In the case of Vodafone India Services Pvt. Ltd, the Bombay High Court directs to furnish a corporate guarantee of the ultimate parent company namely, Vodafone International Holdings BV, Netherlands against the collection/recovery of tax and interest demands aggregating to Rs.1128.46 crores under the Income-tax Act, 1961.
The petitioner assessee, challenged the order of the Income-tax Appellate Tribunal, by which the Tribunal had rejected an application filed by the petitioner seeking a blanket unconditional stay on collection/recovery of tax and interest demands aggregating to Rs.1128.46 crores, which is in pursuance of an assessment order passed against the petitioner under section 143(3) read with section 144C of the Income-tax Act for the assessment year 2014-15, until the disposal of the related appeal filed before the Tribunal. The Income Tax Tribunal, considering the rival contention has granted a conditional stay on collection of the impugned tax and interest demands.
Ms. Sethna, Counsel for the petitioner submitted that insofar as the assessment year 2008-09 was concerned, the petitioner had returned an income of Rs.27.71 crores with transaction value about exercise of put and call options being Nil. However, the revenue had arrived at a figure of Rs.6,105.44 crores under the provisions of Section 92C of the Act in determining the value of the transactions (put and call options), which were said to be assigned to the petitioner.
She has submitted that the percentage of high-pitched adjustment to returned income was 220.33%, in respect of which a tax demand was made against the petitioner as per the assessment order of an amount of Rs.3738.49 crores. It was contended that the petitioner had assailed the assessment order before the Tribunal.
The Tribunal had rejected the petitioner’s appeal against which the petitioner had preferred an appeal before the Court, which came to be allowed by the Division Bench of this Court (Vodafone India Services P. Ltd. vs. Commissioner of Income-tax and Anr.,).
Further submitted that the Tribunal should have appreciated sufficient security available with the department so as not to insist on a further deposit concerning the impugned assessment order, which is for the assessment year 2014-15. Further submitted that for the assessment years 2010-11, 2011-12 and 2012-13, put/call options exercised were to the extent of 6.01%, 2.34% and 2.77% and for the assessment year 2014-15, which is the assessment year in question, it was 3.90%.
The assessee contended that when the equity interest which was to the extent of 12.25% itself was covered by the orders accepting the corporate guarantee, a different standard should not be applied for the assessment year 2014-15.
Mr. Suresh Kumar, counsel for the revenue submitted that in the absence of any perversity or any gross illegality, the observations as made in the impugned order would not call for interference, as the view taken by the Tribunal in the facts of the case directing legitimate deposit of the amount as per the provisions of Section 254(2A) of the Act is an appropriate exercise of the discretion. It is submitted that the impugned order apart from being a plausible order, is a discretionary order and accordingly, it ought not to be interfered with.
A division bench comprising Justice G S Kulkarni & Justice Somasekhar Sundaresan observed that the Tribunal has directed the petitioner to furnish a corporate guarantee from an associate company that has unencumbered assets in India over the balance disputed demands, i.e., Rs.900 crores.
It was viewed that such a condition ought not to have been directed by the Tribunal in the facts and circumstances of the case and more particularly considering the interim orders passed for the prior years based on the same triggers of exercise of options.
The high court division bench substituted the condition by directing the petitioner to furnish a corporate guarantee of its ultimate parent, namely, Vodafone International Holdings BV, Netherlands as accepted by the revenue in the assessment year 2008-09. While modifying the second condition of order, the court directed the Tribunal to complied within a period of four weeks
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