Bombay High Court Irked By ITAT's Deloitte Stay Rejection Order

 

Dear Subscriber,

 

The following important judgement is available for download at itatonline.org.

Deloitte Consulting India Pvt.Ltd vs. ACIT (Bombay High Court)

Rejection of stay application by ITAT on the ground that “the financial position of the assessee is very sound” and “government also needs liquid funds to manage its day to day affairs” & without discussing prima facie case is in disregard of law laid down in KEC International 251 ITR 158 (Bom)

The assessee filed a revised return in which it withdrew a claim for deduction of Rs.5.86 crore paid to its AE. The assessee claimed s. 10A deduction on the enhanced income. The AO held that the revised return was filed to get over s. 92-C(4) and the proviso thereto which provides that no deduction u/s 10-A would be allowed in respect of income enhanced having regard to the Arms Length Price (ALP). The AO’s stand was upheld by the Tribunal. The AO levied penalty of Rs. 2.05 crore and refused to grant stay. The assessee filed a Writ Petition. The High Court held that that the assessee held a prima facie case on merits and granted partial stay of the demand till the decision of the CIT(A). Subsequently, the CIT(A) dismissed the penalty appeal and the assessee filed a stay application before the Tribunal. The Tribunal (order attached) rejected the stay application on the ground that “the financial position of the assessee is very sound” and “government also needs liquid funds to manage its day to day affairs”. The assessee filed a Writ Petition to challenge the said order of the Tribunal. HELD by the High Court:

The impugned order of the Tribunal has been passed in total disregard of the principles laid down in KEC International Ltd 251 ITR 158 (Bom) wherein a Division Bench of this Court laid down parameters to be observed by the Authorities while considering the stay application. The Tribunal has not even given short prima facie reasons recording the Petitioner’s case. The Petitioner does has a strong prima facie case on merits before the Tribunal. Thus, having regard to the fact that the Petitioner has already paid the full tax amount and also 25% of the penalty amount earlier, the Tribunal ought not to have required the Petitioner to deposit a further sum of Rs.50.00 lakhs. In fact, the Tribunal while passing the impugned order has not only ignored the directions in KEC but also the observations made by this Court in the Petitioner’s own case

Note: The guidelines laid down in KEC International have been reiterated in UTI Mutual Fund (No. 1) 345 ITR 71 (Bom). In UTI Mutual Fund (No. 2) 31 TM 222 (Bom) it was held that financial hardship was not necessary for grant of stay. Click here for more law on stay of demand

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Regards,

 

Editor,

 

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