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Income Tax - High Court - Case Laws
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2014 (6) TMI 970
Penalty under Section 271(1)(c) - Held that:- There is no finding of the Assessing Officer that the details supplied by the Assessee in the return of income while making the claim in respect of frontend fees were incorrect or erroneous or false. The Assessee has disclosed in its return of income that the amount of front end fees to be non taxable in India. The note was also annexed to the return giving the basis for which the claim was made. In these circumstances whether the Assessee's stand was justified or otherwise, surely the penalty proceedings could not have been initiated and the penalty could not have been imposed. - Decided in favour of assessee.
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2014 (6) TMI 964
Jurisdiction of AO - Held that:- Tribunal has rightly held that the Assessing Officer has no jurisdiction to reagitate the assessments which were already completed and subsisting. We therefore do not find any element of law to be decided in this appeal.
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2014 (6) TMI 963
Rental income received - treated as “Income from Business” and not as “Income from House Property” - Held that:- As decided in Commissioner of Income Tax-III Vs. Velankani Information Systems (P) Limited [2013 (8) TMI 113 - KARNATAKA HIGH COURT] what is the intention behind the lease and secondly what are the facilities given along with the buildings and documents executed in respect of each of them is to be seen. Thirdly it is to be found out whether it is inseparable or not. If they are inseparable and the intention is to carry on the business of letting out the commercial property and carrying at complex commercial activity and getting rental income therefrom, then such a rental income falls under the heading of profits and gains of business or profession.
Tribunal is justified in law in holding that the rental income received from Forum Mall, Eva Mall and UB City and rental received from Fit Outs (i.e., bare superstructure of the building) should be treated as “Income from Business” and not as “Income from House Property” - Decided against revenue
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2014 (6) TMI 958
Deduction for provision made on account of liability towards contribution to Drug Price Equalization Account (DPEA) - ITAT allowed the claim - Held that:- The Tribunal in the instant case has followed the judgment of the Honourable Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971 (8) TMI 10 - SUPREME Court]. In view thereof and finding that the Tribunal's order is in consonance with the facts and circumstances of the case, so also, the statutory liability having been created in the year in question and which has no bearing on the pending proceedings initiated by the Assessee or the dispute raised therein that we find that this question cannot be termed as substantial question of law.
Deduction u/s 43B on account of non payment of Sales Tax - - ITAT allowed the claim - Held that:- Tribunal has held in favour of the Assessee by observing that the liability in relation thereto was also an issue raised for Assessment Year 1984-1985. . The Revenue surprisingly does not question the common order of the Tribunal for these years. See CIT v. Hindustan Lever Ltd [2014 (4) TMI 1012 - BOMBAY HIGH COURT ]. The question will have to be decided against the Revenue and in favour of the Assessee.
Expenses incurred on installation of computer software, expenses on electrical work and expenses on installation of lifts - whether fall within the ambit of revenue expenditure? - Held that:- In relation to this the Tribunal in the impugned order observed that there is room for certain flexibility in the views taken from time to time. The Assessee in such cases installs the computers. This technology is now said to be acceptable in changing world. The rapid advancement of research also contributes a small degree of endurability, but that by itself does not mean that the expenses incurred cannot be revenue in nature. Since technology advancement is an aspect which must be taken judicial note of, so also, machinery becoming obsolete that there is necessity of acquiring further technology. This is to meet the growing competition and considering trends in the market. Therefore, such expenditure will have to be treated as revenue expenditure - Decided in favour of the Assessee.
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2014 (6) TMI 956
Non filing of paper book - Held that:- The appellant is directed to prepare requisite number of paper books and file the same in the Department within eight weeks from date after serving copy thereof upon the respondent, failing which the appeal shall stand dismissed without any further reference to the Bench
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2014 (6) TMI 947
Penalty under Section 271(1)(c) - difference in valuation of stock and expenses on staff and coolie - Held that:- As after the returns were filed, in the course of survey proceedings, it was found that there was difference in valuation of stock and expenses on staff and coolie. The assessee without a murmur filed second revised return and offered it for tax and paid tax and interest promptly. In the course of assessment proceedings, the assessee tried to justify its returns and had produced before the authorities all its books of account, invoices, check post certificates and delivery notes. When the Assessing Authority called upon the assessee to secure the confirmation letters and also to produce the creditors before him, the assessee was successful in getting confirmation letters from everyone, but could not produce some of the creditors. Only in respect of those creditors whose presence it could not secure which was six in number, the assessee agreed to write off the said persons and offered it for tax. Hence, the assessee was called upon to file second revised returns which it promptly filed and paid the tax with interest. It is not a case where the assessee did not offer any explanation nor the explanation offered by it was found to be false or not found to- be bona fide. Partially it was successful in proving its defense. Therefore, it is a case where, the assessee was not successful in establishing his defense. Therefore, there was no intention either to suppress information or to file any incorrect statement. At this juncture it is pertinent to note that in the notice issued to the assessee, the department has not made it clear what is the accusation against the assessee and it was full of blanks. In those circumstances, the Tribunal on proper consideration of the entire material on record and after taking note of the law on the point as decided by the various courts, rightly held that there is no suppression of material facts and was justified in setting aside the order passed by the First Appellate Authority as well as the Assessing Authority. - Decided in favour of the assessee
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2014 (6) TMI 946
Appeal ADMITTED on the following substantial questions of law:-
A) Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in deleting the addition of ₹ 3,73,95,334/made by the Assessing Officer and confirmed by the learned Commissioner of Income Tax (Appeals) which was a receipt without consideration and taxable under Section 56(2)(v) of the Income Tax Act, 1961?
