Gurbax Singh2015.11.28 11:18I Attest To The Accuracy Andintegrity Of This Documenthigh Court Chandigarh v. Deputy Commissioner Of Income Tax & Another

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH CWP No.21769 of 2015Date of decision: 17.11.201 M/s Perfetti Van Melle India Private Limited .....- Appe Vs, Deputy Commissioner of Income [ax and another ....AmeSsponde CORAM: HON’BLE MR. JUSTICEK AJAY KUMAR MITTAHON’BLE MR. JUSTICK RAMENDRA JAIN 1. Whether Reporters of local papers may be allowed to see the judgment?2. To be referred to the Reporters or not?3. Whether the judgment should be reported 1n the Digest? Present:Mr. Nageshwara Rao, Advocate with|Mr. Sandeep Goyal, Advocate for the appellant. Mr. Tejinder K.Joshi, Advocate for the revenue.| Ajay Kumar Mittal, J. l.The petitioner prays for quashing the order dated dated28.9.2015, Annexure P.8 passed by the Commissioner of Income Tax(Appeals) |CIT(A)], respondent No.2 on the stay application dated 8.5.2015,Annexure P.6/A for the assessment year 2008-09. Prayer has also been madefor quashing the recovery proceedings. Further, direction has been sought toCIT(A) to dispose of the appeal of the petitioner expeditiously. |A few facts relevant for the decision of the controversy,involved as narrated in the petition may be noticed. The petitioner is al company duly incorporated under the provisions of the Companies Act, CWP No 21769 of 2015 1956. It 1s engaged in the business of manutacturing and sale ofconfectionary products from its factories situated at Tamil Nadu, Haryanaand Uttarakhand. For the assessment year 2008-09 1.e. the financial year2007-08, the petitioner filed its return of income on 29.9.2008 declaringincome of.LT13,00,68,080/-. The case was selected for scrutiny and noticesunder Section 143(2) and 142(1) of the Act were issued by the firstrespondent to the petitioner. During the assessment proceedings, it wasnoticed by the Assessing Officer that the petitioner had made internationaltransactions with its associate enterprise and made a reference to theTransfer Pricing Officer (TPO) under Section 92 CA(1) of the Income TaxAct, 1961 (in short, “the Act’) for determination of Arm's length price inrespect of the international transactions. The petitioner filed its objectionsbefore the TPO. The TPO passed order dated 5.10.2011, Annexure P.1determining the Arm's Length price of the international transactions at 4117,99,66,691/- and directed respondent No.1 to make an adjustment to thetotal income of the petitioner byL117,99,66,691/-. On receipt of the orderdated 5.10.2011 passed by the TPO, respondent No.l passed draftassessment order dated 27.12.2011 re-computing the total income of thepetitioner at Ly131,00,34,771/- and consequently raised a demand of =64,53,77,009/-. The petitioner submitted its objections before the DisputeResolution Panel (DRP). Vide order dated 21.9.2012, the DPR rejected theobjections and directed respondent No.l to complete the assessmentproceedings in terms of the direction in the order passed by it. In pursuanceto the order dated 21.9.2012, respondent No.1 passed final assessment orderdated 8.11.2012, Annexure P.2 assessing the petitioner company to the total CWP No 21769 of 20154income of.L131,00,34,771/- and created demandof |L64,53,77,009/-. Thepetitioner filed appeal before the Tribunal being ITA No.5897/Del/2012. Italso filed an application for staying the outstanding demand of =64,53,77,009/-. In the meantime, same issue regarding transfer pricingadjustment in relation to advertisement, marketing and sales promotioncame before the Tribunal in the case of M/s [.G.EFlectronics India PvtLimited vs. The Assistant Commissioner of Income Tax. The President ofthe Tribunal constituted Special Bench referring two legal questions foradjudication. However, in the meantime, the Tribunal vide order dated30.11.2012 decided the stay application and stayed 50% of the outstandingdemand upto six months or disposal of appeal whichever was earlier subjectto the payment of balance 50% of the demand in six equal monthlyisntalments, first to be payable on 28.12.2012. In compliance with the saidorder, the petitioner deposited the monthly installment on 28.12.2012 andthen on 28.1.2013 In the meantime, on 23.1.2013, the Special Bench of theTribunal