Income Tax Appellate Tribunal - Delhi
Reuters India (P) Ltd. vs Deputy Commissioner Of Income Tax on 30 April, 2004
Equivalent citations: (2004)84TTJ(DELHI)95
ORDER
R.V. Easwar, J.M.
1. This is an application filed by the assessee seeking stay of the outstanding demand of Rs. 6,62,69,659 relating to the asst, yr. 2000-01. The application has been filed under the following circumstances.
2. The assessee is a news agency. In the return it claimed deduction in respect of the distribution fee paid to Reuters of UK (UK Co.) in the amount of Rs. 54.03 crores. The AO invoked Section 92 of the IT Act and disallowed Rs. 29.01 crores. Pursuant to the assessment a demand of Rs. 15.99 crores was raised which was amended under Section 154 to Rs. 15.34 crores, comprising of income-tax of Rs. 11.17 crores, the balance being interest. On appeal to the CIT(A) the disallowance was confirmed and an appeal to the Tribunal filed by the assessee is pending.
3. After the order of the CIT(A), the assessee approached the CIT-V, New Delhi, by means of application dt. 10th March, 2004, seeking stay of the recovery of the demand. It was pointed out that out of the demand the assessee had paid Rs. 6.56 crores before the first appeal to the CIT(A) was disposed of and the balance outstanding was only Rs. 4.49 crores, It was pointed out that the AO has misconstrued the facts of the case while invoking Section 92, that the CIT(A) also fell into the same error, that approximately 60 per cent of the disputed demand has already been collected, that considering the strong case the assessee has on merits and its track record no harm or prejudice would be caused to the Revenue if the balance of the demand is stayed. In the application, the assessee however offered to pay a sum of Rs. 1.5 crores against the outstanding demand as a measure of co-operation and to buy peace and requested that the balance be stayed till the disposal of the appeal by the Tribunal, expressing a hope that being a high demand case the hearing before the Tribunal would take place by July, 2004. It was also stated that the assessee would seek an early hearing of the appeal before the Tribunal.
4. The CIT-V, by letter dt. 18th March, 2004 directed the assessee to pay Rs. 1.5 crores before the 24th of March with additional payments as follows :
(a) 2nd and 3rd instalments of Rs. 30 lakhs each for the months of April and May, 2004 on or before the 20th of each month;
(b) The balance to be paid in 12 equal monthly instalments of Rs. 50 lakhs each on or before the 20th of each month;
(c) The residual amount along with interest under Section 220(2) to be paid as the last instalment in June, 2005.
5. It was pointed out in the letter that non-compliance with the above arrangement for payment of the taxes would result in coercive measures being taken to recover them without further notice.
6. The assessee is before the Tribunal seeking stay of the demand till the disposal of the appeal for the following reasons :
(a) The present outstanding, after payment of Rs. 1.5 crores in March, and Rs. 30 lakhs for April is Rs. 6,62,69,659. Out of this amount, the tax portion is only about Rs. 2.35 crores, which amounts to about only 23 per cent of the demand and the balance of 77 per cent consists entirely of interest. The assessee has thus paid a substantial part of the taxes.
(b) The UK Co. is also assessed in Bombay. As per the assessment order passed on it for the same year (copy filed) the distribution fee received by it from the assessee has been taxed in full in its hands and thus there is double taxation of the same amount, once by way of disallowance in the assessee's hands and again by way of inclusion in the UK Co.'s hands. The UK Co. has also paid a substantial part of the taxes by way of adjustment of refunds due to it for the asst. yrs. 2001-02 and 2002-03. A chart showing the relevant figures was filed. Thus the balance of convenience, which is one of the parameters for granting stay, lies in favour of the assessee.
(c) As regards the existence of a prima facie case on merits, another parameter, it was submitted that Section 92 has been misapplied to the facts of the case which have not been properly appreciated, that the section can have no application' if both the payer and the payee of the distribution fee are assessed in India, that the payment of the distribution fee under the same agreement has been allowed as deduction without demur in 'all the past assessments, that reassessment proceedings taken in respect of the asst. yrs. 1996-97 and 1997-98 were stayed by the Hon'ble Delhi High Court by order dt. 21st July, 2003 in Civil Writ Petn. No. 6852/2002 (copy filed), that even the IT authorities did not think of reopening the assessments for the other years and all this would show that the assessee has a strong prima facie case on merits.
(d) Vis-a-vis the financial position of the assessee to pay the taxes, it was stated by the learned counsel for the assessee on instructions that the assessee was in a position to pay the taxes, but the contention put forth was that merely because the assessee could afford to pay the taxes it does not follow that it cannot approach the authorities or the Tribunal for stay, if it is otherwise shown that the other parameters for grant of stay are fulfilled or that enforcement of the demand would cause 'undue hardship' to it. It was pointed out that "undue hardship" was not the same thing as "financial stringency" and connoted an entirely different concept in the sense that recovery of the taxes having regard to the other considerations, such as the existence of a puma facie case, the balance of convenience and the interests of the Revenue, would be harsh on the assessee. Our attention in this behalf was drawn to the following judgments ;
(i) JCT Ltd. v. ITAT and Ors. (2002) 258 ITR 291 (Del)
(ii) R.P. David and Ors. v. Agrl ITO and Anr. (1972) 86 ITR 699 (Mad)
(iii) Sri Balaji Trading Co. and Ors. v. Dy. CTO (1989) 175 ITR 428 (Mad).
