Pradeep Parikh, A.M. - (1.) BY this application, the assessee seeks a stay on the recovery of the outstanding demand of Rs. 7,05,04,010 for assessment year 2001-02.
(2.) The assessee-company is in the business of manufacturing and trading of pharmaceuticals and oral health care products. It had declared a total income of Rs. 15,56,58,680 for the year under consideration. The assessment was made under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act) at a total income of Rs. 36,18,26,520. One of the major additions was that of disallowance of Rs. 16,63,01,800 out of total administrative expenses of Rs. 27,59,36,430. The assessee-company did not have its own marketing set-up and hence had entered into an agreement with Smith Kline Beecham Consumer Health Care Ltd. (hereinafter referred to as SBCH). In order to compensate SBCH for the services rendered by them, the agreement was reached on the basis of an independent study made by Price Waterhouse Coopers (P) Ltd. (hereinafter referred to as PWC) to arrive at arm's length basis of payment. However, the assessing officer was of the view that since both the companies belonged to the same parent company and that they had deep intertwining of business interests between the two. Taking note of the disallowances made in the past years, the assessing officer allowed 7 per cent of the sales amount as deduction and disallowed the balance. The other disallowances were of excise duty under section 43B of the Act, product research development expenses and levy of interest under section 234D though the same was effective from 1-6-2003. The CIT (A) granted partial relief to the assessee. The contention of the learned counsel was that though the issue relating to administrative expenses was decided by the Tribunal in assessee's favour in assessment years 1998-99 and 1990-2000, the CIT (A) instead of following the said order, distinguished it on flimsy grounds and confirmed the disallowance. Moreover, though the Tribunal had passed the order way back in June, 2004, the order giving effect to it was not passed, thereby holding back the refund due to the assessee. On the other hand, in the present year, the order of the CIT(A) dated 25-1-2005 was given effect to on 16-2-2005 and the outstanding demand was recovered by attaching the bank accounts of the assessee on 17-2-2005. In this connection, the learned counsel relied on the order of the Tribunal in the case of RPG Enterprises Ltd. v. Dy. CIT (2001) 251 ITR 20 (Mum-Trib) and several other judgments including that of the Bombay High Court in the case of Mahindra & Mahindra Ltd. v. Union of India 1992 (59) ELT 505 (Bom) to contend that the revenue cannot make recovery till the time-limit to file further appeal has not expired. Thus, the prayer was that the amount of tax collected illegally should be refunded to the assessee. The learned Departmental Representative, after hearing the learned counsel, requested for some time to get more inputs from the assessing officer. In any case, referring to the order of the CIT(A), it was submitted that the facts in this year were somewhat different than in the earlier years as regards administrative expenses and hence the stay should not be granted.
(3.) WE have heard the parties. At this juncture, we are not expected to express any opinion on the merits of the issues involved. However,: considering the facts and circumstances of the case, we do feel that it is a fit case for grant of stay. WE feel it so after examining the various aspects which enable us to form an opinion for grant of stay, viz. whether there is a prima facie case in the assessee's favour, whether it will cause undue hardship if the stay is not granted and as to in whose favour the balance of convenience lies. It is well established that the Tribunal before whom the appeal is pending, has an inherent power to grant stay in appropriate cases.;