Mumbai ITAT stays ₹1031.46 Crore Demand: Verdict Benefits M/s. eBay Singapore Services Pvt. Ltd.

Mumbai ITAT stays ₹1031.46 Crore Demand: Verdict Benefits M/s. eBay Singapore Services Pvt. Ltd.

Providing significant respite to M/s. eBay Singapore Services Pvt. Ltd. (referred to as the assessee), the Mumbai division of the Income Tax Appellate Tribunal (ITAT) has granted a stay on the demand totalling ₹1031.46 crore, which had been issued by the Assessing Officer (AO) to the said assessee. The Tribunal's judgment stemmed from its recognition of an error on the part of the AO, who erroneously directed the assessee to remit 20 per cent of the entire outstanding demand, as opposed to 20 per cent of the disputed demand.

The case pertained to the assessment of the assessee's liability for a short-term capital gain resulting from the sale of shares in Flipkart Ltd. The re-evaluated sum for this particular transaction, in conjunction with other adjustments, culminated in an amended claim of ₹1031.46 crore concerning the overall income. In the initial phase, the assessee had petitioned for a suspension of the demand to the AO, who mandated a payment equating to 20 per cent of the outstanding demand value. The assessee argued that they had already disbursed ₹261.27 crore through Tax Deducted at Source (TDS), surpassing the 20 per cent requirement. Nevertheless, the AO stipulated that the payment should constitute 20 per cent of the net demand instead.

Expressing dissatisfaction with this determination, the assessee lodged an appeal for suspension with the Tribunal, which ruled favourably towards the assessee's stance. The Tribunal explicitly directed the AO to compute the 20 per cent obligation based on the complete disputed demand, rather than solely on the pending demand. The Tribunal returned the matter to the AO for verification, along with instructions to grant an appropriate suspension if the stipulated 20 per cent of the contested demand had been duly remitted.

Blatantly disregarding the Tribunal's specific directive, the AO proceeded to issue a mandate that obligated the assessee to remit the entire pending demand of ₹1031.46 crore. Consequently, the assessee found it necessary to lodge a subsequent application for a stay before the ITAT. Even in the face of the Tribunal's reiterated instructions, the AO persistently directed the assessee anew to submit 20 per cent of the outstanding demand, totalling ₹206.29 crore. This decision was made without acknowledging the TDS payment previously made by the assessee before March 6, 2023.

The two-judge ITAT Bench consisting of B.R. Baskaran (Accountant) and Amit Shukla (Judicial) noted that the ongoing scenario involved an appeal presented before the Tribunal, addressing the disputed augmentation related to the short-term capital gain. The subject under dispute encompassed the entirety of the capital gain, leaving no acknowledged tax obligation in relation to these gains. The central concern of the assessee revolved precisely around this particular augmentation, forming the core of the demand that had been initiated. Consequently, the term 'disputed demand' found applicability within this framework, rather than the term 'outstanding demand'.

The Bench provided clarification that the expression 'outstanding demand' might encompass a range of elements that the assessee may not have contested or could originate from different adjustments. Conversely, the term 'disputed demand' held a specific reference to the augmentation that the assessee had challenged in front of the Tribunal through the appeal under Section 253(1) of the Income Tax Act.

Furthermore, the Bench pointed out that the entire augmentation had been challenged both in front of the AO and subsequently before the Tribunal. It was evident that the TDS amount exceeded 20 per cent of the demand, as calculated by the AO for this specific augmentation. This factual circumstance eliminated any room for ambiguity or misinterpretation, clarifying that the 20 per cent stipulation should be applied to the disputed demand. This precise comprehension had been reinforced by the Tribunal in its prior directives to the AO. Despite the unambiguous nature of these instructions, the AO disregarded them and instructed the assessee to first fulfil the entire outstanding demand. Such conduct on the part of the AO was indeed inaccurate.

The Bench decided to stay the outstanding portion of the demand. This stay was extended for an additional six-month period or until the issuance of the ultimate order, depending on which event transpired earlier. As a result, the Tribunal granted approval to the stay application, offering significant relief to the assessee.