Sca/12637/2019 Of Sun Pharmaceutical Industries Limited v. Deputy Commissioner Of Income Tax

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 12637 of 2019 FOR APPROVAL AND SIGNATURE: HONOURABLE MR. JUSTICE J.B.PARDIWALA Sd/- andHONOURABLE MR. JUSTICE ILESH J. VORA HONOURABLE MR. JUSTICE ILESH J. VORASd/-==========================================================1Whether Reporters of Local Papers may be allowedYesto see the judgment ?2To be referred to the Reporter or not ?Yes3Whether their Lordships wish to see the fair copyNoof the judgment ?4Whether this case involves a substantial questionNoof law as to the interpretation of the Constitutionof India or any order made thereunder ?==========================================================SUN PHARMACEUTICAL INDUSTRIES LIMITED VersusDEPUTY COMMISSIONER OF INCOME TAX ==========================================================Appearance:MR B S SOPARKAR(6851) for the Petitioner(s) No. 1,2MR.VARUN K.PATEL(3802) for the Respondent(s) No. 1,2========================================================== CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALAandHONOURABLE MR. JUSTICE ILESH J. VORA Date : 26/08/2021 CAV JUDGMENT (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA) 1.By this writ application under Article 226 of theConstitution of India, the writ applicants have prayed forthe following reliefs; “(A) Quash and set aside the order dated 12.07.2019passed by Respondent No.1 at Annexure-A to theextent it does not issue refund to the Petitioner No.1but adjusts against the demand of A.Y.2012-13. (B)Direct the Respondent No.1 to issue refund tothe Petitioner No.1 arising out of the order givingeffect of the order of CIT(A) for A.Y.2014-15; (C )Quash and set aside the order dated12.07.2019 passed by Respondent No.2 at Annexure-A to the extent it puts a condition of adjustment offuture refunds arising to the Petitioner without anylimit and to direct the Respondent No.2 to grantunconditional stay of demand against the applicationfiled by the Petitioner dated 10.07.2019 till thedisposal of appeal by the Income Tax AppellateTribunal. (D)Prohibit the Respondent No.1 to recover anyamount from the Petitioner No.1 towards thedemand raised for AY 2012-13 or 2010-11 or adjustany refunds arising to the petitioner No.1 against thedemand of A.Y.2012-13 to 2010-11 till the disposal ofappeal by the Income Tax Appellate Tribunal. (D1) Quash and set aside intimations dated22.07.2019 at Annexure-A1. (D2) Stay the operation of intimations dated22.07.2019 at Annexure-A1 and Prohibit theRespondent No.1 to recover any amount from oradjust any refunds arising to the petitioner No.1towards the demand raised for the Assessment YearA.Y. 2012-13 or 2010-11 till the final disposal ofappeal by the Income Tax Appellate Tribunal. (E)Pending the admission, hearing and finaldisposal of this petition, prohibit the RespondentNo.1 to recover any amount from the Petitioner No.1or adjust any refunds arising to the Petitioner No.1against the demand of A.Y.2012-13 or 2010-11. (F)Any other and further relief deemed just andproper be granted in the interest of justice.” 2.The facts, giving rise to the present litigation, may besummarized as under; 2.1A.Y. 2012-13 on 30[th] November, 2012. The writ applicant filed its return of income for the 2.2The respondent passed the draft assessment orderdated 31[st] March, 2016 under Section 143(3) read withSection 92CA read with Section 144C of the Income TaxAct (for short “the Act”). 2.3Against the aforesaid draft assessment order, thewrit applicant made a reference dated 28[th] April, 2016 tothe Dispute Resolution Panel under Section 144C of theAct. 2.4The Dispute Resolution Panel vide its directions dated30[th] December, 2016, by an large, confirmed all theadditions/disallowances. (F)Any other and further relief deemed just andproper be granted in the interest of justice.” 2.The facts, giving rise to the present litigation, may besummarized as under; 2.1A.Y. 2012-13 on 30[th] November, 2012. The writ applicant filed its return of income for the 2.2The respondent passed the draft assessment orderdated 31[st] March, 2016 under Section 143(3) read withSection 92CA read with Section 144C of the Income TaxAct (for short “the Act”). 2.3Against the aforesaid draft assessment order, thewrit applicant made a reference dated 28[th] April, 2016 tothe Dispute Resolution Panel under Section 144C of theAct. 2.4The Dispute Resolution Panel vide its directions dated30[th] December, 2016, by an large, confirmed all theadditions/disallowances. 2.5The respondent No.1 herein passed the finalassessment order dated 23[rd] January, 2017 under Section143(3) read with Section 92CA read with Section 144C of the Act in accordance with the directions of the DisputeResolution Panel at Rs.3946,48,67,610/- and raised ademand of Rs.2004.94 Crore to the writ applicant No.1.2.6Against the aforesaid assessment order, the writapplicant No.1 filed First Appeal before the Income TaxAppellate Tribunal (ITAT) on 10[th] February, 2017. 2.7 On 14[th] February, 2017, the writ applicant preferredan application under Section 220(6) of the Act with arequest to the respondent No.1 to stay the demand. 2.8The respondent No.1 rejected the aforesaidapplication vide order dated 17[th] February, 2017. The respondent No.1 rejected the aforesaid 2.9 The writ applicant No.1, thereafter, preferred anapplication for stay before the ITAT dated 20[th] February,2017. 