Interim stay of tax recovery requires prima facie case, balance of convenience, and irreparable hardship in section 80P disputes.

Interim stay of tax recovery may be granted where a taxpayer shows a prima facie case, balance of convenience, and irreparable hardship. In this matter, the demand stemmed from disallowance of deduction under section 80P on the allegation that a co-operative credit society was carrying on banking activity and was hit by section 80P(4). The Court noted the taxpayer's reliance on the Banking Regulation Act and CBDT Circular No. 6 of 2010, and treated the stay guidelines as binding where the jurisdictional High Court had not accepted the contrary view. Recovery was found likely to cripple the society's operations, supporting stay of collection pending appeal.

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Issues: Whether the petitioner was entitled to interim stay of collection of tax demand arising from disallowance of deduction under section 80P pending disposal of the appeal.

Analysis: The demand arose from assessments made under sections 143(3) and 147 of the Income-tax Act, 1961, in which deduction under section 80P(2)(a)(i) was denied on the footing that the petitioner was carrying on banking activity and was hit by section 80P(4). The Court noted that the petitioner claimed to be only a co-operative credit society, not a bank, and relied on section 5(b) and section 22 of the Banking Regulation Act, 1949, as well as CBDT Circular No. 6 of 2010 and the Gujarat High Court decision supporting its stand. The Court found that the stay guidelines issued by the CBDT were binding and that the case fell within the category where the High Court having jurisdiction had not accepted the contrary interpretation. The Court also held that the petitioner had shown a prima facie case, balance of convenience, and irreparable hardship, particularly because recovery would cripple the society's functioning and the bank account had been frozen.

Conclusion: The petitioner was entitled to interim stay of collection of the tax demand till disposal of the appeal by the Commissioner of Income Tax (Appeals).

Ratio Decidendi: Interim stay of tax recovery is justified where the assessee establishes a prima facie case, balance of convenience, and irreparable hardship, and the demand falls within the CBDT stay guidelines on conflicting interpretations of law.

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