Tribunal Grants Interim Stay on Tax Recovery for Charitable Trust

The Tribunal granted an interim stay on the recovery of tax and interest amounts for the public charitable trust, subject to conditions. The Tribunal emphasized the importance of considering the CBDT approval under Section 11(1)(c) and deliberated on the impact of the amendment to Section 254(2A) by the Finance Act, 2020. The Tribunal highlighted the need for flexibility in determining reasonable security and referred the matter to the Hon'ble President of ITAT for constituting a larger bench to address significant legal questions. The case was tentatively scheduled for a hearing on 6th July 2020, with the interim stay remaining in place until further orders.

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Issues Involved:
1. Stay on collection/recovery of tax and interest.
2. Validity and impact of CBDT approval under Section 11(1)(c).
3. Powers of the Tribunal under Section 254(2A) as amended by Finance Act, 2020.
4. Nature and implications of security to be furnished by the assessee.

Detailed Analysis:

1. Stay on Collection/Recovery of Tax and Interest:
The assessee, a public charitable trust, sought a stay on the recovery of tax and interest aggregating to Rs. 88,84,40,520 for AY 2011-12 and Rs. 10,91,19,880 for AY 2012-13. The stay applications were made in respect of assessment orders under Section 143(3) read with Section 250 of the Income Tax Act, 1961. The Tribunal decided to deal with both applications together due to common facts and legal issues.

2. Validity and Impact of CBDT Approval under Section 11(1)(c):
The assessee claimed amounts remitted to educational universities outside India as application of income under Section 11(1)(c). Initially, the Assessing Officer included these amounts in the income due to the lack of CBDT approval. However, the CBDT granted approval on 10th November 2015, effective for AYs 2009-10 to 2016-17. The Assessing Officer rectified the assessment orders, deleting the additions. Despite this, the CIT(A) disregarded the rectification, arguing the approval was not retrospective and the necessary verifications were not done in the original assessments. The Tribunal noted the strong prima facie case of the assessee, emphasizing the CBDT’s approval should have been considered.

3. Powers of the Tribunal under Section 254(2A) as Amended by Finance Act, 2020:
The Tribunal examined whether the amendment to Section 254(2A) by the Finance Act, 2020, which mandates a deposit of not less than 20% of the disputed tax, interest, fee, or penalty, affects its powers to grant a stay. The Tribunal considered arguments that the amendment should be directory, not mandatory, to avoid practical difficulties and unconstitutional outcomes. The Tribunal referred to judicial precedents, including the Hon’ble jurisdictional High Court’s judgment in Narang Overseas Pvt Ltd Vs ITAT, which held similar provisions as directory.

4. Nature and Implications of Security to be Furnished by the Assessee:
The Tribunal deliberated on the nature of security required under the amended Section 254(2A). It was argued that security could include bank guarantees, mortgages, liens, or personal bonds, ensuring the revenue’s interests are protected. The Tribunal acknowledged the need for flexibility in determining reasonable security.

Interim Order and Directions:
Pending final decision, the Tribunal granted an interim stay on the recovery of the disputed amounts, subject to conditions:
- The assessee must furnish an undertaking detailing investments of not less than Rs. 99,75,60,400 within one week.
- The assessee must cooperate in the expeditious disposal of the stay applications and appeals, including participating in virtual hearings if necessary.
- The interim stay will remain until the stay applications or appeals are disposed of, or until further orders.

The Tribunal referred the matter to the Hon’ble President of ITAT for consideration of constituting a larger bench to address the significant legal questions involved. The case was tentatively scheduled for hearing on 6th July 2020.

Conclusion:
The Tribunal’s interim order emphasized maintaining the status quo on the collection of disputed demands while protecting the revenue’s interests. The larger bench's decision will address the broader implications of the amendment to Section 254(2A) and the nature of security required, ensuring a comprehensive resolution of the issues.

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