there is a plethora of judicial precedents which support the contention of the assessee that the sale of designs and drawings is tantamount to sale of goods and therefore, the income Page | 4 S.A. No.: 9/KOL/2025 AOO I.T.A. No.: 635/KOL/2025 Assessment Year: 2022-23 Outotec GMBH & Co. KG. therefrom is in the nature of business income and the addition is liable to be deleted as the assessee has strong prima facie case in its favour. As regards the taxability of receipts appearing in Form No. 26AS as unexplained money u/s 69A of the Act, the same pertains to payments received by the assessee during the year under consideration from Bhilai Steel Plant and Steel Authority of India Limited. The assessee has reconciled the invoices received by the assessee under its agreement entered with SAIL in AY 2012-13 and AY 2015-16 and the payments received. The details of addition made in the final assessment order and consequent tax liability are also mentioned. Relying upon the decisions of Hon'ble Supreme Court in the case of ITO vs. M. K. Mohammed Kunhi [1969] 71 ITR 815 and Hon'ble Delhi High Court in the case of Asian Hotels v. MCD [1988] 171 ITR 116 it is stated that the balance of convenience lies in favour of the assessee and if the stay is granted on the demand proceedings, no harm and injury will be caused to the Revenue. The plea of undue hardship has also been taken and it is submitted that as regards safeguarding of public interest, the assessee had submitted its tax disputes for AY 2018-19 and AY 2019-20 under the Direct Tax Vivad se Vishwas Scheme, 2024 (\"VSV Scheme\") enacted vide Finance (No. 2) Act, 2024, pursuant to which it is entitled to refunds aggregating to ₹2,17,19,086/- (₹29,35,404/- for AY 2018-19 and ₹1,87,83,682/- for AY 2019-20). It is submitted that the tax refunds payable to the assessee aggregating to ₹2,17,19,086/- for AY 2018-19 and AY 2019-20 exceed the demand raised upon it amounting to ₹2,12,25,365/- and thus, the public interest is appropriately safeguarded. Without prejudice to the above, the assessee humbly requests that in the event this Hon'ble Bench is inclined to direct the Page | 5 S.A. No.: 9/KOL/2025 AOO I.T.A. No.: 635/KOL/2025 Assessment Year: 2022-23 Outotec GMBH & Co. KG. assessee to deposit 20% of the disputed demand in relation to AY 2022- 23 for obtaining a stay thereon, the same may be adjusted against the aforesaid refunds pending to be issued for AYs 2018-19 and 2019-20 and no separate tax payment be requested from the assessee for securing a stay on the impugned demand. 5. At the time of considering the application for stay, the hardship which may be caused to the assessee is the primary factor to be considered. The attention of the Ld. Counsel for the assessee was drawn to sub-section (2A) of section 254 of the Act and it was required to inform whether the assessee was willing to pay 20% of the outstanding demand as is required by the proviso to sub-section (2A) of section 254 of the Act. The Ld. AR responded that in respect of AY 2018-19 and AY 2019-20 the assessee has submitted and got the tax dispute resolved under the VSV Scheme, 2024 as a consequence of which it is entitled to refunds aggregating to ₹2,17,19,086/- being Rs. 29,35,404/- for AY 2018-19 and ₹1,87,83,682/- for AY 2018-19 and it had no objection if 20% of the outstanding demand is adjusted out of the refund which have become due to the assessee. 6. We have considered the submission made. Since the Ld. AR contended that refund is due to the assessee on account of the disputes being settled for AY 2018-19 and AY 2019-20, and which refund is more than the outstanding demand, the plea for retention of 20% of the demand is acceptable. Accordingly, the Ld. AO is directed to retain 20% of the refund and the rest of the demand shall be stayed for a period of 180 days or till the disposal of the appeal, whichever is earlier subject to the participation in the appeal before the Tribunal and no adjournment shall be sought by the assessee in the appeal before the Page | 6 S.A. No.: 9/KOL/2025 AOO I.T.A. No.: 635/KOL/2025 Assessment Year: 2022-23 Outotec GMBH & Co. KG. Tribunal unless it is absolutely necessary on account of any exigency or unavoidable circumstances. 7. In the result, the Stay Application filed by the assessee is allowed as above. Order pronounced in the open Court on 17th June, 2025. Sd/- Sd/- [Pradip Kumar Choubey] [Rakesh Mishra] Judicial Member Accountant Member Dated: 17.06.2025 Bidhan (P.S.) Page | 7 S.A. No.: 9/KOL/2025 AOO I.T.A. No.: 635/KOL/2025 Assessment Year: 2022-23 Outotec GMBH & Co. KG. Copy of the order forwarded to: 1. Outotec GMBH & Co. KG, C/o Metso Outotec India Pvt. Ltd. - First Floor, Building No. 10, Tower A, DLF Cybercity, Phase II, Gurugram, Gurgaon, Haryana, 122002. 2. Assistant Commissioner of Income-tax, (International Taxation). 3. CIT(A)- 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. 6. Guard File. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata "