2011 (3) TMI 1359 - HC - Income Tax

Writ petition - stay of demand - petitioner submits that in the earlier assessment years, the additions made on account of provision for service warranty, GCC contribution and advertisement was set aside by the appellate authority - petitioner has been paying the royalty to its parent Company and the said expenditure has also been allowed by the assessing officer earlier. But this time, the said amount has been disallowed Held that - if the demand in dispute relates to issues that have been decided in assessee s favour by an appellate authority or court earlier, in such circumstance, the relief for staying the demand should be granted, Commissioner of Income Tax not given any reason for rejecting the application for stay of the demand, interest of justice will be served by directing the appellate authority to hear and dispose of the appeal, Till the disposal of the appeal, the demand for the assessment year in question shall remain stayed, petition stands disposed of accordingly

Summary

Issues:
Assessment of income under the Income Tax Act for the assessment year 2005-06, rejection of stay application by various authorities, interpretation of guidelines for granting stay orders, lack of reasoning in rejecting stay application by the Commissioner of Income Tax.

Analysis:
The petitioner, a Pvt. Ltd. Company engaged in various business activities, challenged orders passed by respondent authorities related to the assessment year 2005-06. The petitioner had filed an appeal against the assessment for the year 1995-96, which was pending. The application for stay of demand was rejected by the assessing officer, Commissioner of Income Tax, and the appellate authority successively, leading to the filing of the present petition.

The petitioner's counsel argued that the authority should have granted interim protection based on past appellate decisions favoring the petitioner on similar issues. Reference was made to circulars and guidelines by the Central Board of Direct Taxes regarding the grant of stay orders. The Department's Standing Counsel supported the impugned orders, suggesting a reconsideration if no reasons were provided for rejecting the stay application.

Upon review, the Court acknowledged the petitioner's past favorable appellate decisions on similar issues and the substance in the case regarding royalty. It was noted that the Commissioner of Income Tax had not provided any reasoning for rejecting the stay application, rendering the order invalid. Without expressing any opinion on the merits, the Court found that the petitioner had a prima facie case. Consequently, the Court directed the appellate authority to hear and dispose of the appeal within two months while staying the demand for the assessment year in question until the appeal's resolution.

In conclusion, the Court disposed of the petition by emphasizing the importance of providing reasons for decisions and ensuring the interest of justice by allowing the appeal to be heard within a specified timeframe while granting a stay on the demand.