Case Law Details

Case Name : Grasim Industries Limited Vs DCIT (ITAT Mumbai)
Appeal Number : SA No 48/Mum/2021 In ITA No. 1935/Mum/20
Date of Judgement/Order : 12/04/2021
Related Assessment Year : 2018-19

Grasim Industries Limited Vs DCIT (ITAT Mumbai)

By way of this stay application, the assessee applicant has sought a stay on collection/ recovery of tax and interest demands aggregating to Rs 3,786.34 crores in respect of the dividend distribution tax (DDT), and interest thereon, under section 115O/115Q r.w.s. 2(22)(a) of the Income Tax Act, 1961, on, what is termed as, a deemed dividend distribution of accumulated profits in the course of a demerger transaction which took place in the period relating to assessment year 2018-19.

ITAT Directed the assessee to furnish securities worth Rs 760 crores, to the satisfaction of the Assessing Officer, which works out to almost 20% of disputed demands anyway, we see no need to deal with the broader question about the impact of amendment in the scheme of Section 254(2A) which is said to restrict powers of the Tribunal in granting the stay, unless the assessee makes a pre-deposit of 20% of the impugned demands or provides security in respect thereof. We have noted that by way of the Finance Act 2020, there is an amendment in in the proposed proviso to Sub-section (2A) of section 254 Act after the words “from the date of such order” the words “subject to the condition that the assessee deposits not less than twenty per cent of the amount of tax, interest, fee, penalty, or any other sum payable under the provisions of this Act, or furnishes security of equal amount in respect thereof” are inserted. In effect thus it provides that the Tribunal “may, after considering the merits of the application made by the assessee, pass an order of stay in any proceedings relating to an appeal filed under sub-section (1) of section 253, for a period not exceeding one hundred and eighty days from the date of such order and the Appellate Tribunal shall dispose of the appeal within the said period of stay specified in that order subject to the condition that the assessee deposits not less  than twenty per cent of the amount of tax, interest, fee, penalty, or any other sum payable under the provisions of this Act, or furnishes security of equal amount in  respect thereof”.That aspect of the matter, however, is wholly academic as on now. It would be relevant only when the Tribunal is, on merits of the stay petition, of the view that the assessee deserves a blanket unconditional stay which is not the case here, and, therefore, so far as the impact of amendment in Section 254(2A) by the Finance Act 2020 is concerned, that is wholly academic in the present context.

10. In view of the above discussions, and bearing in mind entirety of the case, we grant a stay on collection/ recovery of the disputed impugned demands on account of dividend distribution tax, and interest thereon, aggregating to Rs 3786.34 crores on the following conditions:

(a) The assessee shall provide a reasonable security for an amount of Rs 760 crores or more, to the satisfaction of the Assessing Officer, at the earliest possible, and, in no case, not later than two weeks from today; Provided, however, in case the Assessing Officer is, for any reasons whatsoever, not satisfied with the security offered by the assessee, the Assessing Officer shall pass a detailed speaking order in respect of the same, and will give a two week notice to the assessee, on the same lines as was directed by Hon’ble jurisdictional High Court in assesee’s own case (supra), before initiating any coercive recovery proceedings, so that the assessee can pursue appropriate legal remedies against the stand of the Assessing Officer, if so advised.

(b) The assessee will fully cooperate in expeditious disposal of appeal before this Tribunal, and will not seek any adjournment of hearing; and

(c) This stay will be in operation till 180 days from the date of this order, till the order on the related appeal is pronounced or till further orders- whichever is earlier.

In the result, the stay application is partly allowed in the terms indicated above.

FULL TEXT OF THE ITAT JUDGEMENT

Per Pramod Kumar, VP:

1. By way of this stay application, the assessee applicant has sought a stay on collection/ recovery of tax and interest demands aggregating to Rs 3,786.34 crores in respect of the dividend distribution tax, and interest thereon, under section 115O/115Q r.w.s. 2(22)(a) of the Income Tax Act, 1961, on, what is termed as, a deemed dividend distribution of accumulated profits in the course of a demerger transaction which took place in the period relating to assessment year 2018-19.

