Conditional stay on tax demand upheld where exclusive levies and debatable disallowances justified a partial deposit.

Under Section 40(a)(iib) of the Income-tax Act, levies imposed exclusively on the assessee must be tested against the object of the provision, not merely by comparing whether similar charges are borne by others. The FL-9 licence fee and gallonage fee were treated as exclusive levies arising from the assessee's monopoly position, while the shop licence fee and surcharge on sales tax involved two possible views on statutory applicability. In that situation, the appellate authority was justified in granting stay subject to a partial deposit, and the condition requiring payment of 20% of the outstanding demand in instalments was upheld.

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Issues: (i) Whether the appellate authority was justified in granting stay of the assessment demand on condition that 20% of the outstanding demand be paid in instalments, when the assessee contended that the disallowances under Section 40(a)(iib) of the Income-tax Act, 1961 were not sustainable.

Analysis: The disputed disallowances related to licence fee, gallonage fee, shop licence fee and surcharge on sales tax. The exclusivity of the levies had to be examined in the context of the object of Section 40(a)(iib) of the Income-tax Act, 1961, and not merely by asking whether similar levies were charged from others as well. The FL-9 licence fee and gallonage fee were found to be levies imposed exclusively on the assessee in view of the monopoly created in its favour. As regards the remaining levies, the material showed that two views were possible on whether they fell within the statutory prohibition, and the appellate authority's insistence on a partial deposit while granting stay could not be said to be unreasonable.

Conclusion: The conditional stay was upheld and the challenge to the order imposing the 20% deposit condition failed.

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