Thomas Cook India Ltd , vs Assessee

Applicant by Shri P.J. Pardiwalla, & Mr. Madhur Agarwal Respondent by Shri Akhilendra Yadav (DR)

Date of Hearing : 27-03-2015 Date of Pronouncement :27-03-2015

ORDER PER AMIT SHUKLA, J.M.

By way of this Stay Application, the assessee seeks to stay of outstanding demand of Rs.6,97,51,824/-.

2. Before us learned senior counsel, Shri P.J. Pardiwalla and Mr. Madhur Agarwal submitted that the major demand has arisen on account of Transfer pricing adjustment of Rs.20,58,93,778/- made in the following manner:-

2 SA No.127/Mum/2015 Sr. No. Particulars Amount Rs.

1. Travel and related services to AEs 12,04,28,660

2. Disallowance of advertising 8,31,37,292 marketing and promotion expenses

3. Commission of corporate guarantee 20,20,500

4. Disallowance of Incentive fees 3,07,326

Total Transfer Pricing Adjustment 20,58,93,778

3. At the outset, learned Sr. counsel submitted that, so far as disallowance of Advertising marketing & promotion expenses is concerned, the same has been made after following the decision of special bench in the case of LG India. Now the said decision of Special Bench has been reversed by the Hon'ble Delhi High Court and therefore, this matter needs to be set aside to the file of the AO in light of High Court judgment. So far as the adjustment on account of travel related services, the main dispute is with regard inclusion/exclusion of certain comparables for benchmarking the travel segment of the company. The comparables which have been rejected by the TPO were part of the assessee's comparables in the earlier years, which has been accepted, therefore, in this year without any cogent reasons they cannot be excluded. Lastly, regarding commission on corporate guarantee, the TPO has charged 3% of guarantee fees, instead of 0.5% which has been accepted by 3 SA No.127/Mum/2015

the Tribunal in series of decisions. If such adjustments made by the TPO are removed, then practically there would be no Transfer Pricing Adjustment. On the corporate issue, he submitted that the major disallowance has been made u/s.14A for Rs.95 lacs on dividend income of Rs.11 lakhs. Such a disallowance is not only arbitrary but also very high and excessive under the facts and circumstances of the case. Looking to the prima facie merits of the case, he submitted that entire demand should be stayed. He further informed that the department has attached the bank account of the assessee on 28th March 2015, which has caused great hardship to the assessee because the assessee is dealing mostly in foreign exchange and traveling.

4. On the other hand, ld. DR strongly opposed to the complete stay of demand and submitted that the final assessment order has been passed in pursuance of the direction given by the DRP on a very cogent and reasons grounds. In any case, he submitted that substantial demand should be required to be paid by the assessee.

5. After considering the rival submissions and also the prima facie case of the assessee, we are of the opinion that the major component of the demand is arising out of transfer pricing adjustment. If the adjustment on account of advertising marketing promotion expenses of Rs.8.31 crores, which is to be set aside in light of the decision of the Delhi High Court and other issue as 4 SA No.127/Mum/2015

raised with regard to other TP adjustments and disallowance u/s.14A is scaled down, then substantial demand will get reduced. Thus, balance of convenience appears to be in favour of the assessee at least for partial stay of demand. After discussing with the parties, we direct as under;

(a) Assessee shall pay sum of Rs. 1 crore in two installments, viz., first installment of Rs. 50 lakhs on or before 31st March 2015 and balance amount of Rs.50 lakhs on or before 15th April 2015;

(b) Subject to the aforesaid payment, the balance outstanding demand shall be stayed for the period of six months from the date of this order or till the passing of the order in the appeal, whichever is earlier;

(c) the attachment of the bank account shall be revoked from the immediate effect;

(d) The appeal of the assessee is already fixed for hearing on 11.08.2015, hence there is no requirement for preponing the said date;

(e) Since Assessee shall not seek any adjournment except for under bonafide and genuine reasons.

5 SA No.127/Mum/2015 6. In the result, the Stay Application filed by the assessee is partly allowed in the manner indicated above.

Order pronounced on this 27th March, 2015.

Sd/- Sd/- (D. KRUNAKARA RAO) (AMIT SHUKLA) [ ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, dated 27-03-2015. Patel copy to... 1. The appellant 2. The Respondent 3. The CIT(A) - Concerned, Mumbai 4. The CIT- Concerned, Mumbai 5. The DR Bench, D 6. Master File // Tue copy// [[[[[[ BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI