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2019 (3) TMI 480 - AT - Income TaxStay petition - recovery proceedings - disallowance of exemption u/s. 10(38) - HELD THAT - In this case the assessee has already deposited 25, 00, 00, 000/- against the outstanding demand. The assessee has tried to make out a prima facie case in its favour by stating. We are therefore of the opinion that stay should be granted subject to the condition that assessee shall deposit another 25, 00, 00, 000/- on or before 15-03-2019. Therefore the outstanding demand is stayed for a period of six months from the date of this order subject to condition that the assessee would deposit 25, 00, 00, 000/- on or before 15-03-2019. The assessee is also granted out of turn hearing on 23-04-2019 and the registry is directed accordingly. Since the date of hearing is announced in the open court the issuance of separate notices is dispensed with.
Issues:
1. Stay of demand sought by the assessee of ?2,64,67,23,090 arising from an assessment order under section 143(3) of the Income Tax Act. 2. Disallowance of exemption under section 10(38) in respect of gain/profit on sale of investments. 3. Interpretation of Rule 5(b) of the First Schedule of the Income Tax Act post amendment by the Finance Act, 2010. 4. Arguments regarding liability to tax on gain arising from sale of securities/investments. 5. Conditions for granting stay of demand and deposit requirements. Issue 1: Stay of Demand The assessee sought the stay of demand amounting to ?2,64,67,23,090, out of a total demand of ?2,89,67,23,090, resulting from an assessment order passed under section 143(3) of the Income Tax Act. The Tribunal granted the stay subject to conditions, including the deposit of an additional ?25,00,00,000 by a specified date. Issue 2: Disallowance of Exemption under Section 10(38) The dispute revolved around the disallowance of exemption under section 10(38) concerning the gain/profit on the sale of investments. The CIT(A) upheld the AO's decision to disallow the claim of exemption, citing amendments by the Finance Act, 2010, which re-inserted Clause(b) to Rule 5 of the First Schedule. The assessee challenged this decision before the Tribunal. Issue 3: Interpretation of Rule 5(b) Post Amendment The amendment to Rule 5(b) by the Finance Act, 2010 was a focal point of contention. The amendment specified that gains from the sale of investments should be added to taxable income if not reflected in the Profit and Loss Account. The assessee argued that this amendment did not alter the provisions of Section 10(38) and should not lead to tax liability on such gains. Issue 4: Liability to Tax on Gain from Sale of Securities The Revenue contended that the amendment to Rule 5 made gains from the sale of securities/investments taxable, leaving no room for interpretation. The Revenue argued for a deposit of 50% of the outstanding demand before granting any stay, emphasizing the tax liability arising from the sale of investments. Issue 5: Conditions for Granting Stay The Tribunal, while granting the stay of demand, required the assessee to deposit an additional sum by a specified date. The stay was subject to this condition, and the assessee was granted an out-of-turn hearing. The Tribunal cautioned against seeking adjournments without valid reasons, with a provision for the stay to be reviewed if adjournments were sought without sufficient cause. This comprehensive analysis covers the key issues, arguments presented by both parties, the Tribunal's decision, and the conditions imposed for granting the stay of demand.
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