2. The deemed dividend distribution of accumulated profits, in the course of a demerger transaction, triggering the impugned tax demands, in terms of a diagram, seems to be as follows:

impugned tax demands, in terms of a diagram

3. A plain look at the above diagram shows that the impugned demand is raised on the basis of at least three critical assumptions, namely, (a) that the allotment of new shares by the resulting new company, coming into existence on account of demerger of an undertaking of the assessee, to the shareholders of the assessee, constitutes a distribution of accumulated profits by the applicant assessee- under section 2(22)(a); (b) that the value of such distribution of accumulated profits, by way of allocation of shares of the resulting new company, is to be computed on the basis of the market value of shares; and (c) that the assessee was under an obligation, under section 115 ‘O’, to pay dividend distribution tax in respect of the said deemed dividends in the hands of the shareholders of the assessee applicant company.

4. Let us take a quick look at some material facts, as culled out from material on record, in some more detail. The assessee before us is a widely held public listed company. On 11th August 2016, the Board of Directors of the assessee company approved a ‘composite scheme of arrangements’ between the assessee company, Aditya Birla Nuvo Ltd (ABNL), and Aditya Birla Capital Limited (ABCL)- which was earlier known as Aditya Birla Financial Services Ltd (ABFSL). Under this scheme, the ABNL was to merge with the assessee company, and, subsequently, the financial services business (FSB) was to be demerged to ABCL. This composite scheme of arrangement was approved by the National Company Law Tribunal on 1st June 2017, and, under the said scheme, the merger became effective from 1st July 2017, and the FSB demerger to ABCL became effective from 4th July 2017. Prior to this merger, ABCL was a subsidiary of ABNL, but as the ABNL itself merged into the assessee company, it became a subsidiary of the assessee company. Prior to the merger, ABNL held 9.77% shares of one Aditya Birla Finance Limited (ABFL) and the remaining 90.23% shares therein were held by ABCL. When the demerger of the financial services business took place, these 9.77% shares were also transferred to ABCL. The Assessing Officer probed this composite scheme of the arrangement, collected the information under section 133(6), and, for the detailed reasons set out in the assessment order, concluded that the demerger was not in accordance with the provisions of Section 2(19AA) of the Income Tax Act, 1961, that it was merely a transfer of combination of certain assets and liabilities having a net book value of Rs 1,721.61 crores which did not constitute business activity. The Assessing Officer was further of the view that as a consideration for this combination of assets and liabilities, with a book value of Rs 1,721.61 crores, the ABCL had issued 92,02,66,915 shares to the shareholders of the assessee company under the guise of consideration for demerger. The Assessing Officer further computed fair market value of these shares at Rs 261.20 per share, and the consideration for the transfer of the said combination of assets and liabilities, with a book value of Rs 1,721.61 crores, thus worked out to Rs 24037,37,18,918. The Assessing Officer was further of the view that what has been paid to the shareholders of the assessee company, as consideration in the garb of consideration of demerger, is taxable as deemed dividend under section 2(22)(e) of the Act, and, as a corollary thereto, the assessee had a liability to pay dividend distribution tax of Rs 4893,44,40,243 (Rs 4,893.44 crores) which he has failed to discharge. The assessee was held to be an assessee in default under section 115 Q of the Act. The Assessing Officer further raised a demand for interest, beyond the 14 days from the record date) under section 115P, which, at that point in time, worked out to Rs 978,68,88,044 (Rs 978.68 crores). It was in this backdrop that a demand of Rs 5872,13,28,292 (Rs 5,872.13 crores) was raised on the assessee. Aggrieved, the assessee carried the matter in appeal before the CIT(A), but without much success. While the learned CIT(A) upheld the demand in principle, he modified the quantum of valuation of shares @ Rs 145.40 per share, as against the valuation @ Rs 261.20 per share. The demand recomputed, in the proceedings giving effect to the appellate order of the CIT(A) and inclusive of interest under section 115P, is stated to be at Rs 3786,34,91,500 (i.e. Rs 3,786.34 crores). The assessee is still not satisfied and is in further appeal before us. The appeals so filed by the assessee is currently under hearing. In the meantime, the assessee has also filed this application seeking a stay on collection/ recovery of the disputed demands till the related appeal is disposed of, and the order thereon is communicated to the parties.