2.10 The ITAT Vider order dated 10[th] March, 2017,relegated the writ applicant No.1 to seek stay bypreferring application addressed to the respondent No.2. 2.11 On 15[th] March, 2017, the writ applicant filed anapplication addressed to the respondent No.2. 2.12 The respondent No.2, vide his order dated 27[th]March, 2017, granted stay till 30[th] June, 2017 or the orderthat may be passed by the ITAT whichever would havebeen earlier with a condition to adjust the future refundsarising in favour of the writ applicant No.1 against the demand of A.Y.2012-13. 2.13 The writ applicant No.1 filed a fresh applicationdated 19[th] August, 2017 before the respondent No.2. 2.14 The respondent No.2, vide his order dated 21[st]August, 2017, granted stay till 28[th] February, 2018 or theorder of the ITAT whichever would have been earlier butwith further condition to adjust the future refunds accruingin favour of the writ applicant No.1 against the demand ofA.Y.2012-13. 2.15 On 16[th] March, 2018, the writ applicant No.1received a letter, seeking to review the status of the stay. 2.16 On 22[nd] March, 2018, the writ applicant No.1 filed itsreply and further made an application to the respondentNo.2 for stay. 2.17The writ applicant No.1, vide letters dated 14[th]May, 2019 and 20[th] May, 2019 respectively sent remindersto the respondent No.2 for passing appropriate order,granting stay. 2.18 The respondent No.1 issued an intimation dated28[th] June, 2019 proposing to adjust the refund ofRs.222,93,38,240/- emanating from the order givingeffect to the appellate order for the A.Y. 2014-15 againstthe outstanding demands of the writ applicant No.1 for theA.Y.. 2012-13 and A.Y. 2010-11. 2.19 The writ applicant No.1, thereafter, preferred a stayapplication dated 1[st] July, 2019 under Section 254 of theAct before the ITAT for the purpose of getting the demandstayed. The ITAT disposed of the application vide its orderdated 5[th] July, 2019 relegating the writ applicant to therespondent No.2. 2.20. The writ applicant No.1, vide letter dated 10[th] July,2019 addressed to the respondent No.2 explained why thefacts and the circumstances necessitated the grant ofunconditional stay against the demand raised forA.Y.2012-13. 2.19 The writ applicant No.1, thereafter, preferred a stayapplication dated 1[st] July, 2019 under Section 254 of theAct before the ITAT for the purpose of getting the demandstayed. The ITAT disposed of the application vide its orderdated 5[th] July, 2019 relegating the writ applicant to therespondent No.2. 2.20. The writ applicant No.1, vide letter dated 10[th] July,2019 addressed to the respondent No.2 explained why thefacts and the circumstances necessitated the grant ofunconditional stay against the demand raised forA.Y.2012-13. 2.21 The respondent No.2, vide its letter dated 12[th] July,2019, granted the relief and thereby stayed the demandwith the condition to adjust the future refunds arising infavour of the writ applicant No.1 against the demand ofA.Y. 2012-13. 2.22 The respondent No.1, vide order dated 12[th] July,2019, while giving effect to the order of the CIT (A)adjusted the refund of Rs.224 Crore for A.Y. 2014-15 asagainst the demand of the writ applicant No.1 forA.Y.2012-13. 2.23 In such circumstances, referred to above, the writapplicants had to come before this Court with the presentwrit application. 2.24 The writ applicants received an intimation dated 22[nd]July, 2019 issued under Section 245 of the Act proposingto adjust the refund arising for A.Y. 2012-13 of Rs.336Crore and A.Y. 2010-11 of Rs.318 Crore as against thedemand for A.Y. 2012-13 (Ranbaxy). 3.On 23[rd] July, 2019, this Court passed the followingorder; “Draft amendment is allowed. The same shall becarried out at the earliest. Let Notice be issued to the respondents returnableon 14[th] October, 2019. Having heard Mr. S.N. Soparkar, the learned seniorcounsel appearing for the writ applicants and havinggone through the materials on record, we are of theview that the writ applicants have been able to makeout a strong prima facie case to have an interimorder in their favour in terms of paragraph 7(d2). We accordingly grant such relief. Direct service ispermitted.” 4.The Schedule of payment is as under: Ranbaxy Laboratories Limited (Now merged with SunPharmaceutical Industries Limited) Assessment order for AY 2012-13 u/s.143(3) r.w.s. 92CAr.w.s.144C(13) dated 23.01.2017 Details of covered issues in favour of assessee andworking of tax demand Sr. No.Nature of Additions Covered by Relief in taxAddition Rs.Authority Ref. Of Order rateAmount Rs.1.Upward adjustment on account of transfer10,35,06,00,000ITAT ITA No.195/Del/2013 50.80 5,25,84,22,916pricing2.Deduction under section VI A80,95,76,144ITAT ITA No.196/Del/2013 50.8041,12,89,5633.Deduction u/s.35(2AB) of the act4,40,22,43,702ITAT ITA No.1390/Ahd/2016 50.802,23,64,75,099HC of Tax App. No.541/2017 Guj. S.C. SLP21485 of 2018 (Dismissed SLP of department)4.Disallowances u/s.14A read with rule 8D5,45,95,563ITAT ITA No.1390/2016 50.802,77,36,224 (Ranbaxy Lab, Ltd. 5.Disallowance of Marked to Marker losses6,67,29,40,000S.C. Suzlon Energy Ltd. 50.803,39,00,58,6060 (2020) 21 Taxmann.com 137(SC) 390 ITR 36 (Bom HC) 85 TC 354 (Ahd. ITAT)Total22,28,99,55,40911,32,39,82,408Total tax demand as per assessment order20,04.93,660Less Tax relief on issues covered by various orders11,32,39,82,408 56.5% 11,32,39,82,408 56.5% of total demand Balance taxdemand on issues which are not in favourof Assessee of Assessee 8,72,53,83,252 43.5% of total demandTotal taxes paid/refund adjusted7,85,00,00,000 40% of total demand, 90% of demand on issues which are not in favour of assessee. 