2013 (12) TMI 1424 - HC - Income Tax

Stay of demand - Held that - As per the CBDT Instruction which is prevalent as of now is that in the normal course the payment will not be stayed but can only be done for valid reasons and merely because an appeal has been preferred against the assessment order would not entitle a party to the stay - The petitioner-Trust is admittedly having Rs. 120 Crores in its account and therefore is in a position to make the payment - The Tribunal has while taking into consideration the liquidity position of the petitioner-Trust and also keeping in view the interest of revenue proceeded to stay 75% of the outstanding demands in dispute and has only required the petitioner to make payment of 25% of the outstanding demand - The petitioner has only been asked to deposit Rs. 11, 40, 43, 550/- on or before 31.12.2013 - On such deposit and production of the original receipt before the Registry the main appeals of the petitioner have been directed to be fixed in the month of January 2014 - Decided against petitioner.

Summary

Issues involved:
1. Assessment of a Trust as a Charitable Trust under the Income Tax Act, 1961.
2. Stay of outstanding demands in dispute during the pendency of appeal.
3. Validity of directing the petitioner to deposit 25% of the outstanding demand.
4. Applicability of CBDT Instruction on stay of recovery.
5. Interpretation of the judgment in the case of Taneja Developers and Infrastructure Ltd.
6. Timely disposal of appeals by the Tribunal.

Analysis:

1. Assessment of a Trust as a Charitable Trust:
The petitioner, a Trust, contended that it should be assessed as a Charitable Trust under the Income Tax Act, 1961, thereby claiming exemption from tax liability. The petitioner referred to previous court orders and provisions of the Act to support its claim. The court noted the petitioner's argument but found that the assessment made by the respondents for the relevant years was still pending. The court directed the Tribunal to decide the appeals of the petitioner within two months.

2. Stay of outstanding demands during appeal:
The Income Tax Appellate Tribunal had passed an order directing the petitioner to deposit 25% of the outstanding demand in dispute for the assessment years 2004-05 and 2005-06, while staying 75% of the payment during the pendency of the appeal. The petitioner argued that even the 25% directed to be deposited was not sustainable due to running losses. The court observed that the petitioner had sufficient funds to make the payment and upheld the Tribunal's decision based on the petitioner's liquidity position and the interest of revenue.

3. Validity of directing deposit of 25% of outstanding demand:
The court found no irregularity or illegality in the Tribunal's order requiring the petitioner to deposit 25% of the outstanding demand. The total amount to be deposited was specified, and the court noted that upon compliance, the main appeals of the petitioner would be fixed for a future date. The court upheld the Tribunal's decision in this regard.

4. Applicability of CBDT Instruction on stay of recovery:
The court referred to the prevailing CBDT Instruction, stating that payment would not be stayed in the normal course unless valid reasons existed. The Tribunal considered the liquidity position of the petitioner and the interest of revenue before granting a partial stay on the outstanding demands. The court supported the Tribunal's decision based on these considerations.

5. Interpretation of the judgment in the case of Taneja Developers:
The petitioner cited a judgment from the Delhi High Court in a different case to support its argument for staying recovery due to a high assessment figure compared to returned income. However, the court found that the cited judgment was not directly applicable to the present case concerning the status of the Trust as a Charitable Trust. The court issued a direction for timely disposal of the petitioner's appeals by the Tribunal.

6. Timely disposal of appeals by the Tribunal:
In light of the long-pending dispute, the court directed the Tribunal to decide the appeals of the petitioner within two months from the date of the order. The court emphasized the importance of timely resolution and instructed the Registry to send a copy of the order to the Income Tax Appellate Tribunal for compliance.

Conclusion:
The writ petitions were disposed of with the above terms, emphasizing the need for timely resolution of the appeals and upholding the Tribunal's decision regarding the deposit of 25% of the outstanding demand during the pendency of the appeal.