In a relief to Flipkart India, the Karnataka High Court has granted an interim stay on the over `1,100-crore tax demand on the e-commerce major for assessment years 2016-17 and 2017-18. The tax had to be deposited within four days from January 31, following which it had moved the High Court. In its order, the court also gave interim protection to Flipkart India from coercive measures until the next date of hearing.
The submission on behalf of the respondents is that there cannot be any prohibition in law against issuance of notice, but during the appeal period, no coercive measures may be taken and as such, coercive measures will not be taken. This assurance shall be in force until the next date of hearing, and the office is directed to re-list this petition on February 24, 2023,” the High Court said in its order dated February 6.
Flipkart India had filed writ petitions on February 3 against demand notices issued by the Commissioner of Income Tax (Appeals) on January 31 this year. The CIT (A) had upheld the addition on account of capitalising discount as marketting intangibles. The CIT (Appeals) had also disallowed ESOP cross charges of Rs 4,500 crore and `180 crore, respectively, for the two assessment years under review.
Flipkart had said that the Income Tax Appellate Tribunal (Bangalore) had decided in its favour on the issue of capitalisation of marketing intangibles for the Assessment Year 2015-16. It also submitted that the allowability of ESOP cross charges was covered in its favour by the coordinate bench ruling on Biocon as well as by a Madras High Court ruling on PVP Ventures and a Delhi High Court ruling on NDTV.
It had also contended that there was not sufficient time to deposit the demand and there was no justification to provide a four day period for depositing the tax. This also limited the limitation period it had to file an appeal with the ITAT.
Amit Maheshwari, Tax Partner, AKM Global said that one would have to look at the order, but the High Court seems to have taken cognisance of the fact that the tax demand was required to be deposited in a very short period of time. “High Court typically grants relief in such cases where principles of natural justice are not followed. Lately, there have been many cases where taxpayers have been given very less time to produce documents, not shown evidence and hence depriving the chance to provide a rebuttal and not providing adequate opportunity to be heard,” he said.