5.It appears that out of the aforesaid five issues, theCIT agreed with the second, third and fourth issue. So faras the first issue is concerned, the CIT took the view thatthe same, being factual in nature, could not be said to be covered in favour of the assessee. 11,32,39,82,408 56.5% of total demand Balance taxdemand on issues which are not in favourof Assessee of Assessee 8,72,53,83,252 43.5% of total demandTotal taxes paid/refund adjusted7,85,00,00,000 40% of total demand, 90% of demand on issues which are not in favour of assessee. 5.It appears that out of the aforesaid five issues, theCIT agreed with the second, third and fourth issue. So faras the first issue is concerned, the CIT took the view thatthe same, being factual in nature, could not be said to be covered in favour of the assessee. 6.So far as the issue No.5 is concerned, the CIT tookthe view that the decision of the Supreme Court in thecase of Woodward Governor, as relied upon, wasdistinguishable on facts. However, prima facie, it appearsthat that the CIT overlooked the fact that the decision ofthis High Court in Suzlon Energy, against which, by aspeaking order, the SLP came to be dismissed by theSupreme Court (2020 121 taxmann.com 137) followingWoodward and in such circumstances, the issue ofdisallowance of mark to market losses stood concluded infavour of the assessee. 7.Mr. S.N. Soparkar, the learned senior counselappearing for the writ applicants submitted that out of thetotal payment of Rs.2004 Crore the demand of Rs.1132Crore pertains to the issues that are covered in favour ofthe writ applicant and, in such circumstances,unconditional stay should have been granted against therecovery. Mr. Soparkar brought to the notice of this Courtthe office memorandum dated 20[th] February, 2016providing guideline for stay of demand on payment of 20%of the disputed demand (earlier 15%) till the final disposalof the first appeal. Mr. Soparkar pointed out that asagainst the disputed demand of Rs.872 Crore, the writapplicant has already made payment (got refund adjustedof Rs.785/- Crore). The amount of Rs.785 Crore comes to40% payment against the total demand of Rs.2004 Crore and almost 90% payment against Rs.872 Crore of thedisputed demand. 8.Mr. Soparkar submitted that his client having alreadypaid substantial tax, no further tax needs to be recovered.He would submit that unconditional stay may be granteduntil appropriate decision is taken by the First AppellateAuthority, i.e, the ITAT. Mr. Soparkar further pointed outthat the notices issued by the respondent No.1 for thepurpose of further adjusting the refund of Rs.336 Crore(A.Y.2012-13) and Rs.318 Crore (A.Y.2010-11) respectivelyare erroneous inasmuch as the same would amount torecovering far more tax from his client as against thedisputed issues in the assessment order. 9.In the last, Mr. Soparkar also took us through theobservations made by the respondent No.1 while decliningto grant unconditional stay. Those are as under; 10.Mr. Soparkar seeks to rely upon the following caselaw; 11.On the other hand, this writ application has beenvehemently opposed by Mr. Varun Patel, the learnedsenior standing counsel appearing for the Revenue. Mr.Patel raised a preliminary objection as regards themaintainability of the present writ application on the ground of alternative remedy. 12.Mr. Patel would submit that the writ applicant has aremedy of filing stay application before the Income TaxAppellate Tribunal. Mr. Patel submitted that the contentionraised on behalf of the writ applicant that the impugnedorder is not appealable before the ITAT is devoid of anymerit. Mr. Patel argued that the impugned order of PCIT isan administrative order, granting conditional stay againstthe recovery and the same cannot put fetters on thestatutory and judicial power of the ITAT to grantappropriate stay. ground of alternative remedy. 12.Mr. Patel would submit that the writ applicant has aremedy of filing stay application before the Income TaxAppellate Tribunal. Mr. Patel submitted that the contentionraised on behalf of the writ applicant that the impugnedorder is not appealable before the ITAT is devoid of anymerit. Mr. Patel argued that the impugned order of PCIT isan administrative order, granting conditional stay againstthe recovery and the same cannot put fetters on thestatutory and judicial power of the ITAT to grantappropriate stay. 13.Mr. Patel invited the attention of this Court to theprovisions of Section 254(1) and(2A) of the Act, and Rule35(A) of the Income Tax (Appellate Tribunal) Rules, 1963.Mr. Patel seeks to rely on the decision of the SupremeCourt in the case of ITO vs. M.K. Mohammed Kunhi,(1969) 71 ITR 815 (SC). This judgment is relied upon insupport of his contention that the ITAT has the power togrant stay pending the appeal before it. Mr. Patel alsoseeks to rely upon a decision rendered by the MadhyaPradesh High Court in the case of Northern Coals FieldsLtd. vs. Asst. Commissioner of Income-Tax & Ors.,reported in (2017) 398 ITR 508 (MP). 14.Mr. Patel submitted that the impugned order,imposing condition for adjustment of refund is just, properand legal as the same is in conformity with the provisions of Section 245 of the Act. He would argue that Section245 does not provide for any limit so far as the adjustmentof refund is concerned. 