5. We may add so far as the subject demands are concerned, the assessee applicant had earlier also moved two stay applications and both these stay petitions were dismissed as infructuous. Vide order dated 18th December 2020, a coordinate bench of this Tribunal had dismissed one of these petitions and observed as follows:

7. The views of the field authorities are thus self-contradictory. It was in this backdrop that we asked the Assessing Officer to appear in person and take a categorical stand, one way or the other, in the matter. It was clarified by us that in the event of the stand of the field authorities being that no coercive action should be taken to recover the disputed demands, there is no need to deal with this stay petition on merits at all. That is between the assessee and the Assessing Officer, and we are not inclined to get into it, nor is there any occasion for our interference. The Assessing Officer, thereafter, appeared in person on 18th December 2020, and also filed a letter which stated as follows:

2. During the course of hearing on 11-12-2020 in stay application No. 226/Mum/2020 (arising out of ITA No. 1935/Mum/2020), the Hon’ble ITAT, G-Bench, Mumbai directed the department to further clarify its stand as to whether it considers the stay of demand in operation or not, considering various orders of the Hon’ble High Court in assessee’s WP no. 3367 of 2019 with details of recovery measures undertaken till date.

3. In this regard, department’s stand, as approved by Pr. CIT-Central 1, Mumbai, is as follows:

(i) In continuation with department’s earlier submission dtd. 9-12-2020, it is further clarified that there is no absolute clarity on the question regarding whether stay of demand given by Hon’ble High Court in WP 3367 is operational or not. If we look at the substance of writ petition 3367 and stay granted by Hon’ble Bombay High Court in original order dtd: 1-10-2019 in WP No 1405 of 2019, it is evident that writ petition 3367 of 2019 filed by assessee was to seek stay in recovery proceedings till disposal of first appeal and 8 weeks thereafter, which was pending at that time before Ld. CIT(A). Therefore stay granted by Hon’ble Bombay Court in WP 3367 of 2019 could not travel beyond disposal of first appeal by Ld. CIT(A) and 8 weeks thereafter.

(ii) In the unprecedented circumstances arising from covid pandemic, hearing in High Court could not take place in WP 3367 of 2019 for a period of several months and therefore technically stay granted by Hon’ble Bombay High Court was also extended.

(iii) Now, in this situation, if we look at substance of matter, it can be concluded that stay is not operational. However, at same time, there exists an order dtd: 12-12-2019, 10-1-2020 and 31-1-2020 in WP 3367 of 2019 which continues because hearing could not be take place in High Court.

(iv) In view of the above circumstances, department has taken a conscious decision not to take coercive actions and to proceed for filing Interim Application in Bombay High Court for vacating technical stay on recovery of demand arising out of aforementioned orders in WP 3367 of 2019. Interim Application (No 8806 of 2020) in WP 3367 of 2019 has already been filed in Hon’ble High Court and Department is looking forward to mention it before Bombay High Court at earliest.

(v) On the other hand, it may also be pointed out that assessee is also aware that stay granted by Hon’ble Bombay High Court can’t stand in changed circumstances after disposal of appeal by Ld. CIT(A). That appears to be reason why the assessee has filed stay application before Hon’ble ITAT.

(vi) In view of above, Hon’ble Bench may kindly direct assessee to cooperate with department in respect of pending WP no. 3367 of 2019 of assessee before Hon’ble Bombay High Court. In the meantime, Hon’ble ITAT may keep stay proceedings in abeyance or may dismiss assessee’s petition.

[Emphasis, by underlining, supplied by us]

8. Quite clearly, therefore, there is no legitimate apprehension for recovery of the disputed outstanding demands as of now. It is not for us to comment upon the stand of the Assessing Officer, which shows that, in terms of the interim directions issued by Hon’ble High Court in writ petition challenging the validity of order dated 18th October 2019 declining stay under section 220(6), the interim stay on collection of the impugned demands is still in operation. Suffice to note that, on the peculiar facts of this case, the cause of action for our interference has not yet arisen, as, it is, to borrow the words of the Assessing Officer, a conscious decision of the revenue authorities not to recover these outstanding demands for the time being, even though, the Assessing Officer contradicts himself when he holds the belief, as he puts in so many words in the letter which has been reproduced earlier in this order, that the interim stay granted by Hon’ble High Court does not hold the field now. Yet, the Assessing Officer does not wish to recover the demands in the hope that as a law-abiding corporate citizen, the assessee will volunteer to cooperate with the income tax department and the Assessing Officer chooses to wait till suitable clarification is obtained from the Hon’ble High Court to the effect that the stay granted in a writ petition challenging the validity of order declining stay under section 220(6), which is now admittedly infructuous in the light of the appeal having been disposed of by the learned CIT(A), ceases to hold good. This is indeed a welcome approach and reflects the utmost faith in and courtesy with which our taxpayers are being treated. In view of this factual position, we see no need to take a call on merits on this stay petition at this stage. The stay petition is, given the approach adopted by the field authorities, infructuous and must be dismissed as such.

