Granting an interim relief to Tata Education and Development Trust, the Income Tax Appellate Tribunal (ITAT), Mumbai bench has referred the issue whether a stay can be granted by it without the taxpayer having to deposit 20% of the disputed amount, to the special bench.
Meanwhile, this Trust will have to set aside about Rs 100 crore for disputed income tax demands relating to financial years 2010-11 and 2011-12. The assessee claimed these amounts remitted to the educational universities outside India as the application of income under section 11(1)(c) of the Income Tax Act, 1961.
The Tribunal observed that the Trust has to file an undertaking within a week, setting out details of investments of not less than Rs 99.75 crore, which it will not encash till the stay applications are disposed of. The matter has been tentatively listed for July 6.
The Trust filed a stay application contending that the newly introduced provision (which puts a deposit condition before a stay is granted by the ITAT) is a directory and not mandatory. “Holding the provision as mandatory would result in patently an incongruous legal position… a situation which is completely arbitrary, unconstitutional and contrary to the well-settled scheme of law”, the Trust submitted.
Till the matter is decided, the Tribunal directed the income tax department to maintain the status quo in the case and has given an interim stay in favor of Tata Education. It also directed Tata Education to maintain sufficient liquidity so that in future once the matter is decided and appeal goes against it, it can then pay the demand.
“We are of the considered view that these issues are of vital importance to all the stakeholders all over the country, and in our considered understanding, on such important pan India issues of far-reaching consequence, it is desirable to have the benefit of arguments from stakeholders in a different part of the country. We are also mindful of the fact, as learned Departmental Representative so thoughtfully suggests, the issues coming up for consideration in these stay applications involve larger questions on which well-considered call is required to be taken by the bench. Considering all these factors, we deem it fit and proper to refer the instant Stay Applications to the Hon’ble President of Income Tax Appellate Tribunal for consideration of constitution of a larger bench and to frame the questions for the consideration by such a larger bench, under section 255(3) of the Income Tax Act, 1961.”
“The special bench shall hear the matter on question of law if the amendment is a directory or mandatory and binding on the ITAT. It will also hear what happens to stay petition filed before the law came into effect as the ITAT is dealing with many stay petitions filed before April 1, which could not be heard due to nationwide shutdown and non-functional courts. The Supreme Court, in a case, has opined that the ITAT’s powers to grant stay are an inherent power,” the Tribunal added.
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