2014 (3) TMI 1155 - AT - Income Tax

Seeking stay of the outstanding demand - HELD THAT - A total foreign exchange gain of ₹ 776.114 lacs has arisen to the assesse for the relevant year. Of the same, ₹ 23.11 lacs is admittedly on revenue account, while the balance ₹ 753.03 lacs is on the ECB loan utilized for acquiring a capital asset. The assessee has with regard thereto made out a prima facie case before us. As against the demand relatable to the gain on revenue account, as informed, the Revenue has already compensated itself by annexing the assessee s bank account, appropriating over ₹ 16 lacs. Under the circumstances, therefore, we consider it a fit case for grant of stay for the balance demand of little over ₹ 350 lacs. So, however, on a query by the Bench with regard to the non-fund security, with a view to safeguard the interest of the Revenue, the ld. AR agreed not to liquidate its investments (outstanding at ₹ 702.05 lacs as on CGU Logistic Limited vs. ITO 31.12.2013/PB pg.74) to that extent. In view of the foregoing, we grant stay.

Summary

Issues:
Stay petition by the Assessee seeking stay of outstanding demand for A.Y. 2010-11 regarding taxability of foreign exchange gain.

Analysis:
The Assessee filed a stay petition before the Tribunal seeking a stay on the outstanding demand of &8377; 357.79 lacs for the assessment year 2010-11 related to the taxability of a foreign exchange gain. The gain arose from a foreign exchange loan taken for purchasing a capital asset, a vessel, by the Assessee engaged in the shipping business. The Assessee contended that the gain should be adjusted against the cost of the asset as per section 43A of the Act and should impact only the depreciation claim, not the business income. The Revenue, however, argued that the amount was not invested in the capital asset, justifying its treatment as the Assessee's income. The Tribunal noted a total foreign exchange gain of &8377; 776.114 lacs, with a portion on revenue account and the rest on the ECB loan for the capital asset. The Revenue had already recovered a part of the demand from the Assessee's bank account. The Tribunal found a prima facie case in favor of the Assessee and granted a stay for the balance demand, subject to certain conditions.

The Tribunal considered it appropriate to grant a stay on the balance demand of over &8377; 350 lacs, with the Assessee agreeing not to liquidate its investments to safeguard the Revenue's interest. The stay was granted on the condition that the Assessee establishes payment for the gain on the revenue account, provides an undertaking not to liquidate investments to the extent of the outstanding demand, and attends the hearing fixed for the appeal. The Tribunal warned that seeking adjournment without just cause would lead to the vacation of the stay. Consequently, the Assessee's stay application was allowed, and the order was pronounced in the open court on March 07, 2014.