(B) Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in holding that the act of the Assessee in abstaining from contesting the Will of Mrs.Bamji would constitute the consideration for which payment had been received by the Assessee from Mr.Bhavsar and thereby the provisions of Section 56(2)(v) of the Income Tax Act, 1961 were not applicable?
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2014 (6) TMI 943
Appeal admitted on the following substantial questions of law:
a) Whether, the Income Tax Appellate Tribunal was right in holding that the provisions of Section 36(1)(viia) of the Income Tax Act, 1961 do not apply to bad debts report of two advances made by nonrural branches particularly after the insertion of Explanation 2, after the renumbered Explanation 1 to clause (viia) of subsection (1) of Section 36 by the Finance Act, 2013 with effect from 01st April, 2014?
(b) Whether, on the facts and circumstances of the case and in law, the Tribunal was justified in deleting the addition on account of reversal of unrealized interest?
(c) Whether, the reversal of interest was permitted in law in view of the specific provisions of Section 43D of the Income Tax Act, 1961 according to which such interest is taxable in the year of credit or receipt whichever is earlier?
(d) Whether, on the facts and circumstances of the case and in law, the Tribunal was justified in deleting the addition on account of provision for Rural Advances and provision against bad and doubtful debts?
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2014 (6) TMI 934
Non-compete fee - whether capital in nature - whether assessee is entitled to depreciation on the same - Held that:- A right acquired by way of non- compete can be transferred to any other person in the sense that the acquirer gets the right to enforce the performance of the terms of agreement under which a person is restrained from competing. When a businessman pays money to another businessman for restraining the other businessman from competing with the assessee, he gets a vested right which can be enforced under law and without that, the other businessman can compete with the first businessman. When by payment of non-compete fee, the businessman gets his right what he is practically getting is kind of monopoly to run his business without bothering about the competition. Generally, non-compete fee is paid for a definite period. The idea is that by that time, the business would stand firmly on its own footing and can sustain later on. This clearly shows that the commercial right comes into existence whenever the assessee makes payment for non-compete fee. Therefore that right which the assessee acquires on payment of non-compete fee confers in him a commercial or a business right which is held to be similar in nature to know-how, patents, copyrights, trade marks, licences, franchises.
Therefore the commercial right thus acquired by the assessee unambiguously falls in the category of an 'intangible asset'. Their right to carry on business without competition has an economic interest and money value. The term 'or any other business or commercial rights of similar nature' has to be interpreted in such a way that it would have some similarities as other assets mentioned in Cl.(b) of Expln.3. Here the doctrine of ejusdem generis would come into operation and therefore the non-compete fee vests a right in the assessee to carry on business without competition which inturn confers a commercial right to carry on business smoothly. When once the expenditure incurred for acquiring the said right is held to be capital in nature, consequently the depreciation provided under Sec.32(1)(ii) is attracted and the assessee would be entitled to the deduction as provided in the said provision ie., precisely what the Tribunal has held. - Decided in favour of the assessee
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2014 (6) TMI 929
Disallowance u/s 14A - Held that:- The assessing authority should take note of these develpoments in deciding whether any expenditure is incurred in earning the said income. The discussion by the assessing authority clearly demonstrates these aspects has not been taken note of and the notional expenditure is calculated pre modernization. When the assessee has not incurred any expenditure for realizing this income, the question of holding that 2% of the gross total income is an expenditure and that has to be added back to the income is unsustainable in law. - Decided in favour of assessee.
