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IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER S.P. No.300/Bang/2017 [in IT(IT)A No.2818/Bang/2017] Assessment year : 2015-16 M/s. Vodafone Mobile Services Limited (VMSL), [formerly M/s. Vodafone South Limited amalgamated with VMSL], Maruthi Infotech Centre, 11/1, 12/1, Koramangala Amar Jyoti Layout, Bengaluru – 560 071. TAN: BLRH0 1508D APPLICANT Applicant by Respondent by

Vs.

The Deputy Director of Income Tax (International Taxation), Circle 1(1), Bangalore.

RESPONDENT

: Shri Deepak Chopra, Advocate : Shri B.R. Ramesh, Addl.CIT(DR)(ITAT), Bengaluru. Date of hearing : 05.01.2018 Date of Pronouncement : 05.01.2018 ORDER

Per Sunil Kumar Yadav, Judicial Member This stay petition is preferred by the assessee with a request to stay the outstanding demand of Rs.32,05,12,978 till the disposal of the appeal. 2.

During the course of hearing, the ld. Counsel for the assessee has

invited our attention that it has filed a rectification application on 04.01.2018 before the DCIT (International Taxation) and if the rectification application is allowed, the demand raised will get reduced to Rs.34,66,01,088 as

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SP No.300/Bang/2017 Page 2 of 8 against the total demand of Rs.47,05,12,978 as per the appeal effect order dated 12.12.2017. It was further submitted that assessee has already paid Rs.15 crores and after reducing the said amount, the effective outstanding disputed amount would be only Rs.19,66,01,088. Since the assessee has already paid Rs.15 crores which is about 42.38% of the total demand of Rs.34,66,01,088, the recovery of outstanding demand should be stayed without any further payment by the assessee. 3.

During the course of hearing, the attention of the ld. Counsel for the

assessee was invited to the recent judgment of the jurisdictional High Court rendered in the case of Google India Private Ltd. v. DCIT (Intl. Txn.), Bangalore in WP No.52358-52359/2017(T-IT) dated 22.11.2017 in which it was held that although the payment by the assessee in that case was Rs.70 crores against the total disputed demand of Rs.129 cores which was about 55% of the disputed demand, the assessee was further directed to retain a balance of another 20% in the bank account of that assessee’s account, rounded off to Rs.26 crores during the pendency of the appeal before the Tribunal. 4.

The ld. Counsel for the assessee contended that this order of the

jurisdictional High Court was passed in peculiar circumstances, therefore it cannot be followed. He placed reliance upon the order of the Tribunal in the assessee’s own case in AYs 2013-14 & 2014-15 in which the Tribunal has asked the assessee to make a payment of Rs.75 crores out of Rs.257.57 crores and to furnish bank guarantee of the remaining outstanding demand, after taking into account all the relevant facts. The ld. Counsel for the assessee further contended that on merits, the assessee has a good prima facie case as the issue involved in this appeal is covered by the Delhi Bench of the Tribunal in the case of Bharti Airtel Ltd. v. ITO, 178 TTJ 708 (Delhi – Trib.) dated March 17, 2016.

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SP No.300/Bang/2017 Page 3 of 8 5.

In oppugnation, the ld. DR submitted that the impugned issue

involved in this appeal is squarely covered by the orders of the Tribunal in assessee’s own case for the AY 2008-09 in ITA No.449/Bang/2013 dated 30.12.2014 against the assessee.

Therefore, the assessee has no prima

facie case in its favour. He further invited our attention that this order of Tribunal was initially stayed ex parte by the jurisdictional High Court in ITA Nos. 160 to 164/2012 dated 25.04.2015, subject to the condition that an amount of Rs.75 crores deposited by the assessee before the Tribunal shall be kept with the Tribunal and the bank guarantees furnished by the assessee pursuant to the order passed by the High Court in W.A. Nos.904 to 908/2014 shall be kept renewed during the pendency of these appeals. It was further submitted that later on as per order dated 11.06.2015 the stay was vacated by the Hon’ble High Court, following the judgment of the Hon’ble Apex Court in the case of Assistant Collector of Central Excise v. Dunlop India Limited reported in (1985) 1 SCC 260 wherein it was held that where matters of public revenue are concerned, it is of utmost importance to realize that interim orders ought not to be granted merely because a prima facie case has been shown. More is required. 6.

