2014 (6) TMI 675 - HC - Income Tax

Stay of demand - application u/s 220(6) - whether the payment made to an agent of a non-resident foreign carrier shall be treated to have been made to such foreign carrier. - The appeal before the C.I.T. (appeals) is pending - Held that - a prima facie case has been made out and the assessing officer ought to have been considered the said point while dismissing the application under Section 220 sub-section 6 of the said act. This Court, therefore, finds that any order directing the petitioner to deposit the demand raise on the above points to the tune of Rs.30 lakhs is passed, it would cause hardship to the petitioner. Petitioner directed to make pre-deposit of Rs. 10 lakhs as a condition for stay of the recovery proceedings or any coercive steps to be taken for realization of the demand during the pendency of an appeal - stay granted partly.

Summary

Issues:
Challenge to order rejecting application for stay under Section 220(6) of the Income Tax Act; Consideration of submissions made at the time of hearing; Lack of reasons in the impugned order; Interpretation of double taxation avoidance agreement; Prima facie case for stay; Amount to be deposited for stay of recovery proceedings.

Analysis:
The petitioner challenged the order rejecting the application for stay under Section 220(6) of the Income Tax Act, contending that the authority did not consider the submissions made during the hearing and the order lacked reasons. The petitioner argued that a payment to an agent of a disclosed foreign principal should be treated as made to the foreign carrier, citing a Division Bench judgment. The respondent disputed this, stating that the double taxation avoidance agreement was not produced before the authority, and it was unclear if payments were made to the agent of a disclosed foreign carrier.

The Court acknowledged a prima facie case regarding the interpretation of the double taxation avoidance agreement and the payment issue. It found that directing the petitioner to deposit the entire demand of Rs. 30 lakhs would cause hardship. Therefore, the Court ordered the petitioner to deposit Rs. 10 lakhs with the department for a stay of recovery proceedings during the appeal before the Commissioner of Income Tax (appeals). The remaining demand of Rs. 18.81 lakhs was not considered a strong prima facie case by the Court.

To strike a balance between the interests of the revenue and the petitioner, the Court granted an unconditional stay of recovery for two weeks upon depositing Rs. 10 lakhs. The Commissioner of Income Tax (appeals) was directed to expedite the appeal process within three months. Failure to deposit the amount within the stipulated period would allow the department to take permissible steps for recovery. The writ petition was disposed of with no costs incurred by any party.