2022 (2) TMI 187 - HC - Income Tax

High Court allows Income Tax Appellate Tribunal to extend stays beyond 365 days

Principal Commissioner of Income Tax Corporate Circle -2 (2), Chennai Versus M/s. Michelin India Pvt Ltd (formerly known as Michelin India Tyres Pvt. Ltd)

Principal Commissioner of Income Tax Corporate Circle -2 (2), Chennai Versus M/s. Michelin India Pvt Ltd (formerly known as Michelin India Tyres Pvt. Ltd) ... Issues Involved:1. Whether the Tribunal is correct in law in allowing stay beyond a period of 365 days in contravention to the provision of IT Act stipulated in Sec.254(2A) read with the provision theretoRs.Issue-wise Analysis:1. Tribunal's Authority to Extend Stay Beyond 365 Days:The primary issue addressed in the judgment is whether the Income Tax Appellate Tribunal (ITAT) can lawfully extend a stay beyond 365 days, as stipulated in Section 254(2A) of the Income Tax Act, 1961. The appellant, representing the Revenue, challenged the ITAT's decision to extend the stay.The appellant's counsel acknowledged a pivotal Supreme Court ruling in Deputy Commissioner of Income-tax v. Pepsi Foods Ltd., which clarified that 'any order of stay shall stand vacated after the expiry of the period mentioned in the section 254(2A), only if the delay in disposing of the appeal is attributable to the assessee.'2. Supreme Court's Interpretation of Section 254(2A):The Supreme Court's judgment in Pepsi Foods Ltd. was extensively cited. The Court held that the third proviso to Section 254(2A), which mandates the automatic vacation of a stay after 365 days regardless of the reason for the delay, is 'arbitrary and discriminatory' and thus violates Article 14 of the Constitution of India. The Court emphasized that the legislative intent behind the second proviso to Section 254(2A) was to differentiate between assessees responsible for delays and those who are not, allowing stay extensions if the delay is not attributable to the assessee.The Court further noted that the third proviso's objective of ensuring the speedy disposal of appeals cannot justify discriminatory treatment. The judgment highlighted that automatic vacation of stay even when the delay is not the assessee's fault, or when the Revenue is responsible for the delay, is 'manifestly arbitrary.'3. Legal Maxims and Judicial Precedents:The judgment referenced several legal maxims and precedents, including the principle that 'no man should suffer because of the fault of the court or delay in the procedure' (actus curiae neminem gravabit). The Court in Pepsi Foods Ltd. applied this maxim, stating that delays caused by the Tribunal should not prejudice the assessee.Additionally, the judgment discussed the interpretation of statutory provisions, emphasizing that when a literal interpretation leads to an unjust result, courts should seek to achieve the legislative intent and produce a rational construction. This principle was applied to modify the interpretation of Section 254(2A).4. Conclusion and Application to Present Case:In light of the Supreme Court's ruling, the High Court concluded that the ITAT's decision to extend the stay beyond 365 days was justified since the delay in disposing of the appeal was not attributable to the assessee. The substantial question of law was decided in favor of the assessee, and the tax case appeal against the Revenue was dismissed.The High Court's judgment underscores the importance of judicial discretion in interpreting statutory provisions to avoid unjust and arbitrary outcomes, particularly in cases where procedural delays are beyond the control of the assessee.