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2014 (6) TMI 928
Revision u/s 263 - whetehr Revenue proceeds in invoking section 263 of the Income Tax Act 1961 although the view taken by the Assessing Officer is a possible view of the matter? - Held that:- If the Tribunal's order is perused, the Tribunal merely emphasized on the Commissioner that he could not have invoked section 263 of the Income Tax Act in the given facts and circumstances but the Tribunal emphasized the fact that despite the authoritative pronouncement in the case of Malabar Industrial Co. Ltd. [2000 (2) TMI 10 - SUPREME Court ] the Commissioner has proceeded to exercise his powers under section 263 of the Income Tax Act to set aside a possible view of the matter. It is not that the Tribunal was emphasizing anything on the merits of the claim or that the view taken in Sulzer's case was the one applicable in its entirety on merits. What the Tribunal was emphasizing is when the Assessing Officer has taken a possible view, then section 263 of the Act could not have been invoked and that is how the Tribunal proceeded to set aside the order impugned in the Assessee's Appeal. No attempt was made to show that the Assessing Officer's view was not a possible one. Even otherwise, there was enough material in law to indicate that the legal position is otherwise. In such circumstances, we would not permit Mr Ahuja to argue before us that the present Appeal should be admitted on questions which were not subject matter of the Tribunal's order. We would not therefore make any observation with regard to the correctness of the view taken by the Tribunal in the Full Bench decision in M/s Sulzer India Ltd. [2010 (11) TMI 728 - ITAT, MUMBAI ]
We agree that the Tribunal could not have invoked section 263 of the Act and the remedy of the Revenue if any, in law lies elsewhere. The order passed by the Assessing Officer has to be restored only on this count. It is only to emphasize and repeatedly that section 263 of the Income Tax Act could not have been invoked, that the Tribunal held that the view taken by the Assessing Officer is a possible view
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2014 (6) TMI 927
Computation of Arm’s length price - Selection of comparables by TPO – Held that:- It the learned Tribunal has [2014 (3) TMI 626 - ITAT HYDERABAD] decided all the points which are sought to be agitated before us, relying on earlier decisions of Bangalore and Hyderabad Benches of the Tribunal and we do not find any reason to interfere with the impugned judgment. – Decided in favour of Assessee.
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2014 (6) TMI 923
Addition for purchase of computer software - revenue v/s capital expenditure - CIT(A) deleted the addition and confirmed by ITAT - Held that:- Considering the aforesaid finding recorded by the Commissioner of Income Tax (Appeals) as well as the tribunal, it cannot be said that the tribunal and the Commissioner of Income Tax (Appeals) have committed any error in deleting the aforesaid disallowance. We are in complete agreement with the view taken by the tribunal as well as the Commissioner of Income Tax (Appeals) while deleting the aforesaid disallowance. Under the circumstances, the proposed question nos. (b) and (c) are held against the revenue and so far as the proposed question no. (a) is concerned, as the amount involved is only ₹ 2,50,000/-, on the smallness of the amount involved, we decline to entertain the said question. - Decided against revenue
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2014 (6) TMI 916
Entitlement for deduction under Section 80P - Held that:- As in the case of THE COMMISSIONER OF INCOME TAX vs. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA, BAGALKOT [2015 (1) TMI 821 - KARNATAKA HIGH COURT] decided if a Co-operative Bank is exclusively carrying banking business, then the income derived from the said business cannot be deducted in computing the total income of the assessee. The said income is liable for tax. A Co-operative bank as defined under the Banking Regulation Act includes the primary agricultural credit society or a primary co-operative agricultural rural development bank. The Legislature did not want to deny the said benefit to a primary agricultural credit society or a primary co- operative agricultural and rural development bank. They did not want to extend the said benefit to a co-operative bank which is exclusively carrying on banking business i.e., the purport of the amendment. If the assessee is not a Co-operative bank carrying on exclusively banking business and if it does not possess a license from the Reserve Bank of India to carry on business, then it is not a Co-operative bank. It is a Co-operative society which also carries on the business of lending money to its members which is covered under Section 80P(2)(a)(i) i.e., carrying on the business of banking for providing credit facilitates to its members. The object of the aforesaid amendment is not to exclude the benefit extended under Section 80P(i) to the society - Decided in favour of the assessee
Revision u/s 263 - Held that:- As when status of the assessee is a co-operative society and not a co-operative bank, the order passed by the Assessing Authority extending the benefit of the exemption from payment of tax under Section 80P(2)(a)(i) of the Ac t is correct. There is no error. When there is no error, question of order being prejudicial would not arise and therefore, the order passed by the revisional authority is not at all with jurisdiction and rightly the tribunal entertained the appeal against this order and set aside the said order. The same holds good even in this case.- Decided in favour of the assessee
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2014 (6) TMI 914
