2010 (12) TMI 734 - AT - Income Tax

Stay application - It is also observed that the sum of Rs. 9.54 crores has already been recovered from the assessee which is more than 40 per cent of the tax demand originally raised against it - The liquidity position of the assessee also is not very favourable in as much as its current payables as on today are more than the receivables by a sum of Rs. 12 crores and even the bank account has an overdraft balance of Rs. 3.25 crores - Any further recovery of outstanding demand thus, is likely to cause a genuine hardship to the assessee and may have an adverse effect on its routine business - Hence, the balance of convenience clearly lies in favour of the assessee and it is a fit case to grant the stay of entire outstanding demand - Thus, the stay application of the assessee is allowed.

Summary

Issues:
Stay of outstanding demand amounting to Rs. 20,95,57,856 for assessment year 2007-08.

Analysis:
The assessee, a software distribution company, filed a return declaring total income of Rs. 5,73,42,828 for the year in question. The Assessing Officer (AO) computed the total income at Rs. 72,01,19,366, making a significant addition of Rs. 65,41,72,734 on account of local software purchases under section 40(a)(ia) for failure to deduct tax at source. The Commissioner of Income Tax (Appeals) upheld the assessment, resulting in a demand of Rs. 30,49,20,970. The assessee sought a stay of the outstanding demand, which was partially recovered by the Department. The Tribunal noted that the Supreme Court had overruled the Karnataka High Court decision relied upon by the AO and CIT(A) for the addition. The Tribunal found merit in the assessee's argument, indicating a good prima facie arguable case. Considering the financial hardship the assessee would face due to further recovery, the Tribunal granted a stay of the entire outstanding demand until the appeal's disposal or for six months, whichever is earlier. The Tribunal also scheduled an expedited hearing for the appeal.

In conclusion, the Tribunal allowed the stay application of the assessee, considering the overruled precedent, the financial position of the assessee, and the potential hardship further recovery would cause. The Tribunal granted a stay of the outstanding demand until the appeal's resolution or for a specified period, emphasizing the need for an expedited hearing to address the matter promptly.