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Karnataka HC grants interim stay to Flipkart India on demand exceeding Rs.1100 Cr

The Karnataka High Court has granted an interim stay on a demand of over Rs. 1100 crore against Flipkart India for assessment years (AYs) 2016–17 and 2018–19, which was required to be deposited within 4 days.

The ecommerce retailer has preferred writ petitions against demand notices issued by the CIT(A) after upholding addition on account of capitalising discounts as marketing intangibles and disallowing employee stock options (ESOP) cross charges amounting to about Rs. 4,500 crore and Rs. 180 crore, respectively, for the time period mentioned above.

Flipkart’s arguments

Flipkart, who is the assessee in this case, submits that the issue of capitalising marketing intangibles was decided in its favour by ITAT Bangalore for AYs 2015–16. Further, it argues that the appellate orders have been passed in gross violation of the principles of natural justice, as the documents forming the basis of the findings were not provided to the it for a rebuttal.

It also contends that the coordinated bench ruling in Biocon, as well as the Madras HC and Delhi HC rulings in PVP Ventures and NDTV, respectively, cover the allowability of ESOP cross charges in the its favor.

Flipkart also claims a breach of judicial discipline and consistency, citing ITAT orders in favour of it on the underlying issues in AYs 2012-13, 2015-16, and 2017-18, and a CIT(A) order in favour of the Flipkart in AY 2017-18.

The ecommerce firm’s grievance is that no reasonable time is provided to deposit the demand, and there is no justification to provide only 4 days for this purpose, which also restricts the limitation period available to it for preferring an appeal before ITAT.

Thus, it urges that no coercive measures shall be taken until the expiry of such limitation period. The HC has granted protection against coercive measures until the next date of hearing, that is February 24.

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