2018 (2) TMI 1284 - HC - Income Tax

Rejection of stay application - Held that - Parameters for consideration of the stay application even under Order 41 Rule 5 of CPC, which governs the Appellate Courts and Civil Courts apply equally to the taxing statutes also. The argument of the learned counsel for the petitioner-assessee is that a high pitch demand has been raised contrary to the decision of the Hon ble Supreme Court also does not persuade this Court enough to cut short the process of deciding the regular appeal to be heard by the Tribunal against the tax demand of ₹ 145.15 crores and interest to the extent of ₹ 98.83 crores totalling to ₹ 243.98 crores approximately. The assessee had sought Stay of ₹ 172,45,08,305/- of net demand and a sum of ₹ 70 crores had already been paid by the petitioner- assessee. Tribunal had itself given a suggestion in para-2 quoted above of the impugned order, that if the assessee further deposits a sum of ₹ 51 crores in addition to ₹ 70 crores already deposited against the total demand of ₹ 242.45 crores, the Tribunal may consider the grant of Stay for the remaining demand, but since the learned Authorised Representative for the assessee before the learned Tribunal declined the said suggestion, the learned Tribunal proceeded to consider the stay application on its merit and passed the aforesaid order. This Court is not inclined to tinker with the said impugned interlocutory order in the present writ petition because as far as entertaining of the writ petitions against such interlocutory orders under Article 226 of the Constitution of India is concerned, the scales of justice cannot be different for the Revenue and for the assessee, and for this Court, both the parties, in such circumstances, are equally placed.

Summary

Issues:
1. Rejection of stay application by the Income Tax Appellate Tribunal.
2. Disallowance of interest payment on borrowings under section 36(1)(iii) of the Act.
3. Applicability of the decision in S.A. Builders Ltd. case.
4. Parameters for consideration of stay application.
5. Jurisdiction of the High Court to interfere with interlocutory orders.

Analysis:
1. The High Court dealt with a writ petition filed by the petitioner-assessee against the rejection of their stay application by the Income Tax Appellate Tribunal concerning a demand of ?172,45,08,305 raised by the Income Tax Department. The Tribunal rejected the stay application, prompting the petitioner to approach the High Court under Article 226 of the Constitution of India.

2. The main issue revolved around the disallowance of interest payment on borrowings under section 36(1)(iii) of the Act. The petitioner contended that the issue was covered in their favor by the decision of the Supreme Court in S.A. Builders Ltd. case. However, the Tribunal held that the test of commercial expediency was not met in the present case, leading to the dismissal of the stay application.

3. The High Court emphasized the parameters for considering a stay application, including the existence of a prima facie case, balance of convenience, and irreparable injury. The Court noted that these parameters, applicable under Order 41 Rule 5 of the CPC, also extend to taxing statutes. Despite the high demand and the partial stay granted by the Tribunal, the Court upheld the Tribunal's decision to reject the stay application and emphasized the importance of allowing the regular appeal process to proceed.

4. The Court also addressed the jurisdiction of the High Court to interfere with interlocutory orders. While acknowledging the importance of expeditious resolution, the Court declined to interfere with the Tribunal's decision, highlighting the need for equal treatment of both the Revenue and the assessee in such matters. The Court dismissed the writ petition, emphasizing that the scales of justice must be balanced for all parties involved.