ITAT Grants Stay to Xiaomi as Prior Attachments by ED & Tax Authorities Cover Revenue’s Interest

Case Details: Xiaomi Technology India (P.) Ltd. v. DCIT - [2023] 153 taxmann.com 315 (Bangalore-Trib.)

Judiciary and Counsel Details

• • Smt. Beena Pillai, Judicial Member & Chandra Poojari, Accountant Member
  • A. Shankar for the Appellant.
  • Srinivasa Karthi Devara for the Respondent.

Facts of the Case

Assessee-Xiaomi was a subsidiary company of a Singapore entity. It was engaged in the business of distribution of Xiaomi products in India. During the transfer pricing proceedings, the Transfer Pricing Officer (TPO) proposed adjustments on account of Qualcomm and Xiaomi Mobile royalty. The Assessing Officer (AO) passed a draft assessment order considering said adjustment.

Assessee approached the Dispute Resolution Panel (DRP), but no relief was granted. AO passed the final assessment order, and a demand of more than Rs. 1,833 crore was raised.

In the meanwhile, in pursuance to an ongoing investigation under FEMA, Enforcement Directorate (ED) passed a seizure order under section 37A of FEMA. The Assessing Officer (AO) also passed an order under section 281B of the Income-tax Act. Both authorities have provisionally attached the fixed deposit of the assessee totalling Rs. 3,700 crores.

Later, AO passed another order of provisional attachment under section 281B. Aggrieved by said order, the assessee preferred an appeal before the Bangalore Tribunal.

ITAT Held

The Tribunal held that as per section 254(2A), the Tribunal may pass an order of stay in any proceedings relating to an appeal after considering the merit of the application made by the assessee. However, this order would be subject to the condition that the assessee deposits not less than 20% of the amount of tax demand or furnishes security of equal amount in respect thereof.

Assessee rightly pointed out that an amount of Rs. 3,700 crores has been attached by the Enforcement Directorate as well as by Income Tax authorities, and there was an overlapping attachment. The revenue interest was fully secured against quantified demand of Rs. 1,833 crores.

Thus, the assessee was not required to make any further payment and/or furnish any further securities. However, if the attachment is vacated or revoked, the assessee shall deposit not less than 20% of Rs. 1,833 crores or furnish security amounting to not less than 20% of the outstanding liability.