2012 (4) TMI 171 - HC - Income Tax

Stay of demand Charitable trust registered u/s 12A and 80G availing exemption u/s 11 upto AY 2008-09 In AY 2009-10 demand imposed on ground that donations received cannot be regarded as voluntary contributions complete stay of demand not granted Held that - Assessing Officers and Appellate Authorities, should act as quasi judicial authorities while disposing stay applications and not merely as tax gatherers of the Revenue. While they have a duty of protecting the interests of the Revenue, they need to mitigate the hardship to the Assessee and applications for stay must be considered objectively. In present case, assessee continues to have a registration u/s 12A, which has not been revoked. Further, assessee has highlighted the nature of its activities in support of the plea for stay and also explained its financial position. In our view, First Petitioner does have serious issues to be urged before the CIT (Appeals) in appeal. This is a case where complete stay of demand ought to have been granted Therefore, complete stay of demand granted Decided in favor of assessee.

Summary

Issues:
Challenging orders for stay of demand by Director of Income Tax (Exemption) - Grant of stay, nature of donations received, compliance with Section 11(1)(d) of Income Tax Act, 1961.

Detailed Analysis:

1. Challenging Orders for Stay of Demand:
The petitioners challenged two orders from the Director of Income Tax (Exemption) dated 9 March 2012 and 14 March 2012. The first order directed payment of 50% of the total demand, while the second order required payment of a specific amount by a set date. The petitioners, a public charitable trust, had filed an appeal against the assessment order and sought a stay of demand pending the appeal.

2. Nature of Donations Received:
The petitioners had received donations to establish educational institutions and other facilities. The Assessing Officer held that these donations were not voluntary but commercial in nature, leading to a dispute regarding the tax treatment of these donations. The petitioners had been granted exemption as a charitable trust until the Assessment Year 200809, but faced challenges for the subsequent Assessment Year 200910.

3. Compliance with Section 11(1)(d) of Income Tax Act:
The Revenue argued that the donations received did not qualify as voluntary contributions under Section 11(1)(d) of the Income Tax Act. However, the court refrained from expressing a final view on this matter, noting that the appeal was pending before the Commissioner of Income Tax (Appeals). The court emphasized the need for a thorough evaluation of the issues during the appeal process.

4. Grant of Stay and Judicial Review:
The court highlighted the parameters for granting a stay of demand as established in previous judgments. It criticized the lack of reasoning and evaluation in the orders issued by the Assessing Officer and the Director of Income Tax. The court emphasized the quasi-judicial role of these authorities and the importance of balancing the interests of the Revenue with the rights of the Assessee. It noted that the petitioners had serious issues to present in their appeal and directed a complete stay of demand pending the appeal process.

5. Conclusion:
The court quashed the impugned orders dated 9 March 2012 and 14 March 2012, directing a stay of demand until the appeal for Assessment Year 200910 was disposed of by the Commissioner of Income Tax (Appeals). No coercive steps were to be taken against the Assessee for the recovery of the demanded amount. The petition was disposed of with no orders as to costs.