Stay of tax recovery granted where assets were under court control and CBDT instructions did not justify a deposit condition.

The High Court held that insisting on a 25 per cent deposit as a condition for stay of recovery was unwarranted where the taxpayer's assets were under court control and could not be alienated, the disputed demand was pending in appeal, and the Revenue's interests were already protected by an existing stay on the remaining recovery. It further noted that binding CBDT instructions on stay of demand, together with the settled principle that beneficial circulars and instructions bind tax exercising taxing powers, favoured full stay when the assessed income was substantially higher than the returned income and no material justified a partial deposit. The deposit condition was set aside and recovery of the disputed tax stayed until disposal of the appeals.

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Issues: Whether the Income-tax Appellate Tribunal was justified in directing deposit of 25 per cent of the disputed tax as a condition for stay of recovery pending disposal of the appeals, and whether the entire recovery ought to have been stayed in the facts of the case.

Analysis: The petitioner's assets remained under the control of the court and were not available for alienation or sale, so the ability to raise funds for immediate deposit was effectively absent. The disputed demand was also pending in appeal, and the recovery of the remaining demand had already been stayed by the Tribunal, showing that the Revenue's interest was sufficiently protected. The Court further held that the departmental instruction governing stay of demand, together with the settled position that beneficial circulars and instructions of the Central Board of Direct Taxes bind the authorities exercising taxing powers, supported stay of recovery where the assessed figure was substantially higher than the returned figure and no material justified insisting on a partial deposit. The Tribunal's order was found to have ignored the relevant binding instructions and the applicable judicial principles governing grant of stay.

Conclusion: The direction to deposit 25 per cent of the disputed tax was set aside, and recovery of the entire disputed tax was ordered to remain stayed until disposal of the appeals.

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