9. We must, however, take this paradigm shift in the approach of the field authorities, with a reasonable degree of circumspection, and, therefore, just in case the field officers change their mind on continuing with such a considerate approach, and to make sure that the assessee is not subjected to coercive recovery measures, without any warning, and thus pre-empting the exercise of powers to grant the stay, if so deemed fit and subject to such conditions as deemed fit, by this Tribunal, we make it clear that before resorting to any coercive measures the Assessing Officer will give at least one week’s notice to the assessee, so that, if so advised, the assessee can avail of the opportunity of approaching this Tribunal.

6. The above order also came up for consideration in the course of proceedings before Their Lordships of Hon’ble jurisdictional High Court, and Their Lordships were pleased to inter alia observe, in the order dated 20th January 2021, as follows:

8. After considering learned counsel for the parties, and on due consideration, we are of the view that since the Tribunal itself has decided to hear the appeal out of turn, the hearing should be expedited. Further, we feel that if the Assessing Officer initiates any recovery measures, he should give at least two weeks’ prior notice to the petitioner to avail its legal remedy.

9. Considering the above, we issue the following directions:

i. Let the Tribunal decide the appeal of the petitioner, being ITA No. 1935/Mum/2020 within three months from today;

ii. If the Assessing Officer resorts to any coercive measures for recovery of dues in the meanwhile, he shall give at least two weeks’ prior noice to the petition to avail its legal remedy;

iii. All contentions are kept open.

10. With the above directions, writ petition is disposed of.

6. So far as the second stay application is concerned, it was dismissed, vide coordinate bench’s order dated 26thFebruary 2021, as infructuous, in the light of the position, as stated, that the learned CIT (DR) had given an assurance to the Tribunal that since adjournment was sought by the respondent, no coercive action will be taken to recover the disputed demands. The Assessing Officer has now proceeded with issuance of garnishee notices, under section 226(3), on bankers of the assessee, for recovering the disputed demands. On 3rd March 2021, however, the assessee filed this stay application seeking, inter alia, a stay on the garnishee proceedings initiated by the Assessing Officer. Vide our interim order dated 3rd March, 2021, ad-interim stay was granted on the operations of the stay order, and the said ad-interim, extend from time to time, order continues to remain in force till the disposal of this stay application.

