Rittal India Pvt. Ltd. V. Assistant Commissioner of Income-Tax, LTU, Circle-1 and Principal Commissioner of Income-Tax, Large Tax Payers Unit

WP/53218/2018

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The case involves Rittal India Pvt. Ltd., which filed a writ petition against the order of the Income Tax Appellate Tribunal concerning a stay petition. The petitioner argued that the Tribunal failed to consider materials and misinterpreted the applicability of the Arm's Length Price (ALP) to international transactions. The Tribunal's decision was challenged on grounds of financial hardship and incorrect computation of the assessee's margin. The respondents defended the Tribunal's findings, emphasizing the need for financial hardship to be substantiated for granting a stay. The High Court found that the Tribunal's order was contrary to the material on record and lacked proper reasoning, leading to the decision to set aside the Tribunal's order.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 805876 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 12-12-2018
• Assessment Year: misc
• Other Referred Cases: Assistant Collector of Central Excise, Chandan Nagar, West Bengal Vs. Dunlop India Ltd. And Others
• Laws Referred To: Articles 226 & 227 of the Constitution of India
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K V ARAVIND
• Assessee Lawyers: K P KUMAR; T SURYANARAYANA
• Keywords: Appellate Tribunal; Financial hardship; Income Tax; Stay Petition; Transfer pricing
• Section: 92CA

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 12TH DAY OF DECEMBER, 2018 BEFORE THE HON’BLE MR.JUSTICE G.NARENDAR WRIT PETITION No.53218/2018 (T IT) BETWEEN RITTAL INDIA PVT. LTD., NO.23 & 24, KIADB INDUSTRIAL AREA, VEERAPURA DODDBALLAPUR-561203, REPRESENTED HEREIN BY ITS SENIOR MANAGER, FINANCE, MR. KAMAL NATH. ... PETITIONER (BY SRI. K.P.KUMAR, SENIOR COUNSEL FOR SRI. T.SURYANARAYANA, ADV.) AND 1. ASSISTANT COMMISSIONER OF INCOME-TAX, LTU, CIRCLE-1, JSS TOWERS, 100 FEET RING ROAD, BANASHANKARI III STAGE, BENGALURU-560085. 2. PRINCIPAL COMMISSIONER OF INCOME-TAX, LARGE TAX PAYERS UNIT, JSS TOWERS, 100 FEET RING ROAD, BANASHANKARI III STAGE, BENGALURU-560 085. ... RESPONDENTS (BY SRI. K V ARAVIND, ADV.) 2 THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE ORDER DATED 02.11.2018 PASSED BY THE TRIBUNAL AT ANNEX-L REJECTING THE PETITIONER'S PETITION BEARING S.P. NO. 255/ Bang/2018; THIS WRIT PETITION COMING ON FOR ‘PRELIMINARY HEARING’ THIS DAY, THE COURT MADE THE FOLLOWING: ORDER Heard the learned senior counsel Sri. K.P. Kumar along with learned counsel for the petitioner and the learned counsel Sri. K.V. Aravind on behalf of respondent. 2. The petitioner is before this court being aggrieved by the order passed by the Income Tax Appellate Tribunal on the Stay Petition No.255/Bang/2018 dated 02.11.2018. The writ petition is canvassed on the short ground that the Appellant Tribunal while considering and disposing off the application for stay, has failed to look into the materials placed before it and that the reasoning by the Appellate Tribunal that the contention regarding applicability of ALP is restricted to international transaction of the AE has not been contended before the TPO is contrary to the material on record. 3 3. The learned counsel would invite the attention of the court to Annexure-B, being the reply to the show cause notice dated 18.09.2017 wherein under the headings ‘C’ Incorrect Computation of Assessee Margin the petitioner has specifically pleaded ‘the transfer pricing adjustment if any should be restricted only to proportion of operating cost arising from the international transaction of the Assessee pertaining to purchase of goods (spares, materials etc.)’. Further the learned senior counsel would contend that the reasoning by the Tribunal that no details of segments of AE and Non-AE transactions is provided is prima-facie erroneous and the same is controverted by the contents of the order under Section 92CA of the Act produced as Annexure-C to the writ petition, wherein, the AE and Non-AE segments, furnished by the petitioner has been recorded by the authority At para 2.2 of the said order. 4. Further, the learned senior counsel would also invite the attention of the court to the application for stay produced as Annexure-H to the writ petition wherein, at paragraph 3 and 3.1 the petitioner/applicant has 4 specifically pleaded Financial Hardship as it would affect the appellants liquidity and hence, the learned senior counsel would submit that the finding by the Appellate Tribunal that no statement regarding financial hardship is pleaded is erroneous and hence, he would submit that the reasons set out by the Appellate Tribunal prima-facie is contrary to the material on record. 5. The learned senior counsel has also placed reliance on a office memorandum dated 31.07.2017, wherein the Board has stipulated that a deposit of 20% of the demand would constitute a sufficient safeguard. 6. Per contra, the learned counsel for the respondents/revenue would vehemently reiterate the finding and he would contend that the only ground on which the petition for stay can be considered is his financial hardship. In support of his contention he would place reliance on the ruling rendered in the case of Assistant Collector of Central Excise, Chandan Nagar, West Bengal Vs. Dunlop India Ltd. And Others reported in AIR (1985) 1 SCC 260. The learned counsel would take the 5 court through the observation of the Hon’ble Apex Court set out in paragraph 5 which reads as under:- “…….In cases where denial of interim relief may lead to public mischief, grave irreparable private injury or shake a citizen’s faith in the impartiality of public administration, a court may well be justified in granting interim relief against public authority. But since the law presumes that public authorities function properly and bona fide with due regard to the public interest, a court must be circumspect in granting interim orders of far-reaching dimensions or orders causing administrative, burdensome inconvenience or orders preventing collection of public revenue for no better reason than that the parties have come to the court alleging prejudice, inconvenience or harm and that a prima facie case has been shown…..” 7. On a perusal of the said judgment it is apparent that the same arises out of a matter pertaining to indirect taxation. The parameters that are required to be considered by the courts and Tribunals while granting stay and thereby staying the recovery of the revenue is set out. The Hon’ble Apex Court has been pleased to observe as follows:- “………… There can be and there are no hard and fast rules. But prudence, discretion and circumspection are called for. There are several other vital considerations apart from the existence of a prima-facie case. There is a 6 question of balance of convenience. There is the question of irreparable injury. There is the question of the public interest. There are many such factors worthy of consideration. We often wonder why in the case indirect taxation where the burden has already been passed on to the consumer, any interim relief should at all be given to the manufacturer, dealer and the like.” 8. In the instant case it is not in dispute that the matter is otherwise and is one concerning a direct tax. Be that as it may, the criteria as set out by the Hon’ble Apex Court, could also be made applicable in matters arising out of direct taxes. Hence, the Appellate Tribunal was not only required to exercise its discretion but the exercise of the discretion ought to be judicious after taking into account the relevant factors and the exercise of discretionary power on irrelevant consideration, would render the order injudicious and unsustainable as stated supra. The Appellate Tribunal has proceeded to pass the impugned order contrary to the material on record. In that view of the matter, the order is rendered a non-speaking order and stands vitiated by non application of mind. 7 9. In view of the above conclusion, the writ petition is partly allowed. The order dated 02.11.2018 is set aside. The writ petition is allowed subject to the petitioner depositing a sum equal to the 40% of the demand within a period of four weeks from today. The writ petition stands disposed off accordingly. Sd/- JUDGE Chs* CT-HR "