7. In the light of the above submissions, it was contended that stay should be granted till the disposal of the appeal.
8. The learned Departmental Representative on the other hand vehemently opposed the prayer of the assessee. She drew our attention to the principles laid down by the Hon'ble Delhi High Court in the case of JCT Ltd. (supra) which should govern the question of granting stay and submitted that since there is admittedly no financial stringency to pay the taxes there can be no question of the assessee being put to any undue hardship and that there is no distinction between the two as contended on behalf of the assessee. She pointed out that the balance of convenience lies in favour of the Department in the sense that if the taxes are paid now and the assessee succeeds in its appeal before the Tribunal, they would be refunded with interest which is higher than the present market rates of interest and thus the assessee is well-protected.
9. The learned Departmental Representative also raised an argument that the assessee had complied with the directions of the CIT-V in his letter of the 18th of March, 2004 by depositing Rs. 1.5 crores and also by paying the first instalment of Rs. 30 lakhs in April, 2004 and since no coercive measures have been initiated against it, it should be stopped from resiling from its earlier position and approaching the Tribunal for stay. All that can be done is only to direct the assessee to approach the authorities again for a revision of the instalments or for modification of the earlier orders.
10. In reply, the above argument was strongly refuted on behalf of the assessee and it was pointed out that the assessee never offered to adhere to any instalments and all that it had agreed to in its application before the CIT-V was only that it would pay Rs. 1.5 crores and that too was a measure of cooperation and to buy peace and no further instalments were agreed to. In fact, the request was that on payment of the above sum, the balance should be stayed till the disposal of the appeal. Our attention was drawn to the judgment of the Hon'ble Delhi High Court in the case of Ashok Kumar Aggarwal v. ITAT and Ors. (1997) 226 ITR 490 (Del) in this connection and it was submitted that it was open to the assessee to file a stay application before the Tribunal even without approaching the CIT-V but since it was the practice of the Tribunal to insist that the assessee exhausts its alternative remedies before the IT authorities themselves, the assessee had, in deference to such a practice, filed an application to the CIT-V. It was therefore contended that the assessee could not be stopped from seeking a stay of the balance of the demand till the disposal of the appeal by the Tribunal.
11. We have carefully considered the matter. In our opinion, this is a fit case for grant of stay. So far as the existence of a prima facie case for the assessee, on merits, is concerned, we are inclined to hold that there is, without expressing, any final opinion thereon. The question of interpretation of Section 92 is involved, in the light of the claim of the assessee that the section does not apply when both the payer and the payee of the income are assessed to tax in India. This has got to be examined when the appeal is taken up for hearing and the claim cannot be brushed aside without being looked into. Further, the payment of the distribution fee under the same agreement has been allowed in the past and the attempt to reopen the assessments of two years has been stayed by the Hon'ble High Court. Further, a bare perusal of the orders of the IT authorities shows that ultimately it would appear as if whether the payment of the distribution fee is to be allowed at the rate of 25 per cent or 17 per cent. With regard to the balance of convenience, we are of the view that it lies in favour of the assessee since both the assessee and the UK Go. have been taxed in India and it prima facie would appear that there is double taxation. At any rate, such a claim made on behalf of the assessee has to be examined and the. assessment order of the UK Co. filed before us, prima facie supports the assessee's contention. As regards the financial position, there is force in the plea of the assessee that merely because the assessee can afford to pay the taxes it cannot be said that it cannot be granted stay. The judgment of the Madras High Court cited supra supports this plea. The judgment of the Hon'ble Delhi High Court cited supra cannot assist the Revenue since it was not held in that case that no stay shall be granted by the Tribunal merely because the assessee's financial position was sound and he could afford to pay the taxes. The assessee has paid a substantial amount of taxes and what is outstanding as taxes is around Rs. 2.35 crores, which is only 23 per cent of the demand. The balance consists of interest. In our view, there will be undue hardship to the assessee (as against financial hardship) in the sense that if it is directed to pay the entire demand outstanding, despite the satisfaction of the other parameters such as balance of convenience, existence of a prima facie case on merits etc., merely because it can afford to pay the taxes. The interests of the Revenue are not jeopardised in this case because the materials placed before us show that the taxes have been collected from the UK Co. which has received the income by way of distribution fee. The assessee is a long-standing company with substantial assets and income. It cannot be postulated that it would facie away leaving the lawful tax demands outstanding.
12. The argument of the learned Departmental Representative that the assessee is estopped from approaching the Tribunal for stay cannot be given effect to because firstly it did not seek any instalments from the CIT-V; it merely offered to pay Rs. 1.5 crores as a measure of co-operation and to buy peace of mind, and sought stay of the balance of the demand till the disposal of the appeal before the Tribunal. The fact that some instalments were given and the assessee complied with part of the order of the CIT-V is a matter in favour of the assessee with regard to its bona fides and on that ground it cannot be estopped from filing an application for stay before the Tribunal, if it later feels that it has grounds for seeking stay. Secondly, the assessee is not bound to approach the Departmental Authorities as a matter of law; there is no such requirement in law--please see judgment of the Calcutta High Court in Susanta Kumar Nayak v. Union of India and Ors. (1990) 185 ITR 627 (Cal). The Tribunal has merely devised a practice that the assessee should normally exhaust his remedies before the IT authorities. But this is only a matter of practice. The discretionary power of granting stay cannot be curtailed by such procedural practice. It does not take away the jurisdiction of the Tribunal to deal with the stay application, since it is an adjunct of the appellate powers. The assessee therefore cannot be asked to approach the CIT-V again seeking modification of the instalment arrangement.
13. For the above reasons, we accept the prayer of the assessee and grant stay of the outstanding demand of Rs. 6,62,69,659 till the disposal of the appeal, but subject to the assessee furnishing security to the satisfaction of the AO.
14. Since stay has been granted, the appeal itself will be taken up for hearing at an early date. Let the registry issue notices to both sides posting the appeal for hearing in the month of August, 2004.
15. The stay application is allowed in the above terms.