Facts of the Case

Schneider Electric India Private Limited had filed an appeal before the Income Tax Appellate Tribunal (ITA No. 937/Del/2014) challenging an assessment order and the consequent tax demand raised against it. Initially, the Tribunal granted stay of the demand on 13.05.2014 subject to specified conditions, which were duly complied with by the petitioner. Thereafter, on 14.11.2014, the Tribunal extended the interim stay.

However, relying upon the decision in CIT v. Maruti Suzuki (India) Ltd., it was held that the Tribunal lacked authority to extend the stay beyond 365 days from the date of initial grant of stay. The period of 365 days expired on 12.05.2015. During this period, the appeal had been listed before the Tribunal but could not be heard due to reasons not attributable to the petitioner and was subsequently fixed for hearing on 28.07.2015. Consequently, the petitioner approached the High Court seeking extension of stay till disposal of the appeal.

Issues Involved

  1. Whether the High Court can extend a stay of tax demand under Article 226 of the Constitution after expiry of the statutory 365-day limit applicable to the Tribunal.
  2. Whether continuation of stay can be granted where the appeal remains pending for reasons not attributable to the assessee.
  3. Whether ends of justice require continuation of protection already granted by the Tribunal.

Petitioner’s Arguments

The petitioner submitted that:

  • The Tribunal had originally granted a stay of demand subject to conditions which had already been fulfilled.
  • The appeal could not be heard due to circumstances beyond the petitioner’s control.
  • Since the Tribunal had become powerless to extend the stay beyond 365 days, the petitioner had no alternative remedy except approaching the High Court.
  • Various judicial precedents existed wherein the High Court exercised jurisdiction under Article 226 and extended such stays till final disposal of the appeal.

Respondent’s Arguments

The respondent relied upon the legal position that under the applicable statutory scheme and judicial precedent, the Tribunal had no authority to extend a stay order beyond a total period of 365 days from the date of its initial grant.

Sections / Provisions Involved

Income Tax Act, 1961

  • Section 254(2A) – Power of the Income Tax Appellate Tribunal regarding grant and extension of stay of demand.

Constitution of India

  • Article 226 – Power of High Courts to issue writs and grant relief in appropriate cases.

Court Findings / Court Order

The Delhi High Court observed that the petitioner had already been granted a conditional stay by the Tribunal and had complied with all the stipulated conditions. Further, the appeal remained pending not because of any fault or delay attributable to the petitioner.

The Court reiterated that while the Tribunal may be restricted from extending stay beyond the statutory period of 365 days, there is no legal prohibition on the High Court exercising its jurisdiction under Article 226 to grant such relief where circumstances and the interests of justice so warrant.

Accordingly, the High Court directed continuation of the stay order till disposal of the appeal before the Tribunal and disposed of the writ petition.

Important Clarification

The Court clarified that:

  • The limitation imposed on the Tribunal for extending stay beyond 365 days does not curtail the constitutional powers of the High Court under Article 226.
  • Relief may be granted by the High Court where delay in disposal of appeal is not attributable to the assessee.
  • Continuation of stay depends on the facts and circumstances of each case and the requirements of justice.

The Court also relied upon principles recognized in:

 

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2015:DHC:4401-DB/BDA18052015CW49022015.pdf

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