2015 (1) TMI 15 - HC - Income Tax

Refusal to grant stay of outstanding demand - prima facie case on merits considered or not Guidelines laid down in KEC International Ltd. V. B.R. Balakrishnan not considered - Held that - In KEC International Ltd. V. B.R. Balakrishnan 2001 (3) TMI 32 - BOMBAY High Court guidelines has been laid down to be kept in mind by the Authorities while disposing of the stay applications - one of the factors to be considered while granting stay is to examine the question in appeal before directing the petitioner to deposit the full amount or pay the amount partially till the disposal of the appeal by the CIT(A) CIT(A) while passing the order has clearly ignored the decision and the parameters laid down while disposing of the stay applications thus, the order is set aside and stay granted till the disposal of appeal Decided in favour of assessee.

Summary

Issues:
1. Stay of outstanding demand by Commissioner of Income Tax
2. Prima facie case on merits not considered
3. Variation of stay order without reasons
4. Capital receipt not chargeable to tax
5. Guidelines for disposing of stay applications

Analysis:
1. The petition challenged the order refusing to grant stay on an outstanding demand of Rs. 21.70 Crores until the final disposal of the petitioner's appeal for the Assessment Year 2008-2009. A part of the demand was already stayed as it originated from a previous assessment order set aside by the ITAT. The petitioner contended that the impugned order did not consider their prima facie case on merits and varied the stay order without reasons, directing payment of the full outstanding demand.

2. The petitioner argued that the grant-in-aid received was a capital receipt not chargeable to tax, which was not considered in the impugned order. It was highlighted that the amount had been accepted as a capital receipt in the original assessment proceedings, and the reopening proceedings did not justify the change in treatment. The petitioner's counsel emphasized that the Commissioner of Income Tax had not provided any reason for varying the stay order to the petitioner's detriment.

3. The respondent's counsel contended that not all grant-in-aid received would be on a capital account, depending on the terms and conditions. The argument was made that interference with the impugned order was unwarranted based on this premise.

4. Referring to the case law, the Court outlined guidelines for authorities when disposing of stay applications, emphasizing the need to consider the assessee's case, financial viability, and the questions involved in the appeal. It was noted that the Commissioner of Income Tax had disregarded these parameters while passing the impugned order, leading to its setting aside.

5. Consequently, the Court set aside the impugned order and allowed the petitioner to file a fresh representation before the Commissioner of Income Tax. The Commissioner was directed to consider the guidelines laid down by the Court and specifically address the petitioner's argument regarding the non-taxability of the grant-in-aid. A stay of demand was granted until the Commissioner's decision and an additional two weeks thereafter. The petition was disposed of with no costs awarded.