2022 (7) TMI 1523 - AT - Income Tax

Grant of ad-interim stay of the outstanding demand - one of the issues agitated in the appeal relates to disallowance of claim made u/s 35(2AB) - as submitted that in case the claim u/s 35(2AB) of the Act, is not being granted to the assessee then, deduction equivalent to 100% of the expenditure deserves to be allowed u/s 37 - An apparent error has crept in the order of the Dispute Resolution Panel (DRP) and the assessee has filed an application for rectification and if the application before the DRP is disposed off, then whole demand will be wiped out and the assessee will be entitled for a refund. HELD THAT - Tribunal had adjourned the hearing expecting early disposal of the application before the DRP and refrained from passing any stay order in respect of the demand. However, in the last one month, there has been no development. In view of the above situation, we deem it proper to allow this application with the following directions - a) Any demand will be recovered in this assessment order against the assessee only after adjudication of its application filed for rectification before the DRP. Until and unless that application is decided no demand will be recovered from the assessee. b) This order shall remain in operation for a period of 180 days or till the decision of the main appeal, whichever event occurs first. c) In other words, it is made clear that the stay is being granted by keeping in mind that rectification application is pending. In case it is decided then, revenue will be at liberty to take appropriate action, if any, available against the assessee for recovery of the demand. d) The Registry is directed to list the appeal for hearing on out of turn basis on 24th August, 2022. The stay application is disposed of with the above terms.

Summary

Issues: Stay application for outstanding demand; Disallowance of claim u/s 35(2AB) of the Income Tax Act.

Stay Application for Outstanding Demand:
The judgment pertains to a stay application filed by the assessee seeking ad-interim stay of the outstanding demand amounting to Rs. 7,34,33,297. The counsel for the assessee highlighted that one of the issues in the appeal is the disallowance of a claim made under section 35(2AB) of the Income Tax Act, 1961. The assessee had claimed deductions for testing expenditure, which were disallowed. The counsel argued that if the claim u/s 35(2AB) is not granted, then deduction equivalent to 100% of the expenditure should be allowed u/s 37 of the Act. An application for rectification was filed before the Dispute Resolution Panel (DRP) to rectify an error in their order, which, if granted, would result in the entire demand being wiped out and the assessee being eligible for a refund.

Analysis of Stay Application Decision:
The Tribunal had previously adjourned the hearing of the stay application, expecting early disposal of the rectification application before the DRP. However, with no progress in the last month, the Tribunal decided to grant the stay application with specific directions. The Tribunal ruled that no demand would be recovered from the assessee until the rectification application before the DRP is adjudicated. The stay order would remain in effect for 180 days or until the decision of the main appeal, whichever occurs first. It was clarified that the stay was granted considering the pending rectification application, and if the application is decided, the revenue would be free to take appropriate action for demand recovery. The Tribunal also directed an expedited hearing of the appeal on 24th August, 2022.

Conclusion:
The stay application was disposed of with the conditions mentioned above, providing temporary relief to the assessee regarding the outstanding demand. The judgment emphasizes the importance of the pending rectification application and its potential impact on the demand recovery process. The decision reflects a balanced approach by the Tribunal in addressing the concerns raised by the assessee while ensuring procedural fairness and timely resolution of the appeal.