Bombay HC Temporarily stay ₹32.39 Crore Income Tax Demand Notice to PayPal

paypal law insider
paypal law insider

LI Network

Published on: November 26, 2023 at 12:25 IST

The Bombay High Court has granted a stay on the income tax demand and penalty notice served to online payment processing giant, PayPal, amounting to ₹32.39 crores.

The demand, alleging underreported income for the assessment year 2020-21, was contested by PayPal, leading to the court’s decision.

The division bench, comprising Justices KR Shriram and Neela Gokhale, suspended the final assessment order issued by the Assistant Commissioner of Income Tax (ACIT), National Assessment Faceless Centre, Delhi, until January 31, 2024.

In response to PayPal’s plea seeking relief from the effect of the order, the court issued an ad-interim order on November 7.

The order stays the operation of the assessment order, demand notice, penalty notice, draft order, and Transfer Pricing Officer (TPO) order issued by ACIT, Delhi, and Mumbai, until the final disposition of the petition.

The legal challenge by PayPal, presented through advocates Anuj Jhaveri and Mihir Modi, contends that the income tax proceedings initiated against them were arbitrary and illegal.

PayPal argues that the assessment order for the AY 2020-21 exceeded the legally permissible timeframe. According to Section 153(1) of the Income Tax Act, no assessment order can be made after 18 months (extendable up to 12 months) from the end of the relevant fiscal year.

The ACIT Mumbai, on July 29, issued a transfer pricing order, adjusting over ₹91 crores for the distribution of payment services in India and imposing a penalty.

On October 17, the final assessment added ₹91 crores to PayPal’s assessed income, totaling over ₹104 crores. A demand notice for ₹32.39 crores was issued the same day, alleging underreported income.

PayPal maintains that the entire process was in violation of legal provisions and has sought the quashing of the order, demand notice, and penalty notice.

The matter is scheduled for further hearing on January 8, 2024, with the assessing officers given three weeks to file their response.

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