2020 (8) TMI 237 - AT - Income Tax

Stay of recovery of 80% of the outstanding demand - HELD THAT - We are of the view that the assessee made out a prima facie case inasmuch as the issue sought to be raised in the appeal is identical to the issue considered and decided in favour of the assessee in the case of Menzies Aviation Bobba Pvt. Ltd. 2015 (11) TMI 401 - ITAT BANGALORE . On the issue of disallowance of interest on hedging swap transaction, there appears to be a prima facie case inasmuch as there was no capital expenditure debited to the Profit Loss account for AY 2017-18 and the asset was put to use as early as in 2008. Considering the payments already made by the assessee and taking note of the financial hardship pointed out by the assessee, we are of the view that there should be a stay of recovery of the balance outstanding demand i.e., ₹ 4,62,06,437 for a period of six months from the date of this order, or till the disposal of the appeal; whichever is earlier. We also find that the appeal is already fixed hearing on 01.10.2020. The assessee shall not seek adjournment, except for unavoidable reasons. Stay petition is allowed.

Summary

Issues:
1. Stay petition for recovery of outstanding demand of tax, interest, and penalty.
2. Eligibility of deduction u/s. 80IA for the aviation fuel facility.
3. Disallowance of interest on hedging transaction.

Analysis:
1. The stay petition was filed by the assessee seeking relief from the recovery of 80% of the outstanding demand, which included tax, interest, and penalty. The primary issue revolved around the eligibility of the assessee for deduction u/s. 80IA of the Income-tax Act, 1961. The revenue authorities rejected the deduction claim as the assessee did not have an agreement with the required governmental bodies, and the Fuel Farm Facility was not located within the airport precincts, resulting in a substantial deduction denial.

2. Another crucial issue was the disallowance of interest on a hedging transaction by the revenue authorities. The assessee had taken a foreign currency term loan for its aviation fuel facility and entered into a swap arrangement with a bank to mitigate foreign exchange risks. The revenue disallowed the interest deduction claimed by the assessee related to the swap transaction, leading to a significant addition to the total income.

3. The Tribunal considered the arguments presented by both parties. It noted that the assessee had a prima facie case regarding the deduction u/s. 80IA, citing a previous decision in a similar case. Additionally, on the issue of disallowance of interest on hedging, the Tribunal found a prima facie case as the asset was put to use early, and no capital expenditure was debited in the relevant year.

4. Considering the financial hardship faced by the assessee, exacerbated by the COVID-19 pandemic's impact on the aviation industry, the Tribunal granted a stay of recovery for the balance outstanding demand for six months or until the appeal's disposal, whichever is earlier. The Tribunal directed the assessee not to seek adjournment for the upcoming appeal hearing, emphasizing the need for timely resolution.

5. Ultimately, the Tribunal allowed the stay petition, providing temporary relief to the assessee from the recovery of the outstanding demand. The decision was pronounced in August 2020, acknowledging the challenging circumstances faced by the assessee and ensuring a fair consideration of the legal issues at hand.