Bombay High Court Upholds ITAT's Order Directing Vodafone India To Deposit Rs.230 Crores For Staying Income Tax Demand

The Bombay High Court has upheld the order passed by the Income Tax Appellate Tribunal (ITAT) directing Vodafone India to deposit Rs. 230 crores for staying income tax demand.

The bench of Justice G. S. Kulkarni and Justice Somasekhar Sundaresan directed the petitioner, Vodafone India, to deposit an amount of Rs. 230 crore, being the lowest or minimum amount of 20% of the disputed tax demand, which, in our opinion, is clearly in consonance with the provisions of Section 254(2A) of the Income Tax Act.

The first proviso to Section 254 (2A) of the Income Tax Act provides that the ITAT may grant stay under the first proviso, subject to the condition that the assessee deposits not less than 20% of the amount of tax, interest, fee, penalty, or any other sum payable.

The petitioner or assessee has challenged an order of the Income-tax Appellate Tribunal. The Tribunal had rejected an application filed by the petitioner seeking a blanket unconditional stay on the collection and recovery of tax and interest demands aggregating to Rs. 1128.46 crore.

The assessee contended that order necessarily needs to be interfered with, as certainly it was neither feasible nor practicable to comply with such a condition to furnish a corporate guarantee from an associate company that has unencumbered assets in India in excess of the balance disputed demands, i.e., Rs. 900 crores. The condition has been coined for the first time and would amount to a gross departure from the orders that were passed in the prior assessment years, not only by the Tribunal but also by this Court and the Gujarat High Court, as seen from the chart.

The department contended that in the absence of any perversity or any gross illegality, the observations as made in the order would not call for interference, as the view taken by the Tribunal directing legitimate deposit of the amount as per the provisions of Section 254(2A) is an appropriate exercise of discretion.

The court refused to interfere with the ITAT interim order to the extent of directing the assessee to deposit Rs. 230 crore.

The court modified the second condition imposed by the ITAT with respect to the furnishing of a guarantee from an associate company that has unencumbered assets in India in excess of the balance demand, i.e., Rs. 900 crore. The court substituted the condition by directing the assessee to furnish a corporate guarantee of its ultimate parent, namely, Vodafone International Holdings BV, Netherlands.

Counsel For Appellant: Fereshte Sethna

Counsel For Respondent: Suresh Kumar

Citation: 2024 LiveLaw (Bom) 303

Case Title: Vodafone India Services Pvt. Ltd. Versus Assistant Commissioner of Income Tax Circle 8(3)(2)

Case No.: Writ Petition No. 566 Of 2022

Click Here To Read The Order