VIVO MOBILE INDIA PRIVATE LIMITED,HARYANA, INDIA V. ASSISTANCE COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, DELHI

SA 396/DEL/2024

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Vivo Mobile India Private Limited filed a stay application against a substantial tax demand arising from an assessment order under sections 143(3) and 144C of the Income-tax Act, 1961. The assessee reported a loss in its return but faced a transfer pricing adjustment on Advertising, Marketing, and Promotion (AMP) expenses, significantly increasing its assessed income and tax liability. The Tribunal considered the merits of the case, including the applicability of the bright line test to AMP expenditures and the interpretation of associated enterprises under section 92A of the Act. The Tribunal noted the assessee's compliance with procedural requirements, including the deposit of 20% of the demand, and the balance of convenience favored granting the stay.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 31662 (ITAT-DELHI)
• Duration Of Justice: 21 day(s)
• Appeal Type: Others
• Pronouncement Date: 18-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2020-2021
• Appeal Filed On: 27-09-2024
• Other Referred Cases: Maruti Suzuki India Ltd. vs. CIT (2016) 381 ITR 117
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHANKAR LAL VERMA
• Assessee Lawyers: K.M. GUPTA
• Keywords: Transfer pricing; International transaction; Wholly owned subsidiary; Application of stay
• Section: 144C; 92A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “I”, NEW DELHI BEFORE SHRI SAKTIJIT DEY, HON’BLE VICE PRESIDENT and SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER SA No.396/Del/2024 (in ITA No.4408/Del/2024) (Assessment Year : 2020-21) Vivo Mobile India Private Limited, vs. ACIT, Central Circle, 10-11th Floor, Palm Spring Plaza, Delhi. Wazirabad B.O., Wazirabad (75), Gurgaon – 122 003 (Haryana). (PAN : AAECV8538M) (APPLICANT) (RESPONDENT) APPLICANT/ASSESSEE BY: Shri K.M. Gupta, Advocate REVENUE BY : Shri Shankar Lal Verma, Sr. DR Date of Hearing : 18.10.2024 Date of Order : 18.10.2024 O R D E R PER S.RIFAUR RAHMAN, AM: 1. Applicant/Assessee, Vivo Mobile India Private Limited (hereinafter referred to as ‘the assessee’) filed the present stay application sought to stay the demand of Rs.1,41,76,68,830/- out of assessment order passed u/s 143 (3) r.w.s. 144C of the Income- tax Act, 1961 (for short ‘the Act’). 2. At the time of hearing, ld. AR for the assessee submitted that assessee has filed its return of income declaring loss of Rs.4,37,71,93,367/- and the assessment was completed u/s 143 (3) read with section 144C of the Act by making transfer pricing addition on AMP of Rs.8,18,71,60,000/- and assessed the total income at Rs.3,80,99,66,633/-. The total tax 2 SA No.396/Del/2024 demand raised by the Assessing Officer including interest of Rs.1,40,71,12,777/-. After adjustment of credit for tax and refund already issued and the net outstanding tax including interest is at Rs.1,41,76,68,830/-. 3. Ld. AR submitted that assessee is a wholly owned subsidiary of Multi-Accord Limited, a Hong Kong based company which holds 99.99% of share capital of the assessee and it is incorporated in 2014. Vivo India and Vivo Mobile Communication Co. Ltd. (VMCC) has entered in licence agreement pursuant to which VMCC provides intellectual property rights to assessee relating to its business of trading, import, exports, manufacturing and distribution of mobile communication devices and its accessories. Pursuant to the assessment, assessee is in appeal before ITAT and on the merits of the case, he submitted that considering the shareholding structure of the assessee company, the assessee and VMCC are not Associated Enterprises in accordance with the provisions of section 92A of the Act. Further, he submitted that the adjustment made by the Assessing Officer is relating to AMP expenditure and as per the Explanation u/s 92B, it does not fall within the ambit of international transaction. He submitted that the assessee relies on the decision of Hon’ble Delhi High Court in the case of Maruti Suzuki India Ltd. vs. CIT (2016) 381 ITR 117. He further submitted that bright line test cannot be applied to benchmark AMP expenditure. Therefore, he submitted that assessee has a good case on merit. 4. Further, he brought to our notice page 33 of the paper book to submit that Assessing Officer also rejected the stay application. He brought to our notice page 32 of the paper book wherein assessee has already deposited 20% of the total outstanding demand. Accordingly, he prayed that the stay may be granted in faovur of the assessee. 5. On the other hand, ld. DR for the Revenue objected to grant of total stay. 6. Considered the rival submissions and material placed on record. We observed that the issue under consideration is more or less covered by various decisions of Hon’ble Delhi 3 SA No.396/Del/2024 High Court and other High Courts. We also observed that assessee has already remitted 20% of the total outstanding demand and relevant bank challan is already filed in the form of paper book. Considering the above facts on record and balance of convenience is in favour of the assessee, we are inclined to grant stay for a period of 180 days from the date of this order or till the date of disposal of present appeal, whichever is earlier, subject to the rider that the assessee shall not take unnecessary adjournment to prolong the appeal otherwise stay order would cease to operate. 7. The case of the assessee is also posted for hearing on 16.12.2024 along with other pending appeals which are posted on the same date. Since the date of hearing is announced in the open court, there is no requirement for issue of separate notice. 8. In the result, the stay application is allowed on the above terms. Order pronounced in the open court on this 18th day of October, 2024 after the conclusion of the hearing. Sd/- sd/- (SAKTIJIT DEY) (S.RIFAUR RAHMAN) VICE PRESIDENT ACCOUNTANT MEMBER Dated: 18.10.2024 TS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "