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Tax Publishers Infosys Ltd. v. ACIT [S.P. No. 139/Bang/2020, IT(TP)A No. 718/Bang/2017, dt. 24-7-2020] : 2020 TaxPub(DT) 2953 (Bang-Trib.) Stay powers of ITAT -- Effect of writ questioning constitutionality under Article 226(2) of Constitution of India *Facts:* Assessee requested an extension of the stay granted by ITAT which fell beyond 180 days due to adjournment sought by the department in this stay application. It was the department's plea that ITAT could not grant a stay beyond one year even if the delay in hearing the case was not attributable to the reason of the assessee. Held in favour of the assessee -- the ITAT granted extension of the stay for further 180 days. The following points of ITAT are worth noting in this decision -- 1. In Pepsi Foods (P.) Ltd. v. Asstt. CIT (2015) 376 ITR 87 (Del-HC) : (2015) 232 Taxman 78 (Del-HC) : (2015) 57 taxmann.com 337 (Del-HC) : 2015 TaxPub(DT) 2304 (Del-HC) the third proviso under section 254(2A) which caps stay powers of ITAT to 365 days even when delay was not attributable to the fault of the assessee (amendment vide Finance Act, 2008) was struck down as unconstitutional under Article 14 of the Constitution of India as it was discriminating a "well behaved" assessee with a non-cooperative assessee in the same genre. 2. Consequential to the above decision of Pepsi foods the Bombay HC decision of Narang Overseas (P.) Ltd. v. ITAT (2007) 295 ITR 22 (Bom-HC) : (2007) 165 Taxman 557 (Bom-HC) : 2007 TaxPub(DT) 1412 (Bom-HC) would apply which held that the limit of 365 days was only directive and still the ITAT could grant stay beyond 365 days in deserving cases. It is to be noted that this decision was rendered prior to the insertion of the controversial proviso 3 to section 254(2A) in the statute - so principles of equity need to be given due weight even if the tenure extended beyond 365 days is the rule of the law in this aspect. 3. In Kusum Ingots & Alloys Ltd. v. Union of India AIR 2004 SC 2321, it was held that an order passed on writ petition questioning the constitutionality of a Parliamentary Act whether interim or final, in the light of Article 226(2) of the Constitution of India, will have effect throughout the territory of India. Given this the ITAT which is a creature of the law cannot overpower the constitutionality aspect since being sub-ordinate in hierarchy as well. *Upheld:* SAP labs (I) (P) Ltd. (2016) 67 taxmann.com 78 (Bang-ITAT) : 2016 TaxPub(DT) 0753 (Bang-Trib) *Distinguished:* CIT v. Ecom Gill Coffee Trading (P.) Ltd. (2014) 362 ITR 204 (Karn-HC) : (2012) 209 Taxman 190 (Karn-HC) : (2012) 23 taxmann.com 235 (Karn-HC) : 2012 TaxPub(DT) 2425 (Karn-HC) *Editorial Note:* Finance Act, 2020 has also brought in a further controversial amendment whereby a compulsory 20% of the tax dues need to be pre-deposited prior to hearing of stay is heard by ITAT. Reference be made to the decision of Tata Education and Development Trust v ACIT, SA Nos. 147 and 148/Mum/2020 Arising out of ITA Nos. 1423 and 1424/Mum/2018, Assessment Years 2011-12 and 2012-13 Mumbai ITAT, dated 17-6-2020 where this new amendment of pre-deposition prior to appeal to ITAT is pending adjudication before a larger bench on the question of law as to whether this amendment -- "Fetters the plenary/discretionary powers of ITAT's stay granting powers or is it simply being directive to ITAT who thus are still empowered to grant stay even without the 20% pre-deposition on merits even post facto this amendment." *Tail Piece:* Departmental SLP on the decision of Pepsi foods stood dismissed by the Supreme Court -- Refer 2017 TaxPub(DT) 1071 (SC) : (2017) 246 Taxman 0223 (SC).

Tax Publishers

Infosys Ltd. v. ACIT [S.P. No. 139/Bang/2020, IT(TP)A No. 718/Bang/2017, dt. 24-7-2020] : 2020 TaxPub(DT) 2953 (Bang-Trib.)

Stay powers of ITAT -- Effect of writ questioning constitutionality under Article 226(2) of Constitution of India

Facts:

Assessee requested an extension of the stay granted by ITAT which fell beyond 180 days due to adjournment sought by the department in this stay application. It was the department's plea that ITAT could not grant a stay beyond one year even if the delay in hearing the case was not attributable to the reason of the assessee.

Held in favour of the assessee -- the ITAT granted extension of the stay for further 180 days.

The following points of ITAT are worth noting in this decision --

1. In Pepsi Foods (P.) Ltd. v. Asstt. CIT (2015) 376 ITR 87 (Del-HC) : (2015) 232 Taxman 78 (Del-HC) : (2015) 57 taxmann.com 337 (Del-HC) : 2015 TaxPub(DT) 2304 (Del-HC) the third proviso under section 254(2A) which caps stay powers of ITAT to 365 days even when delay was not attributable to the fault of the assessee (amendment vide Finance Act, 2008) was struck down as unconstitutional under Article 14 of the Constitution of India as it was discriminating a "well behaved" assessee with a non-cooperative assessee in the same genre.

2. Consequential to the above decision of Pepsi foods the Bombay HC decision of Narang Overseas (P.) Ltd. v. ITAT (2007) 295 ITR 22 (Bom-HC) : (2007) 165 Taxman 557 (Bom-HC) : 2007 TaxPub(DT) 1412 (Bom-HC) would apply which held that the limit of 365 days was only directive and still the ITAT could grant stay beyond 365 days in deserving cases. It is to be noted that this decision was rendered prior to the insertion of the controversial proviso 3 to section 254(2A) in the statute - so principles of equity need to be given due weight even if the tenure extended beyond 365 days is the rule of the law in this aspect.

3. In Kusum Ingots & Alloys Ltd. v. Union of India AIR 2004 SC 2321, it was held that an order passed on writ petition questioning the constitutionality of a Parliamentary Act whether interim or final, in the light of Article 226(2) of the Constitution of India, will have effect throughout the territory of India. Given this the ITAT which is a creature of the law cannot overpower the constitutionality aspect since being sub-ordinate in hierarchy as well.

Upheld: SAP labs (I) (P) Ltd. (2016) 67 taxmann.com 78 (Bang-ITAT) : 2016 TaxPub(DT) 0753 (Bang-Trib)

Distinguished: CIT v. Ecom Gill Coffee Trading (P.) Ltd. (2014) 362 ITR 204 (Karn-HC) : (2012) 209 Taxman 190 (Karn-HC) : (2012) 23 taxmann.com 235 (Karn-HC) : 2012 TaxPub(DT) 2425 (Karn-HC)

Editorial Note: Finance Act, 2020 has also brought in a further controversial amendment whereby a compulsory 20% of the tax dues need to be pre-deposited prior to hearing of stay is heard by ITAT. Reference be made to the decision of Tata Education and Development Trust v ACIT, SA Nos. 147 and 148/Mum/2020 Arising out of ITA Nos. 1423 and 1424/Mum/2018, Assessment Years 2011-12 and 2012-13 Mumbai ITAT, dated 17-6-2020 where this new amendment of pre-deposition prior to appeal to ITAT is pending adjudication before a larger bench on the question of law as to whether this amendment --

"Fetters the plenary/discretionary powers of ITAT's stay granting powers or is it simply being directive to ITAT who thus are still empowered to grant stay even without the 20% pre-deposition on merits even post facto this amendment."

Tail Piece: Departmental SLP on the decision of Pepsi foods stood dismissed by the Supreme Court -- Refer 2017 TaxPub(DT) 1071 (SC) : (2017) 246 Taxman 0223 (SC).