7. In support of his contention that the assessee has a strong prima facie case, learned counsel submits a complex web of arguments. We will briefly set out only a few points raised by the learned counsel. He submits that the law does not envisage a demand under section 115 O and 115 Q being raised in the absence of an assessment order. The only procedure enabling raising such demands is in the course of assessment under section 143(3) but these proceedings are not even initiated for the relevant assessment year. He has then pointed out the requirements of deemed dividends under section 2(22)(a). It is claimed that the assessee applicant did not distribute anything to its shareholders whereas it is a condition precedent to invoking section 2(22)(a) that there is “distribution by a company of accumulated profits, whether capitalised or not, if such distribution entails the release by the company to its shareholders of all or any part of the assets of the company”. He further points out that the accumulated profits of the assessee company have not been even remotely touched, and that there is no release of company assets or part thereof. Without prejudice to this line of argument, he has further contended that rule 1 1UA, which provides for computation method to arrive at fair market value of shares, will apply for finding out the market value, and, based on 1 1UA formula, the value of assets released at can best be Rs 1,721.61 crores- and not Rs 13,380.69 crores as held by the learned CIT(A). It is pointed out that the assessee was not given fair opportunity of hearing at any stage, and the matter was proceeded with in undue hurry and without proper and unbiased application of mind. It is pointed out that financial services business is an undertaking in terms of the provisions of Section 2(19AA) of the Act. It is also pointed out that the National Company Law Tribunal holds the scheme of merger to be compliant with Section 2(19AA) of the Income Tax Act, 1961, after giving a fair and reasonable opportunity of hearing to the income tax department, it cannot be open to the Assessing Officer to disregard, or otherwise dilute, the binding findings of the demerger scheme. When the income tax department does not avail of the opportunity of presenting its comments before the NCLT, and that is the only opportunity for the income tax department to object to the scheme of merger or demerger- as is said to be accepted by an authority no less than Central Board of Direct Taxes itself, it cannot now be open to the field authorities to decline to give effect to the scheme of merger or demerger, as is finally approved by the NCLT. It is contended that once the scheme is approved by the order of the competent court, revenue authorities cannot overreach or depart from the explicit provisions of the scheme Learned counsel has then taken pains to demonstrate to us, at this stage itself and what he perceives as, glaring fallacies and mistakes in the course adopted by the authorities below. It is then contended that, as is the position admitted by the CBDT itself, the provisions of Section 2(22)(a) donot come into play in the cases of amalgamations. It is also contended that there are two judgments from Hon’ble jurisdictional High Court which show that the assessee has a strong prima facie case, and that was the reason Their Lordships were pleased to grant stay on collection or recovery of the disputed demands during pendency of related appellate proceedings in question. It is submitted that the demand raised on the assessee is so huge, at around Rs 4,000 crores, that it is virtually impossible to pay this kind of tax demand without closing down the business. It is submitted that the assessee has around 20,000 direct employees at various locations all over the country and the payment of impugned demand will render them jobless. When asked whether the assessee is willing to pay any amount, even for part payment of the disputed demands, learned senior counsel stated that his instructions are that in the light of law laid down by Hon’ble Courts above in a large number of cases, including in the case of UTI Mutual Fund Vs ITO [(2013) 31 taxmann.com 222 (Bom)], holding that where the issue has raised a strong prima face case which requires serious consideration as in the present case, a requirement of pre-deposit would itself be a matter of hardship, the assessee is not inclined to make any payment. He then hastens to add that, in any case, it is not possible to pay the outstanding taxes on account of the huge amounts of demands, the financial position of the assessee in the light of his other unavoidable commitments as also the fact that delay in disposal of appeal is only on account of issues in the income tax department. Learned counsel submits that the demands are wholly unsustainable in law and frivolous in nature, and we must not, therefore, ask the assessee to pay these demands, in full or in part, at this stage. Once again he points out that the assessee is doing everything possible to make sure that the appeal is disposed of as soon as possible. There has not been a single occasion, according to him, when the assessee sought the adjournment for any reason whatsoever. Whatever delay is taking place in disposal of appeal is due to factors beyond the control of the assessee, and, at best, on account of non-availability of learned Additional Solicitor General who is to argue the matter. Under these circumstances, the assessee could not be punished for consequences of non-disposal of this appeal. Learned counsel then argued at length, once again spread over more than one session, on the impact of amendment in Section 254(2A) and urged that notwithstanding the said amendment in law, the Tribunal has the powers, as indeed the corresponding duty, to grant unconditional stay, without insisting on any pre-payment of taxes, in deserving cases. For the reasons we will set out in a short while, however, it is not really necessary to deal with these arguments at this stage. Shri Rakesh Garg, learned CIT(DR) and Shri Akhileshwar Sharma, learned Senior Standing Counsel, appear for the respondent. It is submitted that with the amendment in Section 254(2A) vide Finance Act 2020, it is mandatory for the Tribunal to direct the pre-deposit of at least 20% of the disputed demands, or direct furnishing of securities in respect thereof, before any stay can be granted. He argues at length about the legal validity of this amendment and submits that, with this amendment, the powers of the Tribunal, in granting an unconditional stay, without pre-payment requirements, are clearly curtailed. He also submits that the security has to be in the nature of a security which can be quickly realised such as a bank guarantee. It is then further pointed out that the learned CIT(A) has given substantial relief, inasmuch as the demand originally at Rs 5,872.13 crores now stands reduced to Rs 3,786.34 crores, and it cannot thus be said that the CIT(A) has not judiciously examined the matter. It is then pointed out that the assessee is a well-off company with consolidated net worth of over Rs 56,000 crores, and is in a financially sound position. Learned senior standing counsel particularly and repeatedly submits that there is absolutely no ambiguity about the legislative intent, behind amendment in Section 254(2A), and the Income Tax Appellate Tribunal must honour the same. It is submitted that the Income Tax Appellate Tribunal is a creature of the Income Tax Act, 1961, and it cannot, therefore, be open to the Tribunal to question the correctness or otherwise of the provisions of the parent Act itself. It is again pointed out that substantial relief has been granted to the assessee and that it cannot be said that the impugned demands have not been subjected to unbiased judicial scrutiny. A lot of emphasis is placed on the legal nuances about the amendment in Section 254(2A), but, as we have noted a short while ago as well, it is not really necessary to deal with those things at this stage. We are thus urged to direct the assessee to pay at least 20% of the disputed demands. In brief rejoinder, learned senior counsel submits that no issues have been raised about lack of strong prima facie merits, that learned senior counsel as also the learned CIT(DR) have not met the points raised by the assessee on merits. He once again reiterated his elaborate submissions on the point that even after the amendments in the scheme of Section 254 by the Finance Act 2020, the Tribunal is not denuded of the powers to grant blanket stay in deserving cases. Elaborate submissions were then made on the question as to what would constitute a reasonable security, which could range from a plan personal bond to pledge of assets or even bank guarantees in appropriate cases. In response to our question whether any security was offered to the Assessing Officer, he replies in negative. Learned senior counsel, however, fairly submits that the assessee is now willing to give reasonable security of net value of more than Rs 757 crores to suitably protect the interests of the revenue authorities. He offered security of its manufacturing plant at Veraval (Gujarat), with a net value of more than Rs 757 crores, security of shares in Hindalco Industries Ltd and Aditya Birla Fashion Retail Limited having a value exceeding Rs 757 crores, and security of pending refunds aggregating to little less than Rs 400 crores. On the question of bank guarantee, learned counsel, at one stage, pointed out that it is as good as cash payment because the bankers will need to have backup deposits, as margin money, and, as the income tax department will end up encashing the same at the first available opportunity. We are thus urged to grant a stay on the collection of recovery of the tax and interest demands impugned in this appeal, at the most on the condition that the assessee will give an undertaking not to dispose of its plant at Veraval or not to dispose of its shares in Hindalco Industries Limited and Aditya Birla Fashions Limited, and not to insist on issuance of pending refund orders.

