2013 (5) TMI 156 - HC - Income Tax

Stay - Disallowance of depreciation on intangibles & tangible - Demand U/s 40A(2) - Interest U/s 220(2) of the Income Tax Act, 1961 - Held that - It is necessary to note that out of the total tax demand of ₹ 15,81,63,498/-, an amount of ₹ 1,62,40,170/- already stands paid as it was adjusted against the refunds due for the assessment year 2008-09. The balance tax payable would then be ₹ 14,19,23,328/-, out of which, pursuant to the order passed by the Tribunal, a sum of ₹ 50 lacs has already been paid by 5th February, 2013, which leaves a balance of ₹ 13,69,23,328/- and as against this, an amount of ₹ 13,36,32,605/- is only on account of enhancement made of ₹ 30.44 crores which, prima facie, does not appear to be backed by law - We feel that the petitioner has an excellent prima facie case and the Tribunal ought to have granted stay of the demand raised by the revenue. We set aside the impugned order passed by the Tribunal to the extent of balance payments other than the payment of ₹ 50 lacs already made by the petitioner - the rest of the demand is stayed till the Tribunal disposes of the appeal - The writ petition stands disposed of - Any observations made in this order are only prima facie observations and will not be taken into account by the Tribunal while considering and deciding the appeal - We expect that the Tribunal shall decide the appeal expeditiously. The parties have assured that they shall not take any adjournments.

Summary

Issues:
Challenge to the order of the Income Tax Appellate Tribunal regarding stay of demand during appeal.

Analysis:
1. The petitioner contested the Tribunal's decision granting only instalments for a demand of Rs.16,42,55,970, arguing for a complete stay during appeal due to alleged hardship, supported by a strong prima facie case.

2. The petitioner's case involved a loss return for the assessment year 2007-08 following the acquisition of a business, with contentions on depreciation claims and tax liabilities. The Assessing Officer disallowed depreciation on intangibles, resulting in a tax liability adjustment against refunds due for the assessment year 2008-09.

3. The Commissioner of Income Tax (Appeals) upheld disallowances, including adding back a significant amount under Section 40A(2) of the Income Tax Act, which the petitioner disputed. The petitioner argued against the disallowance of depreciation on intangibles while allowing it on tangibles, highlighting inconsistencies in the Commissioner's decision.

4. The Commissioner's total disallowances amounted to Rs.31,68,20,064, leading to a demand of Rs.16,42,55,970, primarily driven by the disputed amount under Section 40A(2) and other disallowances. The petitioner contended that the disputed amount lacked legal basis.

5. The High Court found merit in the petitioner's arguments, noting the strong prima facie case and the need for a stay on the demand. The Court set aside the Tribunal's decision on balance payments, except for Rs.50 lacs already paid, directing a stay until the appeal's disposal. The Court emphasized that its observations were prima facie and should not influence the Tribunal's decision, urging an expedited appeal resolution without adjournments.