15.Mr. Patel submitted that the respondent No.2 -PCIT,while passing the impugned order, considered all theaspects relevant for the purpose of deciding the stayapplication. 16. Mr. Patel submitted that the office memorandumsdated 29[th] February, 2016 and 31[st] July, 2017 respectivelyare not applicable to the cases wherein the appeals arepending before the ITAT. The said office memorandumswould be applicable only in case where the appeals arepending before the CIT (A). He argued that in the case onhand, as the appeals are pending before the Tribunal, thesaid two office memorandums would have no application.In such circumstances, referred to above, Mr. Patel praysthat there being no merit in this writ application, the samebe rejected and the interim relief granted may be vacatedforthwith. ANALYSIS 17.Having heard the learned counsel appearing for theparties and having gone through the materials on record,the only question that falls for our consideration iswhether the action on the part of the Revenue is inaccordance with law. 18.If we have to summarize the stance of the Revenue,we may do so as under; “1.There is an alternative remedy. 2.The Office Memorandum dated 20[th] February,2016 of the CBDT does not apply because theypertain to appeal before the CIT appeals and not theTribunal. 3.It is always open to the Department to adjustthe refund of and the assessee cannot dispute it inview of the provision of section 245 of the Act. 4.In past whenever stay was granted to the writapplicant, such a condition was incorporated but thewrit applicant never challenged it and therefore thewrit applicant is estopped from raising this conditionnow. 5.The writ applicant has not been able to showany financial hardship.” 19.So far as the first contention as regards thealternative remedy is concerned, we are not muchimpressed with the same. It is not that the CIT has notgranted stay in favour of the writ applicant, but the sameis conditional. It is highly doubtful whether such an ordercan be challenged in an appeal before the ITAT. We arenot inclined to reject this writ application only on theground of alternative remedy. 20.So far as the CBDT instructions are concerned, thereis an underlying principle behind the same. The underlyingprinciple is that pending the first appeal, the assesseemay be afforded with some protection against coercive 5.The writ applicant has not been able to showany financial hardship.” 19.So far as the first contention as regards thealternative remedy is concerned, we are not muchimpressed with the same. It is not that the CIT has notgranted stay in favour of the writ applicant, but the sameis conditional. It is highly doubtful whether such an ordercan be challenged in an appeal before the ITAT. We arenot inclined to reject this writ application only on theground of alternative remedy. 20.So far as the CBDT instructions are concerned, thereis an underlying principle behind the same. The underlyingprinciple is that pending the first appeal, the assesseemay be afforded with some protection against coercive recovery on the condition of deposit of some money. Inthe aforesaid context, we may refer to one order passedby the ITAT (Kolkata) Bench ‘C’ in the case of Organon(India) (P.) Ltd. vs. Deputy Commissioner ofIncome-tax, Circle 12(1), Kolkata, reported in (2018)94 taxmann.com 421 (Kolkata-Trib.). We quote the order; “By virtue of this stay application the assessee seeksto keep the demand of Rs.6,16,12,850/- in abeyanceraised for the assessment year 2013-14 pursuant totransfer pricing adjustment made in respect ofadvertising, marketing and promotion (AMP in short)expenses in the sum of Rs.15,60,70,679/-. The Ld.AR argued that except adjustment towards AMP, allother international transaction of the assessee wereaccepted by the Ld. TPO to be at Arm’s length. Heargued that the transaction of AMP does not failwithin the ambit of international transaction asdefined u/s. 92B of the Act in support of which heplaced reliance on the decision of Hon’ble Delhi HighCourt in the case of Maruti Suzuki India Ltd. vs. CIT(2015) 64 taxmann.com 150 / (2016) 237 Taxmann256/381 ITR 117 among others. He further statedthat the assessee had filed a letter dated 07.03.2018before the Ld. AO expressing its willingness to pay20% of the total demand in consonance with therequirement of the recent CBDT Circular dated29.02.2016 and also gave his consent for adjustmentof refunds of the various years for appropriationtowards tax arrears of assessment year 2013-14 tillthe disposal of the appeal by the Tribunal. He alsoargued that though the said circular would applyonly for matters pending before the Ld. CIT(A) , i.e,the first appeal, the impugned appeal before thisTribunal also would have to be construed as firstappeal, inasmuch as on the final assessment orderpassed by the Ld. AO u/s.143(3) read with Section144C(5) of the Act pursuant to directions of Hon’bleDispute Resolution Panel (DRP), and appeal would lie for the first time only before this Tribunal. Hence, theimpugned appeal before this Tribunal also becomesthe first appeal preferred by the assessee andaccordingly requirements laid down for keeping thedemand in abeyance in the circular dated 29.02.2016would also apply for the assessee before us. Inresponse to this, the L. DR vehemently relied on thedecision of Hon’ble Delhi High Court I the case ofSony Ericson Mobile Communication India (P) Ltd. vs.CIT (2015) 55 taxman.com 240/231 taxman 113arguing that AMP expenditure is an internationaltransaction. for the first time only before this Tribunal. Hence, theimpugned appeal before this Tribunal also becomesthe first appeal preferred by the assessee andaccordingly requirements laid down for keeping thedemand in abeyance in the circular dated 29.02.2016would also apply for the assessee before us. Inresponse to this, the L. DR vehemently relied on thedecision of Hon’ble Delhi High Court I the case ofSony Ericson Mobile Communication India (P) Ltd. vs.CIT (2015) 55 taxman.com 240/231 taxman 113arguing that AMP expenditure is an internationaltransaction. 