Tribunal Grants Stay on Tax Demand, Requires Security & Installments

The Tribunal granted a stay of the outstanding demand of Rs. 1,33,33,80,940 for AY 2015-16, related to deemed dividend u/s 2(22)(e), for 90 days or until appeal disposal. The assessee, facing financial hardship, offered assets as security and proposed adjusting income tax refunds. They agreed to pay Rs. 20 crores in installments. The Departmental Representative sought immediate higher payment. The Tribunal approved the stay with conditions, including depositing specified amounts in installments and offering assets as security. The order provided temporary relief to the assessee, subject to compliance with the conditions.

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Issues:
Stay of outstanding demand of Rs. 1,33,33,80,940 for AY 2015-16 due to deemed dividend u/s 2(22)(e) - Financial hardship faced by the assessee - Request for security against assets and adjustment of income tax refund - Payment of Rs. 20 crores in installments - Opposing view by Departmental Representative.

Analysis:
The stay application was filed by the assessee seeking relief from the outstanding demand of Rs. 1,33,33,80,940 related to the Assessment Year 2015-16, primarily arising from the addition made by the Assessing Officer for deemed dividend u/s 2(22)(e) of the Income Tax Act. The amount in question was linked to the Reserve and surplus of a subsidiary company in which the assessee held over 10% voting power and had received an unsecured loan. The assessee contended that the funds received were for a specific commercial purpose and not as dividends, emphasizing their core business of strategic investments in other companies.

The assessee, through its Senior Counsel, highlighted severe financial hardship, supported by audit reports demonstrating the dire financial state. They offered the company's assets as security for the satisfaction of the Income Tax Department and proposed the adjustment of pending income tax refunds against the demand. Additionally, the assessee agreed to pay Rs. 20 crores in installments to settle the remaining demand by a specified date.

On the contrary, the Departmental Representative opposed the stay, citing a minimal deposit made by the assessee against the total demand and suggested a higher percentage payment to be made immediately. After considering the arguments from both sides and examining the records, the Tribunal decided to grant a stay of the outstanding demand for 90 days from the date of the order or the appeal's disposal, subject to specific conditions.

The conditions imposed by the Tribunal included a schedule for the assessee to deposit specified amounts against the outstanding demand in installments, along with offering the assets mentioned in the application as security to the Income Tax Department. The stay was contingent upon the assessee fulfilling these conditions, and a hearing for the appeal was scheduled for a later date. The order pronounced on 17.01.2019 allowed the stay application subject to the stated terms and conditions, providing temporary relief to the assessee while ensuring compliance with the specified requirements.

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