2016 (2) TMI 398 - AT - Income Tax

Tribunal Grants Stay Extension, Considers Financial Hardship, Disregards Proviso

M/s. SAP Labs India Pvt. Ltd. Versus Addl. Commissioner of Income-tax, Range 12, Bangalore.

The Tribunal granted an extension of the stay of recovery of outstanding demand for 180 days or until the disposal of the Assessee's appeal, whichever is ... Extension stay beyond a period of 365 days - Held that:- As rightly submitted by the learned counsel for the Assessee, the existence of all conditions for grant of stay has already been considered by this Tribunal and at this stage, new conditions cannot be imposed. As rightly submitted by the learned counsel for the Assessee, the non-existence of financial hardship cannot be conclusive in the matter. In any event these parameters have already been tested by the Tribunal when it originally granted an order of stay subject to certain conditions. For the reasons given above, we direct that there shall be an order of stay of recovery of outstanding demand for a period of 180 days from this day or till disposal of the appeal of the Assessee by the tribunal, whichever is earlier. Issues Involved:1. Extension of stay of recovery of outstanding demand.2. Tribunal's power to grant stay of recovery and its duration.3. Constitutional validity of the third proviso to Section 254(2A) of the Income Tax Act, 1961.4. Application of judicial precedents and their territorial effect.Issue-wise Detailed Analysis:1. Extension of Stay of Recovery of Outstanding Demand:The Assessee filed an application for extending the stay of recovery of outstanding demand initially granted by the Tribunal. The initial stay was granted subject to the Assessee paying Rs. 4 Crores in installments. This stay was extended multiple times due to the appeal not being heard within the stipulated period due to various adjournments, conflicts of interest, and non-functioning of the Bench.2. Tribunal's Power to Grant Stay of Recovery and Its Duration:Before the insertion of Section 254(2A) by the Finance Act, 1999, there was no express provision for the stay of recovery of tax and penalty. The Supreme Court in ITO Vs. M.K. Mohammed Kunhi recognized the implied power of the Tribunal to grant stay as incidental to its appellate jurisdiction, emphasizing that the Tribunal must have the power to prevent the appeal from being rendered nugatory.Subsequent amendments to Section 254(2A) by the Finance Acts of 1999, 2001, 2007, 2008, and 2012 introduced specific provisions and limitations on the duration of stay orders. The third proviso to Section 254(2A) inserted by the Finance Act, 2008, stipulated that the total duration of the stay granted by the Tribunal cannot exceed 365 days, even if the delay in disposing of the appeal is not attributable to the Assessee.3. Constitutional Validity of the Third Proviso to Section 254(2A):The Karnataka High Court in CIT Vs. Ecom Gill Coffee Trading (P) Ltd. held that the Tribunal cannot extend the stay beyond 365 days as per the third proviso to Section 254(2A). However, the Delhi High Court in Pepsi Foods (P) Ltd. Vs. ACIT declared the third proviso unconstitutional, stating that it violates Article 14 of the Constitution by clubbing together well-behaved Assessees and those causing delays, thus failing to achieve its objective.The Assessee argued that the Delhi High Court's decision should prevail, making the third proviso non-existent in the statute book where the delay is not attributable to the Assessee.4. Application of Judicial Precedents and Their Territorial Effect:The Assessee cited the Supreme Court's decision in Kusum Ingots and Alloys Ltd. and the Karnataka High Court's decision in Mr. Shiv Kumar Vs. Union of India, which held that a provision of a Central Act declared unconstitutional by one High Court applies throughout India. The Bombay High Court in CIT Vs. Godavaridevi Saraf also held that a Tribunal must respect the law declared by another High Court in the absence of a contrary decision.The Tribunal acknowledged these precedents and concluded that the third proviso to Section 254(2A) should be considered non-existent in cases where the delay is not attributable to the Assessee, following the Delhi High Court's ruling.Conclusion:The Tribunal directed an extension of the stay of recovery of outstanding demand for 180 days or until the disposal of the Assessee's appeal, whichever is earlier. The decision emphasized that the conditions for granting the stay had already been tested and that financial hardship alone is not conclusive in refusing the stay. The stay petition was accordingly allowed, and the order was pronounced in the open court on 08th January 2015.