2015 (4) TMI 631 - HC - Income Tax

Stay of demand - by-products also have some value and therefore, TDS ought to have been deducted in respect thereof as per AO - Held that - As mentioned earlier, the petitioner is operating in the whole of the State of Punjab engaged essentially in public utility services of a very important nature, namely, the procurement and distribution of foodgrains throughout the State of Punjab. They are funded by the Reserve Bank of India/Union of India. Although the turnover is around ₹ 12,000 crores, their profits is only about ₹ 1 crore. If the amounts lying in their bank accounts are frozen, at this stage, it would cause enormous inconvenience, harm and prejudice, not only to the petitioner but to the public in general. This important fact persuades us to grant stay in favour of the petitioner. We do not grant the stay, at this stage, merely because the petitioner has a arguable case. That is but one factor. The impugned order merely stated that the factors mentioned in the circular of the CBDT dated 02.12.1993 are absent. The CBDT circular only contains illustrative situations, as noted in the impugned order dated 09.07.2014 itself. It is certainly not exhaustive of the grounds on which a stay can be granted and the grounds which ought to be taken into consideration in an application for grant of stay. The impugned order dated 25.09.2014 merely records that the petitioner has not given a schedule of payment. The last order impugned in these petitions, namely, the order dated 12.03.2015 merely observes that despite various opportunities, the petitioner had failed to submit any proposal/schedule to pay the demand and that the petitioner has not furnished any reasonable cause for not paying the demand. An assessee not paying the demand or not agreeing to do so in instalment, would not be a ground for rejecting the grant of stay, if the assessee is entitled to the same. Thus the petitioner is entitled to a stay of the demand, pending the hearing and of the final disposal of the appeal. - Decided in favour of assessee.

Summary

Issues:
1. Challenge to orders rejecting application for stay of demand.
2. Interpretation of tax liability on residual products.
3. Consideration of prima facie case and balance of convenience for granting stay.

Analysis:
1. The petitioner, a government undertaking, challenged orders rejecting their application for stay of demand related to tax liability on residual products. The petitioner procured paddy, paid farmers, and provided paddy to millers. The millers sent rice to FCI, retaining residual products like husk and rice-bran. The Assessing Officer imposed tax on the by-products, leading to a demand of Rs. 15 crores for assessment years 2012-13 and 2013-14. The petitioner appealed to the CIT, seeking an early hearing, which was pending. The court noted the absence of addressing relevant questions in the impugned orders, such as the existence of a prima facie case.

2. The court highlighted that the by-products' value was disputed, with the petitioner claiming no separate charges for them. The Assessing Officer's view on TDS deduction from the by-products was contested. The court referenced a judgment from the Andhra Pradesh High Court regarding the transfer of property in similar by-products, emphasizing the need for the CIT to consider such precedents. The court stressed the importance of balancing convenience, considering the petitioner's significant role in public utility services and the potential harm from freezing their bank accounts.

3. The court found the impugned orders lacking in addressing crucial factors for granting a stay, such as the absence of a payment schedule and failure to consider the petitioner's circumstances. Emphasizing that non-payment alone should not be grounds for rejecting a stay, the court overturned the orders rejecting the stay of demand. In light of the exceptional circumstances and the potential harm to the petitioner and the public, the court granted a stay of the demand pending the appeal's final disposal before the CIT. The impugned orders were set aside, and no coercive steps were permitted during the appeal hearing. The writ petitions were allowed in favor of the petitioner.