Discretion pending appeal must ordinarily favour the assessee; mere ability to pay does not justify refusing statutory protection.

Section 40 of the Madras Agricultural Income-tax Act, 1955 confers a discretion on the Agricultural Income-tax Officer to treat an appellant as not in default while an appeal remains pending, and that discretion must ordinarily be exercised in the assessee's favour unless there are sound and relevant reasons to deny it. Mere financial soundness or ability to pay the disputed tax is not, by itself, a sufficient ground to refuse the statutory benefit. On that reasoning, the refusal to stay recovery pending appeal was held unsustainable and fresh orders were directed.

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Issues: Whether the Agricultural Income-tax Officer could refuse to treat the assessee as not being in default under the proviso to section 40 of the Madras Agricultural Income-tax Act, 1955, merely because the assessee was financially sound and able to pay the tax pending appeal.

Analysis: Section 40 confers a discretion on the Agricultural Income-tax Officer to treat an assessee who has filed an appeal under section 31 as not being in default while the appeal remains undisposed of. That discretion is not arbitrary and, ordinarily, where an appeal has been presented, the benefit of the proviso should follow unless there exists some sound and relevant reason for denying it. Financial soundness of the assessee and ability to pay the tax, by themselves, do not constitute a sufficient ground to refuse the benefit of the proviso.

Conclusion: The refusal to grant the benefit of the proviso was unsustainable and the issue was decided in favour of the assessee.

Final Conclusion: The petitions succeeded and the impugned refusal to stay recovery of the tax covered by the appeals was set aside, with a direction to pass fresh orders in accordance with the ruling.

Ratio Decidendi: A statutory discretion to treat an appellant as not in default pending appeal must ordinarily be exercised in favour of the assessee, and it can be refused only for sound and relevant reasons; mere financial capacity to pay is not enough.

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