The ld. DR further invited our attention to the judgment of the

Hon’ble Madras High Court in the case of Verizon Communications Singapore PTE Ltd. v. ITO reported in (2014) 361 ITR 575 (Madras) which was taken into account by the jurisdictional High Court while vacating the stay in which similar view was expressed. It was further submitted that against the judgment of the jurisdictional High Court, the assessee has filed SLP before the Hon’ble Apex Court, but the same was also disposed of as per the judgment dated 16.06.2015 in which it was held that amount of Rs.75 crores deposited by the petitioner before the Tribunal can be withdrawn by the revenue pursuant to the order dated 25.04.2015, but the bank guarantee furnished by the assessee shall not be encashed by the revenue till the final disposal of the appeals and shall be kept alive. Under

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SP No.300/Bang/2017 Page 4 of 8 these circumstances, the impugned issued is squarely covered against the assessee by the orders of the Tribunal in assessee’s own case, therefore assessee should not be granted of any stay of recovery of the demand. 7.

Having carefully examined the material available on record in the

light of rival submissions, we find that the issue involved in the appeal is with regard to the nature of payment of interconnect charges made by the assessee to foreign carriers for provision of carriage services outside India. Undisputedly identical issue was examined by the Tribunal in assessee’s own case for the AY 2008-09 in which the Tribunal has taken a view that the nature of payment is royalty and the assessee is liable to deduct TDS. Since TDS was not deducted, the assessee was held to be in default and action u/s. 201(1) & 201(1A) was rightly taken by the AO. This order of the Tribunal was challenged before the Hon’ble High Court of Karnataka and the jurisdictional High Court by passing an ex parte order stayed the operation of order, but later on after hearing both the parties, vacated the earlier stay order passed and while vacating the stay, the Hon’ble High Court has considered and followed the judgment of the Hon’ble Apex Court rendered in the case of Assistant Collector of Central Excise v. Dunlop India Limited (supra) wherein the Hon’ble Apex Court has made the following observations, which are recorded in the order of the Hon’ble High Court:-

“7. Now coming to the facts xxx have been made. Even assuming that the Company had established a prima facie case, about which we do not express any opinion, we do not think that it was sufficient justification for granting the interim orders as was done by the High Court. There was no question of any balance of convenience being in favour of the respondentCompany. The balance of convenience was certainly in favour of the Government of India. Governments are not run on mere bank guarantees. We notice that very often some courts act as if furnishing a bank guarantee would meet the ends of justice. No governmental business or for that matter no business of any kind can be run on mere bank guarantees. Liquid cash is necessary for

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SP No.300/Bang/2017 Page 5 of 8

the running of a Government as indeed any other enterprise. We consider that where matters of public revenue are concerned, it is of utmost importance to realize that interim orders ought not to be granted merely because a prima facie case has been shown. More is required. The balance of convenience must be clearly in favour of the making of an interim order and there should not be the slightest indication of a likelihood of prejudice to the public interest. We are very sorry to remark that these considerations have not been borne in mind by the High Court and interim order of this magnitude had been granted for the mere asking.” 8.

While vacating the stay, Their Lordships have also examined the

judgment of the Hon’ble Madras High Court in the case of Verizon Communications Singapore PTE Ltd. v. ITO (supra) in which a similar view was expressed. Against the vacation of stay, the petitioner has filed a SLP before the Hon’ble Apex Court, which was also disposed of by the Hon’ble Apex Court vide its order dated 16.06.2015 through which the revenue was allowed to withdraw Rs.75 crores deposited by the assessee pursuant to the order of Hon’ble High Court dated 25.04.2015.

So far as bank

guarantee furnished by the assessee is concerned, the Hon’ble Apex Court has directed the revenue not to encash the same till the final disposal of the appeal, but it shall be kept alive. 9.

In the light of these facts where the issue is covered against the

assessee, we do not find a prima facie case in favour of the assessee. Moreover, guidelines have been laid by the Hon’ble Apex Court in the case of Assistant Collector of Central Excise v. Dunlop India Limited (supra) which have been reproduced hereinbefore and the said guidelines should be kept in mind while adjudicating the request of stay of the assessee. Nothing has been placed on record on behalf of the assessee with regard to financial hardship being faced by the assessee.