2.We have heard the rival submissions. In thefacts and circumstances of the case, we are inclinedto accept the arguments of the Ld. AR to the extentthat the appeal filed before us would have to beconstrued as first appeal and accordingly, theassessee is directed to pay a sum of Rs.1.20 croreson or before 27.03.2018 and produce the evidence ofpayment of the same to the Registry on the verysame date. The assessee is also directed not toalienate his immovable properties, if any, without theprior consent of the Administrative Commissioner ofIncome Tax having jurisdiction over this case in orderto protect the interest of the revenue till the arrearsare discharged for assessment year 2013-14. The Ld.AR stated that the appeal for the assessment year2012-13 i.e, immediately preceding year, is listed forhearing on 02.05.2018 wherein similar issue isinvolved. Accordingly, we direct the Registry to listthis case also along with appeal for assessment year2012-13 on 02.05.2018. In view of the aforesaidfindings, we are inclined to keep the demand inabeyance for a period of six months from today or tillthe disposal of the appeal whichever is earlier,subject to fulfillment of aforesaid conditions. In case,if the assessee fails to make remittance of 1.20crores on or before 27.03.2018, the conditional staygranted herein would stand automatically vacated. 3.In the result, the stay application of the assessee is disopsed off accordingly.” 21.So far as Section 245 of the Act is concerned, thereneed not be any debate as regards the power of theDepartment to adjust the refund, however, such powershould be exercised in a reasonable manner. Here is acase wherein the assessee is sought to be deprived of ahuge amount towards the refund. A huge amount towardsrefund is being declined on the ground that a demand ispending for the previous year. If such unbridled power isassumed by the Revenue to adjust the refund, it wouldresult in a situation where two assessees against whomequal demands are raised will be treated differently. Oneassessee who has to recover significant amount towardsthe refunds and another who has not to recover therefunds would be put in two different categories becausein the first case refund would be adjusted whereas in thesecond case, no such adjustment is possible. 22.We are also not impressed by the submissioncanvassed on behalf of the Revenue as regards estoppel.First, there cannot be any estoppel against the statute. 23.In the last, we may only observe that the writapplicant has raised issues relating to financial hardships.The writ applicant has pointed out that it has sufferedlosses in earlier four years. In the aforesaid context, wemay refer to a decision rendered by the Punjab & HaryanaHigh Court in the case of Jindal Steel & Power Ltd. vs.Principal Commissioner of Income Tax, (2016) 75 taxmann.com 224 (Punjab & Haryana). We quote therelevant observations; 22.We are also not impressed by the submissioncanvassed on behalf of the Revenue as regards estoppel.First, there cannot be any estoppel against the statute. 23.In the last, we may only observe that the writapplicant has raised issues relating to financial hardships.The writ applicant has pointed out that it has sufferedlosses in earlier four years. In the aforesaid context, wemay refer to a decision rendered by the Punjab & HaryanaHigh Court in the case of Jindal Steel & Power Ltd. vs.Principal Commissioner of Income Tax, (2016) 75 taxmann.com 224 (Punjab & Haryana). We quote therelevant observations; “20. The Pr.CIT rightly did not grant a complete staybut considered the petitioner's application in thealternative for a stay subject to its paying 15% of theoutstanding demand in terms of the OfficeMemorandum dated 29.02.2016. Considering thefacts of the case, the financial position of thepetitioner and having regard to the said guidelinesdated 29.02.2016, the Pr.CIT granted the petitioner astay of the demand till the disposal of the appealbefore the CIT(A) subject to the petitioner paying15% of the outstanding demand, namely, ` 41.64crores in the installments stipulated. In paragraph-5,the petitioner's request for adjusting a refund of `15.14 crores in respect of the assessment year 2008-09 was accepted. The assessee was accordinglydirected to pay the balance amount of ` 26.18 croresin varying installments between 20th June, 2016 and20th March, 2017. The concluding portion of theorder passed by respondent No.1 reads as under:- "5. It may be mentioned that installments in theinitial months have been kept at lower sideconsidering the assessee's request for lowerinstallments on account of pressing financialposition. The assessee shall make the paymentby 20th day of each month and furnish the copyof the challan before the AO. On payment of15% of outstanding demand as stated above,the assessee shall not be treated as theassessee in default in respect of the balancedemand till the disposal of appeal of the learnedCIT(A) and the AO shall not take any coercivemeasure to recover the said demand. However,the Assessing Officer is free to adjust any refundwhich may arise in favour of the assesseecompany in any assessment year. 6. In case the assessee company does not comply with the above directions and does notadhere to the above payments of installments,the AO shall be free to take steps as per law torecover the demand." 