Sinhagad Technical Education Society v. The Income-Tax Appellate Tribunal & Others

IN THE HIGH COURT OF JUDICATURE AT BOMBAYCIVIL APPELLATE JURISDICTION WRIT PETITION NO.2932 OF 2010 Sinhagad Technical Education Society..Petitioner.Versus The Income-tax Appellate Tribunal & Others..Respondents. Mr.J.D. Mistry with Mr.Niraj Seth, Mr.Nitin Dhumal for the petitioner..Mr.Vimal Gupta for the respondents. CORAM : Dr.D.Y. Chandrachud & J.P. Devadhar, JJ. DATE : 19April 2010. P.C. : 1.Rule, returnable forthwith. By consent of both the parties, the matter is taken up for hearing and final disposal. 2.The petition is directed against an order passed by the Income Tax Appellate Tribunal on 26 March 2010 on the applications for stay filed by the assessee for assessment years 1999-2000 to 2003-2004. The total demand for these assessment years is Rs.5.23 crores. The Tribunal has by its order impugned directed that the appeal shall be placed for hearing and final disposal on 13 May 2010. However, the assessee has been directed to pay 50% of the total arrears of Rs.5.23 crores in six equal installments, the first of which was to be paid on or before 31 March 2010 and the assessee was directed to furnish a bank guarantee for the balance 50% of the demand. 3.The learned Counsel appearing on behalf of the assessee has urged that in the order passed by the Commissioner (Appeals), which is impugned before the Tribunal in the appeal, the only ground on which the exemption under Section 11 of the Income Tax Act, 1961 has been denied, is a breach of Section 13(1)(d)(i). The breach which has been alleged is that the assessee which was registered as a Charitable Trust had invested its funds in the shares of certain cooperative banks, which is not one of the modes specified in Section 11(5). The contention of the assessee is that this ground is exfacie untenable since the only reason to subscribe to the shares of certain cooperative banks in the present case is that the assessee was, as a condition precedent of the extension of a term loan facility required to subscribe to a certain number of shares of the bank concerned. In this context, letters addressed to the assessee by the Rupee Cooperative Bank Limited and by the Sampada Sahakari Bank Limited have been annexed to the paper-book and were relied upon during the course of hearing. 4.On the other hand, learned Counsel appearing on behalf of the Revenue submitted that though the Tribunal has directed the assessee to deposit 50% of the demand, amounting to Rs.2.62 crores within six months and to forthwith furnish a bank guarantee for the balance, the hearing before the Tribunal is to take place on 13 May 2010 and that consequently in effect the assessee would be required to pay only those installments which fall due before the date of hearing besides furnishing a bank guarantee. The learned Counsel submitted that the assessee cannot be heard to argue that the appeal before the Tribunal should proceed without the assessee being required to deposit atleast a part of the demand and to secure the Revenue by furnishing a bank guarantee. 5.The Tribunal has in the course of its order observed that the reason for denial of an exemption under Section 11 would have to be determined at the final hearing and that the issue may turn either way at the hearing. The Tribunal was of the view that while the assessee is at present facing a liquidity crunch with a liability of Rs.13.20 crores, at the same time the interest of the Revenue needs to be protected. The Tribunal held that the stay applications for all the five assessment years must be allowed in order to enable the assessee to conduct its activities. The assessee, it may be noted, conducts nearly 72 educational institutions, where 44,000 students are pursuing their education. 6.In our view, it would neither be appropriate nor proper for the Court to express at this stage any opinion on the interpretation of the provisions of Section 13(1)(d). However, having regard to the submissions 6.In our view, it would neither be appropriate nor proper for the Court to express at this stage any opinion on the interpretation of the provisions of Section 13(1)(d). However, having regard to the submissions which have been urged on behalf of the assessee and as noted by the Tribunal itself, the case of the assessee cannot be regarded as prima facie lacking in merit. We are making this observation confined to the disposal of the stay applications. During the course of the hearing, we had indicated to the learned Counsel that it would be appropriate for this Court to modify the order of the Tribunal so as to direct the assessee to deposit an amount of Rs.20,00,000/- and to furnish a bank guarantee of Rs.50,00,000/-. The learned Counsel appearing on behalf of the assessee, after taking instructions, submitted that the assessee is willing to do so within a period of two weeks from today. The statement which has been made made before the Court is accepted. We have taken due note of the financial difficulties which have been indicated in the order of the Tribunal, as being faced by the assessee. In the circumstances, we dispose of this petition by modifying the order of the Tribunal in the following terms : i)The assessee shall, within a period of two weeks from today, pay an amount of Rs.20,00,000/- towards the demand for the assessment years in question;amount of Rs.20,00,000/- towards the demand for the assessment years in question; ii)The assessee shall furnish a bank guarantee of a nationalized bank in the amount of Rs.50,00,000/- within a period of two weeks from today;the amount of Rs.50,00,000/- within a period of two weeks from today; iii)The bank guarantee and the payment shall abide by the final orders of the Tribunal; iv)The Tribunal is requested to hear the appeal commencing from 13 May 2010, the date fixed by the Tribunal, and to dispose of the appeal if necessary by proceeding with a day to day hearing of the appeal. This shall however not preclude the Tribunal from taking up the appeal at an earlier date, subject to due notice to the Revenue and to the assessee. 7. The writ petition shall accordingly stand disposed of. There shall be no order as to costs. (J.P. Devadhar, J.) (Dr.D.Y. Chandrachud, J.)