2019 (1) TMI 147 - AT - Income Tax

Stay against the outstanding demand - Revision u/s 263 - whether the amount in question on account of option money is revenue in nature or capital in nature? - Held that - According to the Assessee, the agreement in question between the assessee and M/s. CUIH is dated 07.08.2001 and have been examined by the A.O. in earlier years and no adverse view have been taken against the assessee. In preceding A.Ys. 2013-2014 and 2014-2015 though the contention of assessee have been accepted by the A.O. but the Ld. Pr. CIT has reopened the assessments under section 263 of the I.T. Act against which, appeals of the assessee are pending before the Tribunal on 14.01.2019. It is a case where assessee has declared income of ₹ 54,51,114/- in the return of income but due to the above addition, assessment have been framed against the assessee in a sum of ₹ 247.39 crores. The balance of convenience also lies in favour of assessee and in case, entire demand is recovered against the assessee, the purpose of the filing of the appeal would be frustrated. The interest of Revenue is also protected because the assessee has already paid substantial demand to the Revenue against the outstanding demand. The appeal of assessee is pending for disposal and appeals of assessee for another years on the same issue are also pending for disposal - we stay the entire outstanding demand for a period of six months or disposal of the appeal whichever may expires earlier, subject to the condition that assessee shall not seek unnecessary adjournment in the matter.

Summary

Issues:
Stay application against outstanding demand of ?111,61,79,720 for A.Y. 2015-2016.

Detailed Analysis:

Issue 1: Nature of Income
The assessee filed a stay application against the demand arising from the addition of ?246.84 crores as business income by the Assessing Officer (A.O.). The A.O. considered the amount received as "option money" from Commercial Union International Holding Limited (CUIH) as taxable business income, not linked to divestment of stake, leading to the addition in the income of the assessee. The Counsel argued that the option money was a refundable security deposit linked to capital investment and should be considered a capital receipt, not taxable as revenue. The A.O. had accepted this explanation in previous years but changed the view for the current assessment year. The Tribunal found that the assessee had a prima facie case for an absolute stay, considering the substantial demand already paid and pending appeals on similar issues. The stay was granted for six months or until the appeal's disposal, with a condition not to seek unnecessary adjournments.

Issue 2: Balance of Convenience
The Tribunal considered the balance of convenience in favor of the assessee, as recovering the entire demand would defeat the purpose of the appeal. The interest of Revenue was protected as the assessee had already paid a significant amount against the outstanding demand. The Tribunal noted that the assessee had declared income of ?54,51,110 but faced an assessment of ?247.39 crores due to the disputed addition. The decision to grant a stay was based on the totality of facts and circumstances, ensuring fairness to both parties and allowing for a final hearing on the fixed date along with other appeals on the same issue.

In conclusion, the Tribunal allowed the stay application of the Assessee, emphasizing the need to balance the interests of both parties and ensuring a fair hearing process.