The assessee has

moved an application for rectification of the order of CIT(Appeals) through which it claim that if rectification application is allowed, the demand would be reduced from Rs.47,05,12,978 to Rs.34,66,01,088, but this application

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SP No.300/Bang/2017 Page 6 of 8 was filed on 04.01.2018, only one day before the filing of stay application; whereas the appeal effect order was passed on 12.12.2017. Therefore, much importance cannot be given to the application for rectification filed by the assessee, as it is not rather considered by the AO. Therefore, we cannot make any comments with regard to the merits of this application as on date. 10.

The outstanding demand is Rs.47,05,12,978 against which the

assessee has paid only Rs.15 crores. Therefore, the outstanding demand is Rs.32,05,12,978. Recently, the jurisdictional High Court has dealt with an issue with regard to payment of outstanding demand while granting stay in the case of Google India Private Ltd. v. DCIT (Intl. Txn.) (supra) in which the Hon’ble jurisdictional High Court has directed the assessee to retain a balance of another 20% in the account maintained by the assessee, besides the deposit against the outstanding demand which was at 55%. The relevant observations of the Hon’ble High Court are extracted hereunder for the sake of reference:-

“9. It is noted that the demand is about Rs.29,00,00,000/(Rupees one hundred and twenty nine crore only). It is an admitted fact that a sum of Rs.70,00,00,000/- (Rupees seventy crore only) is deposited by the petitioner which amounts to about 55% of the outstanding demand. In order to further protect the interest of the revenue and keeping in mind the fact that the appeal is slated for final arguments before the Appellate Tribunal and balancing the equities on both sides, the petitioner is directed to retain a balance of another 20% in Account No.0037238007 maintained with CITI Bank, M.G. Road Branch, Bengaluru – 560 001. The said balance is rounded off to RS.26,00,00,000/(Rupees twenty six crore only) shall be maintained pending disposal of the appeal by the Appellate Tribunal. It is directed that the respondent shall not take further steps pursuant to order dated 15/11/2017 (Annexure-H) and notice dated 20/11/2017 till the disposal of the appeal by the Appellate Tribunal.” 11.

Keeping in view the totality of the facts of the case and the

guidelines laid down by the Hon’ble Apex Court and the jurisdictional High

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SP No.300/Bang/2017 Page 7 of 8 Court,

we find that the recovery of demand should be stayed subject

to payment of Rs.5,00,00,000/- (Rupees Five Crores only) on or before 31st January, 2018 (31.01.2018) and to retain a balance of another 20% of the total demand in the bank account maintained by the assessee (the said balance is rounded off to Rs.10 crores), pending the disposal of the appeal by the Tribunal. On payment of Rs.5 crores, the total paid amount against the outstanding demand comes to 42.5% of the disputed demand, as per the appeal effect order dated 12.12.2017 and about 57.7% of the disputed amount of Rs.34.6 crores as per the rectification petition filed u/s. 154 dated 04.01.2018, if allowed.

Accordingly, we direct the revenue not to

enforce recovery of the demand subject to the payment of Rs.5 crores by the assessee on or before 31.01.2018 and retaining a balance of another Rs.10 crores in its bank account maintained by the assessee. Accordingly, stay is granted till three months from the date of the order or till the disposal of the appeal, whichever is earlier. Since we have stayed the recovery of demand, we direct the registry to fix the appeal for hearing on 12.02.2018 and issue notice to both the parties. We however make it clear at this stage that if the assessee seeks adjournment during the course of hearing of the appeal without justifiable reasons, the stay granted as per this order shall get vacated automatically. 12.

In the result, the stay petition is allowed in the terms indicated

above.

Pronounced in the open court on this 5th day of January, 2018. Sd/( JASON P. BOAZ ) Accountant Member Bangalore, Dated, the 5th January, 2018. / Desai Smurthy /

Sd/( SUNIL KUMAR YADAV) Judicial Member

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SP No.300/Bang/2017 Page 8 of 8

Copy to: 1. 2. 3. 4. 5. 6.

Applicant Respondent CIT CIT(A) DR, ITAT, Bangalore. Guard file

By order

Senior Private Secretary ITAT, Bangalore.