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Issues: Whether an ad interim stay of recovery granted by a superior court extinguishes the assessee's liability to pay the tax determined and prevents levy of the statutory penalty for non-payment during the period of stay.
Analysis: Under sections 41 and 42 of the Karnataka Agricultural Income-tax Act, 1957, an assessee who fails to pay the amount demanded within the prescribed time is deemed to be in default, and the penal consequence follows automatically. An interim stay against recovery does not suspend the operation of the taxing liability itself where the stay only restrains coercive recovery or further proceedings. Such an order merely puts recovery in abeyance and does not obliterate the underlying liability. The statutory levy described as penalty was treated as compensatory in substance, in the nature of interest for the period of default, and there was no basis to read the stay order as granting immunity from that consequence.
Conclusion: The interim stay did not extinguish the assessee's liability or bar the automatic levy of penalty for the period of default; the issue is decided against the assessee.
Final Conclusion: The writ petitions failed, and the demands based on default under the Act were upheld.
Ratio Decidendi: A stay of recovery does not extinguish the statutory liability to pay tax or the automatic compensatory consequence for default unless the order expressly suspends the operation of the charging or default provisions themselves.
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