Delhi High Court Grants Stay on Reassessment Proceedings Against Flipkart Marketplace

Delhi High Court Grants Stay on Reassessment Proceedings Against Flipkart Marketplace

The Delhi High Court has granted a stay on the reassessment proceedings initiated by the Income Tax Department against Flipkart Marketplace and its subsidiary, FK Myntra Holdings.

The division bench of Justices Rajiv Shakkdher and Girish Kathpalia issued notices to the relevant parties and directed the submission of counter-affidavits within eight weeks. The Court directed that during this period, the reassessment proceedings will be stayed until further orders from the Court. The Court listed next hearing for 6 December.

The case revolved around the investment of approximately Rs. 3,000 crores made by the Singapore-based entities into an Indian company called Flipkart Internet Pvt. Ltd.

Thereafter, the Income Tax Department had initiated reassessment proceedings for the assessment year 2019-20, alleging that the foreign direct investment made by Flipkart Marketplace and FK Myntra Holdings constituted income escaping assessment.

However, both entities presented their case before the Court, claiming to hold a valid Tax Residency Certificate (TRC) of Singapore and asserting that they had not filed any income tax return in India.

Aggrieved by the same, the company approached the High Court, challenging the reassessment order issued by the department for fiscal 2020.

Advocate Kumar Visalaksh, representing the petitioners- Flipkart Marketplace, argued that the investment made by the entities in shares of Flipkart Internet should not be considered as income escaping assessment unless the Assessing Officer can form a prima facie view that it involves round-tripping.

The assessees relied on jurisdictional High Court rulings in Nestle and Blackstone Capital, asserting that the investment in shares should be treated as a capital account transaction and not as income escaping assessment unless the Revenue can establish a prima facie case of round-tripping based on available material.

While noting that similar questions of law are being debated by different courts in several other cases, the Court issued notice to the Income Tax Department.

Accordingly, the Court directed the department to file its counter-affidavit on the matter in the next eight weeks.