Entitlement for deduction under Section 80P - Held that:- As in the case of THE COMMISSIONER OF INCOME TAX vs. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA, BAGALKOT [2015 (1) TMI 821 - KARNATAKA HIGH COURT] decided if a Co-operative Bank is exclusively carrying banking business, then the income derived from the said business cannot be deducted in computing the total income of the assessee. The said income is liable for tax. A Co-operative bank as defined under the Banking Regulation Act includes the primary agricultural credit society or a primary co-operative agricultural rural development bank. The Legislature did not want to deny the said benefit to a primary agricultural credit society or a primary co- operative agricultural and rural development bank. They did not want to extend the said benefit to a co-operative bank which is exclusively carrying on banking business i.e., the purport of the amendment. If the assessee is not a Co-operative bank carrying on exclusively banking business and if it does not possess a license from the Reserve Bank of India to carry on business, then it is not a Co-operative bank. It is a Co-operative society which also carries on the business of lending money to its members which is covered under Section 80P(2)(a)(i) i.e., carrying on the business of banking for providing credit facilitates to its members. The object of the aforesaid amendment is not to exclude the benefit extended under Section 80P(i) to the society - Decided in favour of the assessee
Revision u/s 263 - Held that:- As when status of the assessee is a co-operative society and not a co-operative bank, the order passed by the Assessing Authority extending the benefit of the exemption from payment of tax under Section 80P(2)(a)(i) of the Ac t is correct. There is no error. When there is no error, question of order being prejudicial would not arise and therefore, the order passed by the revisional authority is not at all with jurisdiction and rightly the tribunal entertained the appeal against this order and set aside the said order. The same holds good even in this case.- Decided in favour of the assessee
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2014 (6) TMI 913
Deduction u/s 80P - Whether the Tribunal was correct in holding that the provision of sub-section (4) of Section 80P of the Income Tax Act are applicable only to co-operative Banks and not to credit Co-operative Societies, which are engaged in business of banking, including providing credit facilities to their members? - Held that:- As in the case of THE COMMISSIONER OF INCOME TAX vs. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA, BAGALKOT [2015 (1) TMI 821 - KARNATAKA HIGH COURT] decided if a Co-operative Bank is exclusively carrying banking business, then the income derived from the said business cannot be deducted in computing the total income of the assessee. The said income is liable for tax. A Co-operative bank as defined under the Banking Regulation Act includes the primary agricultural credit society or a primary co-operative agricultural rural development bank. The Legislature did not want to deny the said benefit to a primary agricultural credit society or a primary co- operative agricultural and rural development bank. They did not want to extend the said benefit to a co-operative bank which is exclusively carrying on banking business i.e., the purport of the amendment. If the assessee is not a Co-operative bank carrying on exclusively banking business and if it does not possess a license from the Reserve Bank of India to carry on business, then it is not a Co-operative bank. It is a Co-operative society which also carries on the business of lending money to its members which is covered under Section 80P(2)(a)(i) i.e., carrying on the business of banking for providing credit facilitates to its members. The object of the aforesaid amendment is not to exclude the benefit extended under Section 80P(i) to the society - Decided in favour of the assessee
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2014 (6) TMI 912
Entitlement to deduction under Section 80P(2)(a)(i) - Held that:- As in the case of THE COMMISSIONER OF INCOME TAX vs. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA, BAGALKOT [2015 (1) TMI 821 - KARNATAKA HIGH COURT] decided if a Co-operative Bank is exclusively carrying banking business, then the income derived from the said business cannot be deducted in computing the total income of the assessee. The said income is liable for tax. A Co-operative bank as defined under the Banking Regulation Act includes the primary agricultural credit society or a primary co-operative agricultural rural development bank. The Legislature did not want to deny the said benefit to a primary agricultural credit society or a primary co- operative agricultural and rural development bank. They did not want to extend the said benefit to a co-operative bank which is exclusively carrying on banking business i.e., the purport of the amendment. If the assessee is not a Co-operative bank carrying on exclusively banking business and if it does not possess a license from the Reserve Bank of India to carry on business, then it is not a Co-operative bank. It is a Co-operative society which also carries on the business of lending money to its members which is covered under Section 80P(2)(a)(i) i.e., carrying on the business of banking for providing credit facilitates to its members. The object of the aforesaid amendment is not to exclude the benefit extended under Section 80P(i) to the society - Decided in favour of the assessee
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2014 (6) TMI 906