passed judgment in the case of M/s L.G.Electronics India Pvt.Limited. It was held by majority that the adjustment in relation toAdvertisement and Market Promotion (AMP) expenses and earning a markup from associated enterprise was permissible. Consequently, the matter inthat case was restored back to the TPO for de novo adjudication on the basisof guidelines given in the order. Thereafter, the petitioner filed writpetition before this court to stay the remaining instalments to be paid till thedisposal of the main appeal. This court directed the petitioner to pay 50%of the demand as per the order of the Tribunal to avail the benefit of stay.The petitioner paid the remaining instalments towards 50% of the demand CWP No 21769 of 2015 raised 1.e. <a32,26,88,505/-. The petitioner's appeal was also heard by theTribunal and it vide order dated 18.10.2013, Annexure P.3 remanded thematter back to the file of TPO for deciding the same in view of its decision1n M/s LG Electronics' case (Supra). Aggrieved thereby, the petitioner filedappeal before this court which is still pending. In the meantime on16.3.2015, the Delhi High Court passed order on the issue of advertisingand marketing expenses. It rejected the application of ‘Bright Line Test’ as amethod to compute the adjustment related to AMP. Respondent No.1 passedrevised final assessment order dated 30.3.2015, Annexure P.4 creating ademand of=a29,79,66,020/- but did not refer the matter to the TPO.According to the petitioner, respondent No.1 failed to give effect to thedemand already paid in protest amounting to “a32,66,88,505/-. Thepetitioner filed rectification application under section 154 of the Act. Thepetitioner also filed civil miscellaneous application before this court seekingstay against coercive steps by respondent No.1 against the demand raised inpursuance to the notice dated 31.3.2015. This court while disposing of theapplication vide order dated 27.4.2015, Annexure P.5 directed the petitionerto file an appeal and application of interim relief before respondent No.2.This court also directed respondent No.1 not to take any steps for recoveryof demand for a period of two weeks after the decision on the stayapplication before respondent No.2. Accordingly, the petitioner filed theappeal and stay application before respondent No.2. In the rectificationapplication filed by the petitioner, respondent No.1 passed order dated18.8.2015 under section 154 of the Act re-computing the total demandamounting to.LO46,23,25,903/-. After giving credit for the amount already CWP No 21769 of 2015 CWP No 21769 of 2015 deposited, net outstanding demand was determined at an13,96,37,398/-.Respondent No.1 also issued a notice of demand dated 18.8.2015 for theoutstanding demand payable. Respondent No.2 while rejecting thepetitioner's request for stay on recovery of balance disputed demand passedorder dated 28.9.2015, Annexure P.8 directing the petitioner to pay theentire balance outstanding demand of =a13,96,37,398/- in followingequalized instalments as under:- “Tot instalmentLT3,50,00,000/- to be paid on 15.10.20159[nd]instalmentLT3,50,00,000/- to be paid on 15.11.20153[rd]instalment<3,50,00,000/- to be paid on 15.12.2015?[th]instalmentBalance outstanding demand to be paid on15.11.2016.9[nd]instalmentLT3,50,00,000/- to be paid on 15.11.20153[rd]instalment<3,50,00,000/- to be paid on 15.12.2015?[th]instalmentBalance outstanding demand to be paid on15.11.2016. Hence the instant writ petition. 3]In the reply filed on behalf of the respondents 1n court today, ithas been inter alia stated that respondent No.2 passed a detailed andreasoned order and allowed the petitioner to pay outstanding income tax infour installments starting from 15.10.2015 to 15.1.2016. There was noreason to stay the recovery of the remaining outstanding amount. The TPOpassed an order under section 92CA of the Act proposing an adjustment of|L117,99,66,691/- on account of excess advertisement and marketingexpenditure incurred by the petitioner for promoting the branch of itsassociated enterprise. No prejudice would be caused to the petitioner 1n caseof depositing the outstanding tax demand. On these premises, prayer fordismissal of the writ petition has been made. 4 We have heard learned counsel for the parties.4]A perusal of the