The division bench of the Delhi High Court has held that Mr. Justice Manmohan and Ms. Justice Manmeet Pritam Singh Arora has dismissed the petition and the stay application.
The petitioner, TATA Teleservices Limited fails to deduct tax at source on the interest payments made to China Development Bank (CDB), a bank wholly owned by the Government of China. During assessment proceedings, the Assessing Officer demanded Rs. 42,40,72,259/- as part of the alleged failure. The aggrieved petitioner filed an appeal before CIT (A) and is pending adjudication.
The application seeking stay of the demand was rejected by the assessing officer stating that AO cannot grant a stay until 20% of the disputed payment is paid. The CIT(A) on review application verbatim reproduction of the assessment order to conclude that the petitioner has no prima facie case.
The petitioner approached the High Court seeking a complete and unconditional stay against the demand of Rs. 42,40,72,259/- arising out of the assessment ordertill the disposal of the appeal currently pending before CIT(Appeals) and to not treat the petitioner as an assessee in default.
The counsel for the petitioner submitted that as per article 11(3) of the India-China Double Taxation Avoidance Agreement (DTAA), any interest income which arises in India and is payable to a financial institution wholly owned by the Government of China would be exempt from tax in India.
The High Court while dismissing the petition held that observed that the ownership of the CDB is a disputed question of fact that cannot be decided and it cannot be a matter of prima facie determination as it is the material fact to be determined in the appeal filed by the petitioner. The High Court further rejected the plea of hardship for payment of 20% of the disputed amount as the petitioner has not suffered any operational losses in the relevant financial year.
Mr.Kamal Sawhney and Mr. Sunil Kumar Agarwal appeared on behalf of the petitioner and the respondent.
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