Tribunal grants stay, requires Rs.20 crore deposit. Employees not in violation of Income Tax Act.

The Tribunal allowed the stay application filed by the assessee, directing them to deposit Rs.20 crores in two installments within specified deadlines. The Tribunal found that the employees who received benefits were not managers or trustees, and therefore did not violate section 13(3) of the Income Tax Act. The appeal was adjourned for further hearing.

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Issues:
Stay of recovery of demand based on rejection of exemption under section 11 of the Income Tax Act due to alleged violation of section 13(3) of the Act by giving benefits to employees.

Analysis:
The Stay Petition was filed by the assessee to halt the recovery of a demand amounting to Rs.3,01,83,05,459 until the appeal's disposal. The demand arose from the Assessing Officer's addition, rejecting the exemption under section 11 of the Act. The rejection was based on the assertion that the assessee provided benefits to its employees through priority in plot allotments and price concessions, thereby contravening section 13(3) of the Act. The Department contended that since the assessee allotted plots to employees on a concessional basis, a violation of section 13(3) occurred, opposing the stay application.

The assessee argued that the employees were not managers but performed routine tasks, were not involved in management, and did not make strategic decisions. The benefit to employees was claimed to be a declared policy under the Parishad Rules, specifically referring to para 36 of the rules. The assessee maintained that as an institution, not a trust, section 13(3) would apply only if benefits were given to managers. The assessee cited case law to support the argument that employees were not managers.

The assessee requested the stay, highlighting that over 30% of the disputed tax had been deposited, and a prima facie case was established, favoring the balance of convenience. The Department objected, citing case law to assert that employees fell under the purview of section 13(3) violation. The Tribunal found that core persons of the assessee did not receive preferential allotments, and employees who received discounts were not trustees or managers. It was noted that the employees did not act in managerial capacity, meeting the specific requirement of the section concerning managers. Consequently, the Tribunal directed the assessee to deposit Rs.20 crores in two installments, adjourning the appeal for further hearing.

In conclusion, the Tribunal allowed the stay application, requiring the assessee to make the specified deposits within set deadlines.

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