8. While we must refrain from making any observations on merits of the case, it would prima facie appear that it is indeed neither a frivolous demand in principle, nor is it a frivolous appeal. Just as illustrations, we may highlight a few points which comes to our mind which need to be examined in detail before taking a call one way or the other. To form a prima facie view that it is an ex facie legally unsustainable demand inasmuch no asset of the applicant assessee have been released to its shareholders, one will have to overlook the possibilities of significant consequences flowing fact that while undertaking has been transferred from the demerged company to the resulting new company, the consideration for this undertaking has flown from the resulting new company to the shareholders of the assessee applicant. When a company transfers an undertaking to another company, and obviously both companies being juridical persons, the consideration for the said undertaking must be given to the company transferring the undertaking. When the payment, whether in cash or in kind, is made to a person other than the transferor of undertaking, and in consideration of transfer of the said undertaking, such a payment can perhaps be received by the other person on behalf of the transferor company. After all right to receive a payment, whether in cash or in kind, could also be said to be an asset of the company, and, looking to the overall arrangements in question, it cannot be categorically concluded out the demerger scheme does not constitute, directly or indirectly, distribution by a company of accumulated profits, whether capitalised or not, if such distribution entails the release by the company to its shareholders of all or any part of the assets of the company. A call will also have to be taken whether the shares allotted to the assessee’s shareholders must come “out of” the accumulated profits, or as long as distribution is “of” accumulated profits- directly or indirectly, the foundational requirements of Section 2(22)(a) will suffice. On the other hand, there are serious legal question as to whether the liability under section 115 ‘O’ can be ascertained during the pendency of regular assessment under section 143(3), and whether it can be open to the income tax authorities to rewrite the demerger scheme approved by the National Company Law Tribunal- particularly when the income tax authorities did not question the same when they were provided of an opportunity to object to the same, and that is an opportunity which is, according to the CBDT, is said to be “only” opportunity available to the income tax authorities to question the merger or demerger scheme. The impact of a large number of judicial precedents, on this issue, will have to be considered and examined in detail. There are also serious legal issues with respect to the manner in which the market value of the shares, allotted to the shareholders of the assessee appellant directly by the resulting new company, is to be ascertained. Just because on a particular day, i.e. the first day on which the listing of new shares is done or the day on which a particular PE investment is done in the resulting new company, is at ‘x’ value, that ‘x’ value does not become fair market price of the shares. In any case, the assessee’s claim that there is no net difference in the position of the shareholders, pre and post demerger, will also have to be examined. There are large number of other issues raised by the assessee, and unless these points are met, the impugned demands cannot be confirmed. The issues raised by the assessee cannot be said to be frivolous either. Taking all these factors into account, we are of the considered view that it is not a fit case of unconditional stay on collection or recovery of the entire impugned demands of tax and interest aggregating to Rs 3,786.34 crores. We are of the considered view that it is a fit case in which the assessee must pay or provide reasonable security for at least 20% of the disputed demand, and this amount, which comes to Rs 757.26 crores, is rounded off to Rs 760 crores. However, we must also take into account the fact that the amount of Rs 760 crores is so substantial an amount, more so in these pandemic days, that such a huge cash outgo would cripple functioning of that business and bring it to a halt at least temporarily, and the fact that the conduct of the assessee, in not seeking any adjournment at all and thus making every effort for expeditious disposal of appeal, has not been wanting at all. While, on one hand, revenue authorities must safeguard and protect their legitimate interests, revenue authorities must take a pragmatic stand with compassion and with larger interest of the nation in mind. The assessee applicant is a well-established business houses, with firm roots, in India, the delay in disposal of appeal is on account of the delay in appointment of, and availability of, counsel by the income tax department, and the assessee has not been evasive or wanting in compliance or in conduct- at least so far as the appellate proceedings before this Tribunal are concerned. The demand in question is on account of genuine differences about tax implications of a wholly internal business restructuring transaction. Considering all these factors, while we have declined an unconditional stay on collection/ recovery of disputed demands, we also consider it fit and proper to permit the assessee to furnish a reasonable security of the value of Rs 760 crores or more, in lieu of making payment of the aforesaid amount, to the satisfaction of the Assessing Officer, and we also deem it fit and proper to direct the Assessing Officer to accept such a security for the time being and keep all the coercive recovery proceedings in abeyance till the disposal of this appeal. As to what will constitute reasonable security is something which is in the exclusive domain of the Assessing Officer, and unless his decision is perverse or grossly unreasonable, obviously there is no occasion for any other authority to interfere in the matter. In case the assessee is aggrieved of the stand taken by the Assessing Officer in this regard, the Assessing Officer will give the assessee a period of two weeks, on the same lines as directed by Hon’ble jurisdictional High Court in assessee’s own case, before taking any recovery measures, so that the assessee can seek legal remedies, if so advised, against the same. The garnishee proceedings already initiated by the Assessing Officer shall also remain suspended, even if not withdrawn by the Assessing Officer, in the meantime.

