$~4 & 5
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Order: 07.01.2019
+ W.P.(C) 3174/2018, C.M. Appl. No. 12596/2018
SONY MOBILE COMMUNICATIONS INDIA PVT. LTD.
..... Petitioner
versus
ADDITIONAL COMMISSIONER OF INCOME TAX & ORS.
..... Respondent
+ W.P.(C) 3175/2018, C.M. Appl. No. 12598/2018
SONY INDIA PVT. LTD.
..... Petitioner
versus
ADDITIONAL COMMISSIONER OF INCOME TAX & ORS.
..... Respondent
Counsel for the petitioner:
Mr. Nageshwar Rao, Mr. Sandeep S. Karnail, Mr. Parth,
Advocates
Counsel for the respondent:
Mr. Ashok K. Manchanda, Senior Standing Counsel for
Income Tax Department.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE PRATEEK JALAN
ORDER
%
S. RAVINDRA BHAT, J. (ORAL)
It is stated that the petitioner's counsel that the rejoinder was
filed; apparently, the respondent has not received copy of the same.
W.P.(C) No.3174 & 3175 of 2018 Page 1 of 5
Let the same be supplied.
The petitioner's grievance is with respect to the demand made
by the Assessing Officer for the Assessment Year 2013-2014. It is
contended that the petitioner is entitled to refund, on the basis of
TPO's recommendation that the Assessing Officer made intensity
adjustments, which are the subject matter of an appeal, given that the
draft assessment report was finalised after hearing the
Assessee/Petitioner. It is submitted that during the pendency of the
appeals before the Income Tax Appellate Tribunal [ITAT], the request
for grant of stay was not fully acceded to. In these circumstances, the
petitioners, in these proceedings, have sought the appropriate orders
for interdicting the demands and subsequent adjustments of refunds
due to them.
On the very first date of hearing, i.e. on 04.04.2018, this court
while issuing notice, recorded as follows: -
"Learned counsel for the petitioner submits that the
intensity test is not one of the recognized methods for
computing arm's length pricing. He submits that the said
method is nothing but another form or method to apply
Bright Line test. He submits that in the case of Sony
Mobile Communications India Pvt. Ltd., assessee had
paid Rs.29.31 Crores towards advertisement
expenditure, which aspect was overlooked by the TPO in
the transfer pricing order. The rectification application
filed by the petitioner was dismissed by the TPO without
examining the said mistake on the ground that it was
beyond the scope of rectification as it was not clear
whether the amount was received or paid. Counsel for
the petitioner submits that this reasoning of the TPO
would reflect and indicate complete non-application of
mind by the said officer while passing the transfer
W.P.(C) No.3174 & 3175 of 2018 Page 2 of 5
pricing order.
3. In the case of Sony India Pvt. Ltd., it is submitted that
the petitioner had received Rs.l27 Crores as
reimbursement towards advertisement and warranty
charges but this factor was overlooked by the TPO who
had added this figure to the AMP charges already
declared. Rectification application filed to correct the
said error has been rejected on the ground that it was
beyond the scope of rectification. Learned counsel for the
petitioner submits that this would show that the first
order passed by the TPO was without application of
mind for this aspect should have been examined before
computing the AMP figures. Either the TPO was correct
or incorrect. It cannot be left undecided.
4. Learned counsel for the respondent states that he
would obtain instructions on merits and has to examine
the merits. He relies upon the order passed by the
tribunal.
5. On being asked, learned counsel for the petitioner
submits that in case of Sony Mobile Communications
India Pvt. Ltd., the net profit declared Rs.31 Crores on
which tax of Rs.18 Crore has been paid. In the case of
Sony India Pvt. Ltd., net profit of Rs.l84 Crores was
declared on which tax of Rs.61 Crores was paid. The
turnover in the two cases was Rs.l360 Crores and
Rs.8258 Crores, respectively.
6. On the petitioner depositing a sum of Rs.2.5 Crores in
the case of Sony Mobile Communications India Pvt. Ltd.
and Rs.5 Crores in the case of Sony India Pvt. Ltd. with
the respondents within a period of two weeks, there
would be stay of recovery of demand pursuant to the
assessment orders relating to Assessment Year 2013-14
in the case of two petitioners. The interim order passed
herein would not bar and prohibit the respondent from
W.P.(C) No.3174 & 3175 of 2018 Page 3 of 5
processing cases of refund, if any, due and payable to the
petitioner. Pendency of the present writ petitions would
not be a ground for either party to take adjournment
before the tribunal."
We note that the interim orders have been continued during the
pendency of these two petitions, on various subsequent dates i.e.
23.07.2018 and 10.10.2018.
Having heard the counsel for the parties, it is apparent that on
the one hand, the appellant is aggrieved by the additions sought to be
made on account of the recommendations of the TPO which were
finalised by the Assessing Officer after hearing the Assessee. The
subsequent demand was a natural corollary to the assessment finalised
for the concerned years (AY 2013-2014); on the other hand, the
petitioner claims to be entitled to refund of certain amounts, which are
pending and payable on its account for previous and other assessment
years. The petitioners' appeals are pending before the Income Tax
Appellate Tribunal [ITAT]. In these circumstances, the most
appropriate course left to this court would be to direct that the existing
status quo be maintained, (which means that, on the one hand,
demands arising out of the assessment years for the concerned AY are
not enforced for a limited time and at the same time, the Assessing
Officer does not, as a consequence, adjust the refund, available to the
credit of the Assessee/Petitioner). Accordingly, the respondents are
hereby directed not to enforce the demands, under the relevant
provisions of the Income Tax Act, and also not to adjust refund
amounts due and payable to the petitioners, if any, during the
W.P.(C) No.3174 & 3175 of 2018 Page 4 of 5
pendency of the appeals before the ITAT. At the same time, in order
to ensure that there is no undue delay, the ITAT is directed to
complete the hearings and render its final orders as expeditiously as
possible and under no circumstance beyond 31.03.20109.
The writ petitions are disposed of in terms of the above
directions.
A copy of this order be given dasti to the parties.
S. RAVINDRA BHAT, J
PRATEEK JALAN, J
JANUARY 07, 2019
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W.P.(C) No.3174 & 3175 of 2018 Page 5 of 5
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