2023 (8) TMI 1648 - HC - Income Tax

Exemption u/s 11 and 12 - petitioner is a temple popularly known as Jamalapuram Venkateswara Swamy Temple and the said temple according to the petitioner stands exempted under the provisions of Section 12A - contention of the petitioner that the temple all the more is entitled for the exemption for the reason that it is a religious institution and therefore it falls within the ambit of Section 11 HELD THAT - In the instant case undisputedly the petitioner is a religious institution and is a temple which has been granted exemption u/s 12A. Moreover the records which have been produced by the authorities concerned would reflect that barring out the demand raised at a couple of occasions it does not appear to have been any demand raised against the petitioner either preceding the impugned notice or impugned assessment order under challenge. Taking into consideration the fact that the petitioner being a religious institution and is exempted from the income tax by virtue of Sections 11 and 12A of the Act we are inclined to set aside the impugned order dated 02.08.2023. Accordingly the Writ Petition is disposed of directing that the appeal pending before respondent No.3 to be decided on its own merits in accordance with law at the earliest. Meanwhile respondent No.2 shall not insist upon the payment of any amount as demanded in the order which is under challenge before the appellate authority.

Summary

ISSUES:

Whether a religious institution exempted under Sections 11 and 12A of the Income Tax Act, 1961 is obliged to pay a specified amount as a condition for grant of stay on tax demand under Section 220(6) of the Act.Whether the Income Tax authority exercising jurisdiction under Section 220(6) of the Act is bound by departmental instructions or circulars while deciding stay applications.Whether the impugned order imposing payment conditions for stay of demand is sustainable in law.The scope of discretion vested in the Assessing Officer under Section 220(6) of the Income Tax Act in granting stay of demand during pendency of appeal.

RULINGS / HOLDINGS:

The Court held that the Income Tax authority exercising jurisdiction under Section 220(6) of the Act exercises "quasi judicial power" and is "not bound or confined by departmental instructions," including CBDT circulars, while deciding stay applications.The Court ruled that no statute prescribes a fixed amount to be paid by an assessee challenging an order, and therefore, insisting upon payment of a substantial amount as a condition for stay is not warranted, especially for a religious institution exempt under Sections 11 and 12A.The impugned order directing payment of Rs.1.00 crore and Rs.25 lakhs as condition for stay was set aside, and the matter was remanded for fresh consideration in accordance with law.The appeal pending before the appellate authority was directed to be decided on its own merits without insisting on any payment as a precondition for stay.

RATIONALE:

The Court applied the legal framework under Section 220(6) of the Income Tax Act, 1961, which confers discretion on the Assessing Officer to grant stay of demand during pendency of appeal.The Court relied on the Supreme Court precedent establishing that jurisdiction under Section 220(6) is quasi judicial and not bound by departmental circulars, emphasizing independent application of mind.The decision referenced a recent Division Bench ruling of the same High Court, which reiterated the principles laid down by the Supreme Court in the context of stay applications under Section 220(6).The Court recognized the special status of the petitioner as a religious institution exempt under Sections 11 and 12A, noting the absence of prior demands and the limited source of income, which justified a liberal approach.No doctrinal shift was indicated; rather, the Court reinforced established principles regarding quasi judicial discretion and non-obligation to follow departmental instructions in stay matters.