Tax demand stay pending appeal granted where prima facie case, hardship, and conflicting precedents favored the assessee.

CBDT stay guidelines were treated as binding on assessing authorities when considering stay of tax demand pending appeal. Because conflicting High Court decisions existed and the jurisdictional High Court had not adopted the Department's view, a prima facie case was found in favour of the petitioner. The balance of convenience also favoured stay, as the assessee was a co-operative society regulated under co-operative law and was not shown to be carrying on banking business with a banking licence. Severe financial hardship and irreparable prejudice supported interim protection, and collection of the demand was stayed until disposal of the appeal.

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Issues: Whether the petitioner was entitled to stay of collection of tax demand pending disposal of the appeal, having regard to the CBDT stay guidelines, the existence of a prima facie case, and the balance of convenience and hardship.

Analysis: The assessment orders had disallowed deduction claimed under Section 80P(2)(a)(i) of the Income-tax Act on the view that the petitioner functioned as a co-operative bank and therefore fell within Section 80P(4). The petitioner relied on a contrary High Court decision holding that a co-operative credit society is distinct from a co-operative bank, and also relied on the CBDT instructions governing stay of demand. The Court held that the CBDT guidelines were binding on the assessing authorities and that the case fell within the category where conflicting High Court decisions existed and the jurisdictional High Court had not adopted the Department's view. On that basis, a prima facie case was made out. The Court also found that the balance of convenience favoured the petitioner, since the society was regulated under the co-operative law framework and was not shown to be carrying on banking business with the requisite banking licence. It further held that enforcement of the demand pending appeal would cause severe financial hardship and irreparable prejudice to the society and its members.

Conclusion: The petitioner was entitled to interim stay of collection of tax demand until the appeal was disposed of by the Commissioner of Income Tax (Appeals), and the impugned orders were set aside.

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