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TMI Blog2020 (6) TMI 472X X X X Extracts X X X X X X X X Extracts X X X X ..... charitable trust registered under Bombay Public Trust Act 1950 (now known as Maharashtra Public Trust Act 1950), as also as charitable institution under the Section 12A of the Income Tax Act, 1961. In both of these assessment years, the assessee had returned NIL income, but had also claimed amounts remitted to the educational universities outside India as application of income under section 11(1)(c). This amount, for the assessment year 2011-12, was Rs. 197,79,27,500, and, for the assessment year 2012-13, was Rs. 25,37,00,000. During the course of the scrutiny assessment proceedings, the Assessing Officer noticed that in terms of proviso to Section 11(1)(c), unless the Central Board of Direct Taxes, by way of a general or special order, specifically approves that the income derived from property held under trust, applied for the purposes of specified under section 11(1)(c)(i) and (ii), shall not be included in the total income of the person in receipt of such income, it shall not be excluded from the total income of the person in receipt of such income. The Assessing Officer further noticed that as no such approval from the Central Board of Direct Taxes has been granted, the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the action of the CIT(A), the assessee is in appeal before us. The assessee has also filed the present application seeking a stay on collection/ recovery of the disputed demands pertaining to tax and interest etc, till the related appeals are disposed of. Submissions of the parties: 3. Learned counsel for the assessee begins by taking us through the facts of the case to demonstrate, what he perceives as, very strong merits of his case. He submits that the short reason for which the impugned additions to income of the assessee were made was the lack of the CBDT approval, as required by proviso to Section 11(1)(c) of the Act, and once that approval has been received, which has been specifically stated by the CBDT to cover the relevant assessment year, that is the end of the matter. He submits that in the rectification proceedings, the Assessing Officer rightly deleted the impugned addition, and, as such, the appeals had infact become infructuous. However, the CIT(A) proceeded to revive the additions based on his understanding of the correct legal position which is contrary to the decision of the CBDT. He submits that it is not open to the CIT(A), in any case, to question the wisd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms. In such a situation also then, the Tribunal will have to decline complete stay even though the issue is settled by binding judicial precedents in favour of the assessee. He then gives an example of a hypothetical situation in which an issue is settled in favour of the assessee by Hon'ble High Court but the Department is in appeal in the Supreme Court, and the Assessing Officer and the DRP has to hold against the assessee, just to keep the matter alive. If the interpretation that the provision is mandatory will result in a situation in which the assessee will have to pay taxes on an issues, which is settled in his favour by the jurisdictional High Court in his own case- a patently incongruous legal position. The view that this provision is mandatory in nature will result in a situation which is completely arbitrary, unconstitutional and contrary to the well settled scheme of law. He submits that while interpreting a statutory provision, it cannot be open to us to interpret it so as to render the provision unworkable and contrary to the settled law. He thus urges us to treat this provision as directory in nature and not as a mandatory provision. In this backdrop, learned counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision with respect to the nature of security or the manner in which the security is to be provided. It is his contention that the true purpose of this provision is to ensure that the income tax department must be secure with respect to its dues on the assessee, and that in the event of assessee losing its case, the interests of the revenue, to recover its dues, should not be adversely affected. Such a security could be in the form of a bank guarantee, a mortgage, a lien, charge or pledge, or even an undertaking or a bond. He submits that anything over and above, or in addition to, what is available to the income tax department under chapter XVII-D of the Act, could be considered security for this purpose. He submits that, for example, a personal bond given by a trustee could also be a reasonable security, or, for that purpose, an undertaking by the assessee that the assessee will not sell its assets of certain amounts, so as that the interests of the income tax department remain intact. He further submits that firstly it is entirely directory as to whether the assessee should pay a part of disputed taxes or offer any additional security in respect thereof, but, in the event th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not have attended to the matter, and he has no issues on that aspect, but the fact remains that if these stay petitions were to be disposed of on the day these stay petitions were last scheduled the amendment in Section 254(2A) would not have come into the way. These amendments cannot come into play in respect of the matters which the Tribunal was already dealing with before the amendments came into force. In the light of these discussions, according to the learned counsel, the amendment is to be read as merely directory, not at all mandatory, and, considering very strong prima facie case of the assessee in which the CIT(A) appeals has de facto reversed the stand of the CBDT- something clearly contrary to the settled legal position, the unconditional full stay should be granted. Learned counsel further submits that, however, in the event the Tribunal thinks it appropriate to direct that some security should be offered by the assessee, he is ready to file personal undertakings or bonds of the trustees, or, in the alternative, give an undertaking to the effect that the investments made by the trust in the Government securities and mutual funds, which adequately cover the entire di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ender the amendment redundant. It is reiterated that even on merits, for the reasons elaborated earlier, the assessee does not deserve any leniency with respect to collection of disputed demands. He, however, leaves the matter to the bench.In his brief rejoinder, learned counsel submits that whatever be the wording of the memorandum to the Finance Bill 2020 states, it is not the case that the amendment is mandatory and not directory. He reiterates his submissions on the legal point as also on the facts with respect to strong case on prima facie merits. He also expresses his willingness for the appeals being heard on an early date- if necessary, through a virtual court hearing. We are once again urged to grant full stay on collection or recovery of the demands impugned in appeal, and to schedule the related appeals for hearing at an early date. Our analysis and directions: 7. We have given our careful consideration to the rival contentions and the legal position with respect to the powers of the Tribunal to grant stay in deserving cases, and the impact of amendment to first proviso to Section 254(2A) by the Finance Act, 2020. We have also considered legal history on this aspect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the meantime, however, we must take suitable steps to maintain the status quo, so far as collection of disputed impugned demands are concerned, and, at the same time, to protect legitimate interests of the revenue to recover the disputed impugned demands in the event of the assessee not being successful in the present stay applications, or, the assessee not being successful eventually in the appeals. Given the overall situation- as also the fact that the stay petitions have been referred for consideration of constitution of a larger bench, we deem it fit and proper to grant an interim stay on collection/ recovery of the aggregate amounts of tax and interest etc, amounting to Rs. 88,84,40,520 and Rs. 10,91,19,880 for the assessment years 2011-12 and 2012-13 respectively, impugned in these appeals, on the following conditions: a. The assessee will, within not more than one week of receipt of this order, furnish an undertaking setting out complete details of investments of amounts not less than Rs. 99,75,60,400 which the assessee will not encash till the stay applications are disposed of. b. The assessee will fully cooperate in expeditious disposal of the related stay applica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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