Computation of deduction under Section 80HHE - whether 90% of net interest income had to be reduced when computing the profits of business and not the gross interest income as held by the Assessing Officer and confirmed by the CIT - Held that:- As decided in CIT v. Krone Communication Ltd [2010 (7) TMI 631 - Karnataka High Court] the law on the point is fairly well-settled. Tax under the Act is upon income, profits and gains. It is not a tax on gross receipts. Under section 2(24) the word "income" includes profits and gains. The charge is not on gross receipts but on profits and gains. Gross receipts or sale proceeds, however, include profits. The very basis for computing section 80HHC deduction was "business profits" as computed under section 28, a portion of which had to be apportioned in terms of the above ratio of export turnover to total turnover. Therefore, before giving deduction under section 80HHC, the gross total income of the assessee being profits from business had to be arrived at in terms of clause (baa) to the Explanation. While calculating "business profits" the same had to be done in terms of section 28 to section 44D alone. The idea of section 80HHC is to ensure that the exporter gets the benefit of the profits derived from export and not to depress the profit further. Therefore, it can only be the net commission, interest, rent, etc., which can be included in the profits. - Decided in favour of the assessee
Purchase of software - revenue v/s capital expenditure - Held that:- As decided in the case of CIT v. IBM India Ltd. [ 2013 (10) TMI 1225 - KARNATAKA HIGH COURT ] The application software enables the assessee to carry out his business operation efficiently and smoothly. However such software itself does not work on stand-alone basis. The same has to be fitted to a computer system to work. Such software enhances the efficiency of the operation. It is an aid in manufacturing process rather than the ' tool itself. Thus, for payment of such application software, though there is an enduring benefit, it does not result into acquisition of any capital asset. The same merely enhances the productivity or efficiency and hence to be treated as revenue expenditure. In fact, this Court had an occasion to consider whether the software expenses is allowable as revenue expenses or not and held, when the life of a computer or software is less than two years and as such, the right to use it for a limited period, the fee paid for acquisition of the said right is allowable as revenue expenditure and these softwares if they are licensed for a particular period, for utilizing the same for the subsequent years fresh licence fee is to be paid. Therefore, when the software is fitted to a computer system to work, it enhances the efficiency of the operation. It is an aid in manufacturing process rather than the tool itself. Though certain application is an enduring benefit, it does not result into acquisition of any capital asset. It merely enhances the productivity or efficiency and therefore, it has to be treated as revenue expenditure - Decided in favour of the assessee
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2014 (6) TMI 890
Interpretations of provisions of section 32AB - Whether the customs duty paid under protest in pursuance of the interim order passed by the hon'ble High Court was to be charged off in the profit and loss account under Part II and Part III of Schedule 6 to the Companies Act which would reduce the book profit to be computed for the purpose of deduction to be granted under section 32AB? - Held that:- While deciding the benefit to which the assessee is entitled to under section 32AB of the Act, the Assessing Officer has only power to examine whether the books of account are certified by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. Therefore, he cannot apply the principles under the Income-tax Act for the purpose of determining the profit of the assessee from business or profession for the purpose of section 32AB. There cannot be two incomes one for the purpose of the Companies Act and another for the purpose of the Income-tax Act maintained under the same Act for the purpose of section 32AB. After arriving at profits of business or profession of the assessee, as stipulated in sub-section (3) of section 32AB, the said provision also provides for addition to such income as stipulated therein. After such additions, the authority has to determine the profits of business or profession for the purpose of extending the benefit under section 32AB.
In the instant case, even if in the profit and loss account a sum of ₹ 32,22,067 paid as customs duty had been deducted by virtue of sub-section (3) of section 32AB as it is a contingent liability and not a ascertained liability, it has to be added. In the instant case, as the said amount was not deducted, the question of adding would not arise. The assessing authority was justified in upholding the claim of the assessee who had not excluded the same from the profit of business or profession. Hence, the orders passed by the revisional authority as well as the appellate authority are not in accordance with law and they are required to be set aside, accordingly set aside. - Decided in favour of assessee.
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2014 (6) TMI 675
Stay of demand - application u/s 220(6) - whether the payment made to an agent of a non-resident foreign carrier shall be treated to have been made to such foreign carrier. - The appeal before the C.I.T. (appeals) is pending - Held that:- a prima facie case has been made out and the assessing officer ought to have been considered the said point while dismissing the application under Section 220 sub-section 6 of the said act. This Court, therefore, finds that any order directing the petitioner to deposit the demand raise on the above points to the tune of Rs.30 lakhs is passed, it would cause hardship to the petitioner.
Petitioner directed to make pre-deposit of Rs. 10 lakhs as a condition for stay of the recovery proceedings or any coercive steps to be taken for realization of the demand during the pendency of an appeal - stay granted partly.
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