Sony India Pvt.Ltd v. Addl. Commissioner of Income Tax and Another & Anr

order as to costs.

Dasti.

(R.V. EASWAR) JUDGE

(S. RAVINDRA BHAT) JUDGE FEBRUARY 24, 2014 vld

* IN THE HIGH COURT OF DELHI AT NEW DELHI % Date of decision: 24th February, 2014 + W.P.(C) 1235/2014, C.M. APPL. 2576/2014 SONY INDIA PVT. LTD. ..... Petitioner Through: Sh. Deepak Chopra, Sh. Harpreet Singh and Sh. Amit Shrivastava, Advocates. versus ADDL. COMMISSIONER OF INCOME TAX AND ANR. ..... Respondents Through: Sh. Rohit Madan, Sh. Akash Vajpai and Sh. P. Roy Choudhry, Advocates. + W.P.(C) 1178/2014, C.M. APPL. 2465/2014 SONY MOBILE COMMUNICATIONS (INDIA) PVT.LTD ..... Petitioner Through : Sh. Deepak Chopra, Sh. Harpreet Singh and Sh. Amit Shrivastava, Advocates. versus ADDITIONAL COMMISSIONER OF INCOME TAX & ANR. ..... Respondents Through : Sh. Kamal Sawhney, Sr. Standing Counsel with Sh. Sanjay Kumar and Sh. Raghvendra Singh, Advocates. CORAM: MR. JUSTICE S. RAVINDRA BHAT MR. JUSTICE R.V. EASWAR R.V. EASWAR, J. WP(C) 1178/2014 This writ petition has been filed by Sony Mobile communications (India) Pvt. Ltd. ("Sony Mobile" hereafter) a company which has now merged with Sony India Pvt. Ltd., the petitioner in WP(C) No.1235/2014 ("Sony India", hereafter). The claim in the petitions is for issuance of a writ quashing the attachment order passed by the first respondent i.e., the Additional Commissioner of Income tax under section 226(3) of the Income Tax Act, 1961 for the assessment year 2009-10. The impugned order was passed on 17.2.2014 in the circumstances narrated below. 2. Sony Mobile was incorporated on 23.4.2007 as a subsidiary of Sony Ericson Mobile Communications of Sweden. It is engaged in the business of importing, buying and selling a wide range of mobile phones in India and providing after-sales support services. In respect of the assessment year 2009-10, it filed a return of income declaring a total income of Rs.31.13 crores. The first respondent i.e. the Assessing officer, scrutinised the return after issuing notice under Section 143(2) and referred the return to the transfer pricing officer (TPO) requiring him to determine the arm's length price of the international transactions of the petitioner. The TPO recommended the adjustment of Rs.70.15 crores on account of excess advertising, marketing and promotion expenses (AMP expenses) incurred by the petitioner in respect of the brand owned by the foreign parent company. A draft assessment order was accordingly prepared by the first respondent on 26.3.2013 proposing to make a transfer pricing adjustment of Rs.70.15 crores on account of AMP expenses and disallowance of advertisement and marketing expenses of Rs.12.27 crores on the footing that such expenses were capital in nature. 3. Sony Mobile filed objections to the draft assessment order before the dispute resolution panel (DRP) which gave some minor relief in respect of the transfer pricing adjustment but dismissed the other objections. In terms of the directions of the DRP, a final assessment order was passed by the first respondent on 10.1.2014 computing the total income of the petitioner at Rs.113.56 crores and raised a tax demand of Rs.43,87,90,358/-. 4. On receipt of the assessment order, an appeal was preferred against it before the Income Tax Appellate Tribunal, Delhi Bench on 13.2.2014 and the same was registered as ITA No.836/Del/2014. On 17.2.2014, a stay application was filed before the Tribunal seeking stay of the disputed demand and it is claimed that on the same day it informed the respondents about the filing of the stay application and requested that no coercive action may be taken till the Tribunal disposed of the stay application. In the meantime, on 14.2.2014, an application had been filed before the AO under section 220(3) of the Act seeking stay of the recovery of the demand of tax. On this, the AO passed an order on 17.2.2014. There, he observed that the demand became payable in the month of February, 2014 but no payment was made by Sony Mobile against the same. The AO also noted the statement of the petitioner that it was in the process of filing an appeal as well as a stay applicat