21. It is clear that the stay was granted subject to theassessee paying the said amounts which constituted15% of the total demand and nothing more. There is,however, a dispute regarding the last sentence inparagraph-5. It entitles the Assessing Officer "toadjust any refund which may arise in favour of theassessee company in any assessment year". Thepetitioner contends that this liberty to adjust is onlyin respect and to the extent of the balance of thesaid 15%, namely, ` 26.18 crores which was to bepaid in the said installments and on the other it couldbe to the extent of the entire demand. The AssessingOfficer, however, interpreted the order to mean thathe was entitled to adjust the refund that thepetitioner may be entitled to against the entiredemand. This compelled the petitioner to seek aclarification before the Pr.CIT. The Pr.CIT by the saidorder dated 26.08.2016 referred to the guidelinesand to the previous order. In particular a referencewas made to Clause-C of the original instructionsdated 02.02.1993 which reads as under:- "C. GUIDELINES FOR STAYING DEMAND. (i) .............… (ii) In granting stay, the Assessing Officer may impose such conditions are he may think fit. Thus he may,- a) Require the assessee to offer suitable security ofsafeguard the interest of revenue; b) Require the assessee to pay towards the disputedtaxes a reasonable amount in lump sum or ininstallments; "C. GUIDELINES FOR STAYING DEMAND. (i) .............… (ii) In granting stay, the Assessing Officer may impose such conditions are he may think fit. Thus he may,- a) Require the assessee to offer suitable security ofsafeguard the interest of revenue; b) Require the assessee to pay towards the disputedtaxes a reasonable amount in lump sum or ininstallments; c) Require an undertaking from the assessee that he will cooperate in the early disposal of appeal failingwhich the stay order will be cancelled; d) Reserve the right to review the order passed afterexpiry of reasonable period, say upto 6 months, or ifthe assessee has not cooperated in the early disposalof appeal, or where a subsequent pronouncement bya higher appellate authority or court alters the abovesituation; e) Reserve a right to adjust refund arising, if any,against the demand." After quoting the above provision, the order dated26.08.2016 concludes as under:- "4. From the above instruction issued by the CBDT, itis clear that for granting of stay of outstand demandthe Department may impose such conditions, whichinter-aliaincludesthattheAssessingOfficer/Department may reserve the right to adjustthe refund arising, if any, against the demand. 5. In view of the above, the request of the assesseecompany to amend the stay order dated 14.06.2015is hereby rejected." 22. The order dated 26.08.2016 does not clarify theorder dated 14.06.2016. It does not state that theorder dated 14.06.2016 entitled the Assessing Officerto adjust the refunds against the entire demand. Theorder merely states that in view of Clause-C of theoriginal instructions dated 02.02.1993 theDepartment has a right to do so. This was not aclarification. 23. We will assume that the Department'sinterpretation of the orders is correct. In any eventthe order dated 26.08.2016 does not construe thefurther Office Memorandum dated 29.02.2016. TheOffice Memorandum forms a part of the originalinstruction No. 1914 dated 02.02.1993. This is clear from paragraphs-1 and 4 thereof. Paragraph-4expressly states that the modified guidelinescontained in the Office Memorandum were beingissued "in partial modification of the instructionNo.1914". Instruction No. 1914 dated 02.02.1993 asclarified by instruction No.1914 dated 21.03.1996must, therefore, be read together with the Officememorandum dated 29.02.2016. 23. We will assume that the Department'sinterpretation of the orders is correct. In any eventthe order dated 26.08.2016 does not construe thefurther Office Memorandum dated 29.02.2016. TheOffice Memorandum forms a part of the originalinstruction No. 1914 dated 02.02.1993. This is clear from paragraphs-1 and 4 thereof. Paragraph-4expressly states that the modified guidelinescontained in the Office Memorandum were beingissued "in partial modification of the instructionNo.1914". Instruction No. 1914 dated 02.02.1993 asclarified by instruction No.1914 dated 21.03.1996must, therefore, be read together with the Officememorandum dated 29.02.2016. 