impugned order dated 28.9.2015, Annexure P.84]A perusal of the impugned order dated 28.9.2015, Annexure P.8 CWP No 21769 of 2015 shows that for the assessment year 2008-09, the petitioner filed its return ofIncome on 29.9.2008 declaring income ot a13,00,68,080/-. After scrutiny,the Assessing Officer made a reference under section 92CA of the Act to theTPO for determination of Arm's Length Price of international transactionsundertaken by the petitioner. The TPO vide order dated 5.10.2011 proposedadjustments on account of advertisement and market promotion expensesagainst which the petitioner filed objections before DRP. The saidobjections were rejected and consequently the Assessing Officer passedassessment order dated 8.11.2012 incorporating adjustment of L1,17,99,66,691/- proposed by TPO. The petitioner challenged the said orderbefore the Tribunal. Vide order dated 18.10.2013, the Tribunal directed theAssessing Officer to apply the decision of Special Bench in L.G.ElectronicsIndia Pvt. Limited's case (supra). Consequently, the Assessing Officercreated a demand of|LC29,76,66,020/-. The petitioner challenged the saidorder before this Court by filing appeal. Vide order dated 27.4.2015, thiscourt directed the respondents not to take any coercive steps for a period oftwo weeks after the communication of the decision on the application forinterim relief. The petitioner thereafter moved an application dated 8.5.2015for stay of demand ofLy29,79,66,020/-. The petitioner also filed anapplication under section 154 of the Act for rectification and vide orderdated 18.8.2015, the Assessing Officer modified the amount payable to—L13,96,37,398/-. After considering the matter, the petitioner was asked to paythe said demand either at once or in the three equal installments ofL3,50,00,000/- within the period starting from 15.10.2015 to 15.12.2015 andthe balance outstanding demand to be paid on 15.1.2016. The order passed by the CIT(A) appears to be just and reasonable. The petitioner was givensufficient time to pay the outstanding demand.6.It 1s true that while considering an application for stay, it 1sneither expedient nor appropriate for the Court to initiate a detailed enquiryto find out whether the stand of the assessee 1s on sold ground, becauseexpression of a final opinion on the merits at that stage, without examiningthe entire material and affording full opportunity of hearing, 1s hkely tocause prejudice to either side. But, at the same time, the Court 1s required toconsider whether, on the basis of the material placed before it, a prima faciecase for grant of stay 1s made out or not. Similarly, the Court has to considerwhether on the basis of the pleadings and the material placed before it,undue hardship 1s likely to be caused to the assessee in case the stay 1sdeclined or when a conditional stay 1s granted, the conditions imposed areso burdensome that the assessee is unable to comply with the same and,thus, rendering the right of appeal non-existent. Needless to point out thatthe power of stay by the Court is not likely to be exercised in a routinemanner or as a matter of course in view of the special nature of taxation andrevenue laws. It will only be when a strong prima facie case 1s made out thatthe court will consider whether to stay the recovery proceedings and onwhat conditions and the stay will be granted in most deserving andappropriate cases where the court 1s satisfied that the entire purpose of theappeal will be frustrated or rendered nugatory by allowing the recoveryproceedings to continue during the pendency of the appeal. Ty.In the present case, applying the aforesaid guiding principlesand keeping in view the totality of facts and circumstances of the case as CWP No 21769 of 2015 noticed herein before, once the petitioner has already been grantedopportunity to pay the outstanding demand in four installments as notedabove and no prejudice has been demonstrated to be caused to the assesseeon that account, there appears to be no error in the impugned order passedby respondent No.2. Further, learned counsel for the petitioner has also notbeen able to show that the order is unjustified. Consequently, finding nomerit in the petition, the same 1s hereby dismissed. (Ajay Kumar Mittal)Judge November 17, 2015 (Ramendra Jain)Judge