Red Hat India (P) Ltd. v. Cit

Pramod Kumar, Vice President:— By way of this stay application, the assessee applicant seeks the stay on collection/recovery of the disputed tax and interest demand, aggregating to Rs. 38,10,33,787/- impugned in the appeal before this tribunal in the matter of assessment u/s.143(3) of the Income Tax Act, 1961 for the Assessment Year 2016-17.

2. When this application came up for hearing, Shri Ajit Jain, learned counsel for the assessee submitted that the assessee applicant before us is engaged in the business of marketing and promotion of Red Hat Subscriptions to clients in India, enabling them to avail support services for open source software applications. Learned counsel of the assessee then invited our attention to the various additions which have been made in the impugned assessment, including the transfer pricing adjustment and then took us through each of this adjustment and demonstrates that the assessee has a prima facie arguable case in appeal. The learned counsel for the assessee also submitted that some of the issues raised in this appeal, i.e., addition on account of unearned revenues, aggregating to Rs. 28.01 crores is covered in favour of the assessee in assessee's own case. It was, thus, submitted that the assessee has a reasonable case in appeal, strong prima facie merits and good chances to succeed in appeal. The learned counsel for the assessee then also invited our attention to the fact that certain refunds are pending with the Assessing Office, which aggregates to Rs. 8.64 crores. The learned counsel for the assessee suggested that he is willing to pay 20% of the disputed demand and prayed that out of this demand so arrived at, adjustment may kindly be made for the pending demands.

3. Learned Departmental Representative, on the other hand, relied on the stands of the authorities below and opposes the stay application and further submits that so far as the amount said to be pending for refund is concerned, the same are yet to be quantified and yet to be verified. He, thus, urged us not to take these amounts in consideration, so far as the amount directed to be paid by us are concerned.

4. We have heard the rival contentions, perused the petition and duly considered the facts of the case, in light of the applicable legal position. On a careful consideration of the contentions of the learned counsel, as also the material on record, while we refrain from making any observations on the merits of the case, we are of the prima facie view that the assessee has an arguable case in appeal and that the balance of convenience, therefore, is in favour of a partial stay being granted in respect of the impugned tax and interest demand. We are, therefore, of the view that it is a fit case for grant of stay subject to the condition that:

(a) the assessee applicant pays Rs. 10 crores within one month from today;

(b) the assessee applicant fully co-operates in expeditious disposal of the appeal and does not seek any adjournment, except in most unavoidable circumstances;

(c) the assessee applicant completes its filing of paper book and all necessary documents within one month from today and does not resort to any dilatory practise.

(d) As a corollary to the stay having been granted to the disputed demands, an out of turn hearing is also being granted in this case. The Registry is directed to fix this case for hearing, as is stated to be convenient to both the parties on 09.11.2021.

5. With these conditions, the stay is granted for a period of 180 days from today, till further orders or till its disposal of the appeal - whichever is earlier. Ordered accordingly.

6. In the result, the present stay application is allowed in terms indicated above. Dictated and pronounced in the open court on 24 day of September, 2021.