24. It is necessary now to interpret the OfficeMemorandum dated 29.02.2016. Under clause-4Awhere the outstanding demand is disputed beforethe CIT(A), the Assessing Officer "shall" grant a stayof the demand on payment of 15% of the disputeddemand unless the case falls in para-B of Clause-4. Inthe case before us, the demand is disputed beforethe CIT(A). The present case does not fall underpara(B) either. Clause-4(B)(a) provides that in asituation where the Assessing Officer is of the viewthat the nature of the addition resulting in thedisputed demand is such that payment of a lumpsum amount higher than 15% is warranted, theAssessing Officer shall refer the matter to theAdministrative Pr.CIT/CIT who after considering alltherelevantfactsshalldecidethequantum/proportion of demand to be paid by theassessee as lump-sum payment for granting a stay ofthe balance For Subsequent orders see CM-11613-CWP-2016 13 of 16 demand. Admittedly, a referenceunder clause 4(B)(a) was not made by the AssessingOfficer to the Pr.CIT. In that event, Clause-4(A) alonewould operate. As we mentioned earlier, clause 4(A)provides that where the outstanding amount isdisputed before the CIT(A), the Assessing Officer"shall" grant stay of demand till disposal of the firstappeal on payment of 15% of the disputed demand.In other words, the Assessing Officer is bound togrant a stay of the entire demand on payment of15% of the disputed demand unless the case fallsunder category-B of clause-4. The Assessing Officeris not entitled to insist upon the assessee depositinga higher amount. 25. Faced with this, Mr. Putney relied upon clause-4(E)(iii). He submitted that the Assessing Officer isentitled to impose such conditions as he thinks fit. Aplain reading of the clause, however, militatesagainst the submission on behalf of the Department.It entitles the Assessing Officer to reserve the right toadjust the refunds arising "to the extent of theamount required for granting stay........." Therefore,the right to adjust the refund is limited to the amountto be deposited by the assessee as a condition forthe stay. 26. The Assessing Officer in the order dated26.08.2016 referred to guidelines-C(ii)(e) which weset out earlier. It provides that in granting a stay theAssessing Officer may impose such conditions as hemay think fit and that he may reserve a right toadjust the refund arising, if any, against the demand.However, this guideline stands modified by the OfficeMemorandum dated 29.02.1996 which entitles theAssessing Officer to reserve the right to adjust therefund arising "to the extent of the amount requiredfor granting stay.........." . Clause-4 of the OfficeMemorandum expressly stated that the guidelinestherein were issued in partial modification of theinstruction No. 1914. Thus guideline-C(e) of theoriginal instructions dated 02.02.1993 stood modifiedby para-4(e)(iii) of the Office Memorandum. 27. As we observed earlier in the present case by theimpugned order dated 14.06.2016 the petitioner wasrequired to deposit 15% of the outstanding demand,namely, ` 41.64 crores. This figure attained finality.At the cost of repetition, the Assessing Officer did notrefer the matter to the Administrative Pr.CIT for anamount higher than 15% of the amount to bedeposited as a condition for stay. This in factindicates that the last sentence in paragraph 5 of theorder dated 14.06.2016 granted the AssessingOfficer the right to adjust any refund which may arisein favour of the assessee in respect and to the extent of the said 15% of the demand only. In any event,even if it entitles the Assessing Officer to adjust anyrefund against the entire tax demand, it would becontrary to the instructions of the CBDT contained inthe Office Memorandum dated 29.02.2016. 28. Lastly, Mr. Putney submitted that the AssessingOfficer has unbridled powers under section 220(6) ofthe Act. However, in view of the circular dated02.02.1993 as clarified by the circular dated21.03.1996 and modified by the Office Memorandumdated 29.02.2016 the Assessing Officer's powershave been circumscribed to the extent providedtherein. 29. We quite see the force in Mr. Putney's contentionthat the department must safeguard its interest andthat its interest may be jeoparadized if the petitioneris entitled to avail of the refund and at the same timeenjoy the benefit of the stay. However, theDepartment is bound by the circular as modified bythe Office Memorandum. Had the circulars/OfficeMemorandum not been in force, it may have been adifferent matter altogether. 30. In the circumstances, the writ petition is disposedof by holding that the petitioner shall be entitled to astay of the demand subject to its depositing theinstallments as required by the order dated14.06.2016 and that the future refunds can beadjusted only to the extent of the balance amountdirected to be paid as a condition for the stay. The respondents shall, however, be entitled towithhold the refund(s) upto and including 31.10.2016to enable them to challenge this order.” 24.The aforesaid decision of the Punjab & Haryana HighCourt, as has been referred to and relied upon by theBombay High Court in the case ofAndrewTelecommunications India (P.) Ltd. vs. Principal Commissioner of Income-tax, Goa, (2017) 77taxmann.com 312 (Bombay), wherein the following hasbeen observed; “7. On the contrary, it is submitted by Ms. AshaDesai, the learned Counsel for the respondents thatthe impugned orders passed by the competentauthorities, refusing to grant stay, are passed by therespondents, what she calls to be on theadministrative side. It is submitted that the petitionerhas filed an appeal, which is pending before the CIT(A) and the petitioner can seek appropriate order ofstay in the appeal and in view of this, the petitionmay not be entertained. The learned Counsel in thisregard has pointed out the decision of this Court inthe case of Ulhas Jewellers Pvt. Ltd. Vs. PR.Commissioner of Income Tax, Panaji and Another(Writ Petition No. 906/2016 decided on 29.09.2016).It is submitted that the refund, which is said to bedue to the petitioner, is under process and that is fora different assessing year and has nothing to do withthe impugned demand for the Assessment Year2012-13. 