2014 (3) TMI 844 - AT - Income Tax

Tribunal grants stay on demand for A.Y. 2010-11 over disallowed interest, favoring assessee

M/s. HDFC. Bank Limited Versus Asstt. Commissioner of Income Tax

The Tribunal granted a stay of the outstanding demand for A.Y. 2010-11 due to the disallowance of broken period interest, amounting to Rs. ... Stay of outstanding demand – Disallowance of broken period interest – Held that:- Assessee contended that already in his own case for the previous years, stay has been granted - Relying upon American Express International Banking Corporation vs. CIT [2002 (9) TMI 96 - BOMBAY High Court] - in A.Y. 2002-03 a similar disallowance was made by the AO on account of broken period interest which was deleted by the CIT(A) and the department did not prefer any appeal against the order of ld. CIT(A) for A.Y. 2002-03 on this issue - the assessee thus has a good prima facie case to succeed in its appeal on the main issue of broken period interest and once it is decided in favour of the assessee, it will result in refund of tax for the year under consideration instead of the present outstanding demand - the balance of convenience lies in favour of the assessee and it is a fit case to stay the outstanding demand as sought by the assessee – thus, the outstanding demand stayed till the disposal of appeal – Decided in favour of Assessee. Issues: Stay of outstanding demand for A.Y. 2010-11 due to disallowance of broken period interest.Analysis:1. Background: The assessee sought a stay of the outstanding demand of Rs. 900,00,33,067/- for A.Y. 2010-11, primarily arising from the disallowance of broken period interest amounting to Rs. 2649,26,00,000/-.2. Assessee's Argument: The counsel for the assessee argued that previous decisions by the Tribunal and the Hon'ble Bombay High Court favored the assessee's case regarding broken period interest. The counsel highlighted that the A.O. had allowed broken period interest in previous assessment years and that the disallowance for A.Y. 2010-11 was inconsistent with past practices.3. Revenue's Argument: The ld. D.R. opposed the stay application, emphasizing that the A.O. had not taken coercive action for recovery despite the outstanding demand. The Revenue contended that the disallowance was justified based on specific grounds different from previous years, and the ld. CIT(A) had upheld the disallowance.4. Tribunal's Decision: After considering both arguments and the merits of the case, the Tribunal found in favor of the assessee. The Tribunal noted the prima facie case of the assessee on the disallowance of broken period interest and granted a stay of the outstanding demand for six months or until the appeal's disposal, whichever is earlier. The Tribunal directed the assessee to offer sufficient security to the satisfaction of the A.O. during the stay period.5. Conclusion: The Stay Application filed by the assessee was allowed, and the appeal was scheduled for an expedited hearing on 10-06-2014. The order aimed to balance the interests of the assessee and the Revenue by granting the stay while ensuring the protection of the Revenue's interests through the provision of adequate security.