2015 (9) TMI 77 - HC - Income Tax

Stay on balance demand of tax denied - no financial difficulty is caused by the deposit - Held that - As decided in UTI Mutual Fund Vs. ITO 2013 (3) TMI 350 - BOMBAY HIGH COURT where a strong prima facie case has been made out in its favour by the assessee, the requirement of predeposit would by itself be a matter of hardship. We are informed that the CIT (Appeals) has already commenced the hearing of petitioner s appeal filed from the assessment order dated 24th March, 2014 for the Assessment Year 2008-09 with effect from 18th August,2015. The appeal has now been adjourned to 29th October,2015 as the concerned CIT (Appeals) is on leave. Mr.Kapoor states, on instructions, he is on leave for a period of two months. In view of the fact that the CIT (Appeals) is seized of the matter and hearing it, it would be appropriate that in the peculiar facts of the present case the Revenue does not adopt any coercive proceedings till such time as the CIT (Appeals) disposes of the petitioner s appeal arising out of assessment order dated 24th March, 2014 and for the period of two weeks thereafter. However, as the hearing has already commenced, we would direct the CIT (Appeals) to dispose of the appeal as expeditiously as possible and preferably on or before 15th December,2015.

Summary

Issues:
1. Refusal to stay balance demand of tax pending appeal
2. Treatment of grant received as revenue or capital receipt

1. Refusal to stay balance demand of tax pending appeal:
The High Court considered the challenge to the order by the Commissioner of Income Tax refusing to stay the balance demand of tax amounting to Rs. 19.46 crores pending the disposal of the petitioner's appeal. The petitioner had sought a stay of demand following the assessment order for the Assessment Year 2008-09. Initially, the Assessing Officer had granted a stay of 50% of the tax payable, but the Commissioner of Income Tax later refused to stay the demand till the disposal of the appeal by the CIT (Appeals). The Court noted that the refusal was based on the grounds that the deposit would not cause financial hardship to the assessee and that the funds were not utilized for land acquisition as required. However, the Court held that the financial difficulty caused by the deposit should be considered, especially when a strong prima facie case is made out by the assessee. The Court directed the CIT (Appeals) to dispose of the appeal expeditiously, considering the peculiar facts of the case.

2. Treatment of grant received as revenue or capital receipt:
The main issue for consideration was whether a grant of Rs. 40 crores received from the State of Maharashtra for land acquisition should be treated as a revenue or capital receipt. The funds were provided for the development of Airports and Special Economic Zones within the state, with a requirement for monthly reports on fund utilization. The impugned order refused to grant a stay based on the grounds that the deposit would not cause financial hardship and that only a portion of the funds had been utilized for land acquisition. The petitioner argued that in previous years, similar grants were not treated as revenue by the Revenue, and most of the funds received had been used for land acquisition. The Court found that due consideration had not been given by the Commissioner of Income Tax regarding the receipt and utilization of funds. The Court directed that coercive proceedings should not be adopted by the Revenue until the CIT (Appeals) disposes of the appeal, emphasizing the need for expeditious disposal of the appeal.

In conclusion, the High Court disposed of the Writ Petition by directing the CIT (Appeals) to expedite the appeal process and refraining the Revenue from coercive actions until the appeal is decided. The Court emphasized the importance of considering financial hardship and proper evaluation of funds received in such cases.