8. We have carefully considered the rivalcircumstances and the submissions made. Theimpugned demand is for Rs.16,90,79,380/-.Admittedly, the petitioner has challenged the saiddemand in an appeal, which is pending before theCIT (A). According to the respondents, the impugnedorder refusing to grant stay is passed on theadministrative side. Be that as it may, the O.M. dated29.02.2016, to the extent relevant, reads thus: 8. We have carefully considered the rivalcircumstances and the submissions made. Theimpugned demand is for Rs.16,90,79,380/-.Admittedly, the petitioner has challenged the saiddemand in an appeal, which is pending before theCIT (A). According to the respondents, the impugnedorder refusing to grant stay is passed on theadministrative side. Be that as it may, the O.M. dated29.02.2016, to the extent relevant, reads thus: 4. In order to streamline the process of grant of stayand standardize the quantum of lump sum paymentrequired to be made by the assessee as a pre-condition for stay of demand disputed before CIT (A),the following modified guidelines are being issued inpartial modification of Instruction No. 1914: (A) In a case where the outstanding demand isdisputed before CIT (A), the assessing officer shallgrant stay of demand till disposal of first appeal onpayment of 15% of the disputed demand, unless thecase falls in the category discussed in para (B)hereunder: (B) ….. (C) ….. (D) ….. (E) In granting stay, the Assessing Officer mayimpose such conditions as he may think fit. He may,inter alia,: (i) require an undertaking from the assessee that hewill cooperate in the early disposal of appeal failingwhich the stay order will be cancelled; (ii) reserve the right to review the order passed afterexpiry of reasonable period (say 6 months) or if theassessee has not cooperated in the early disposal ofappeal, or where a subsequent pronouncement by ahigher appellate authority or court alters the abovesituations; (iii) reserve the right to adjust refunds arising, if any,against the demand, to the extent of the amountrequired for granting stay and subject to theprovisions of Section 245.” 9. It can thus be seen that under para 4(A) of theO.M., a case where outstanding demand is disputedbefore the CIT(A) (as in the present case), theassessing officer shall grant stay of demand, till thedisposal of the first appeal on payment of 15% of thedisputed demand, unless the case falls in categorydiscussed in para 4(B). It is not in dispute that thepresent case would not fall in the category asprovided in para 4(B) of the O.M. and thus, would begoverned by para 4(A). 10. It is further not in dispute that a refund forRs.12,25,45,340/- is pending before the Principal CIT for the Assessment Years 2006-07 and 2007-08. It isfurther undisputed that the said refund is pendingsince 20.01.2016 (Assessment Year 2006-07) andsince 20.04.2016 (Assessment Year 2007-08). 11. It would further appear that para 4(E)contemplates some additional conditions, which maybe imposed by the assessing officer, while grantingstay, which includes a right to adjust the refund, ifany, to the extent of demand required for grantingstay and subject to the provisions of Section 245. Itwas not disputed during the course of the argumentsat bar that such a demand can be adjusted againstthe pending refund for the previous year, if any. Thedispute is really about the extent of such adjustment.While it is claimed by the respondents that the entireamount of the refund shall be adjusted as against theimpugned demand as a condition for stay, on behalfof the petitioner, it is contended that 15% of theimpugned demand may be adjusted, out of the totalamount due, which is in excess of Rs. 12 crores.Presently, we are only concerned with the issue ofgrant of stay of the impugned demand. Consideringthe overall circumstances and para 4(A) of the O.M.,we find that the impugned order can be stayed,subject to an amount of Rs. 2,53,61,907/- (15% ofthe total demand of Rs. 16,90,79,380/-) beingadjusted out of the refund, which is due for theAssessment Years 2006-07 and 2007- 08. 12. Thus, the petition is partly allowed. Theimpugned communication/order, rejecting theapplication for stay, is set aside. There shall beinterim stay of the impugned demand, pendingdisposal of the appeal before the CIT (A), oncondition of an amount of Rs. 2,53,61,907/-, from outof the refund for the Assessment Years 2006-07 and2007-08, being retained towards 15% of the amountas stipulated in O.M. Dated 29.02.2016. This shall besubject to the final order that may be passed in theappeal. In the circumstances, there shall be no orderas to costs.” 25.We may also refer to a decision rendered by this HighCourt in the case of Vodafone India Service P. Ltd. vs.Union of India, (2020) 113 taxmann.com 120 (Gujarat),wherein the following has been observed; “7. Before adverting to the merits of the case,reference may be made to the provisions of sub-section (6) of section 220 of the Act, which readsthus: "220. When tax payable and when assessee deemedin default- (6) Where an assessee has presented an appealunder section 246 or section 246-A the AssessingOfficer may, in his discretion, and subject to suchconditions as he may think fit to impose