9. In view of the above discussions, and in view of the fact that, even on merits, we have directed the assessee to furnish securities worth Rs 760 crores, to the satisfaction of the Assessing Officer, which works out to almost 20% of disputed demands anyway, we see no need to deal with the broader question about the impact of amendment in the scheme of Section 254(2A) which is said to restrict powers of the Tribunal in granting the stay, unless the assessee makes a pre-deposit of 20% of the impugned demands or provides security in respect thereof. We have noted that by way of the Finance Act 2020, there is an amendment in in the proposed proviso to Sub-section (2A) of section 254 Act after the words “from the date of such order” the words “subject to the condition that the assessee deposits not less than twenty per cent of the amount of tax, interest, fee, penalty, or any other sum payable under the provisions of this Act, or furnishes security of equal amount in respect thereof” are inserted. In effect thus it provides that the Tribunal “may, after considering the merits of the application made by the assessee, pass an order of stay in any proceedings relating to an appeal filed under sub-section (1) of section 253, for a period not exceeding one hundred and eighty days from the date of such order and the Appellate Tribunal shall dispose of the appeal within the said period of stay specified in that order subject to the condition that the assessee deposits not less  than twenty per cent of the amount of tax, interest, fee, penalty, or any other sum payable under the provisions of this Act, or furnishes security of equal amount in  respect thereof”.That aspect of the matter, however, is wholly academic as on now. It would be relevant only when the Tribunal is, on merits of the stay petition, of the view that the assessee deserves a blanket unconditional stay which is not the case here, and, therefore, so far as the impact of amendment in Section 254(2A) by the Finance Act 2020 is concerned, that is wholly academic in the present context.

10. In view of the above discussions, and bearing in mind entirety of the case, we grant a stay on collection/ recovery of the disputed impugned demands on account of dividend distribution tax, and interest thereon, aggregating to Rs 3786.34 crores on the following conditions:

(a) The assessee shall provide a reasonable security for an amount of Rs 760 crores or more, to the satisfaction of the Assessing Officer, at the earliest possible, and, in no case, not later than two weeks from today; Provided, however, in case the Assessing Officer is, for any reasons whatsoever, not satisfied with the security offered by the assessee, the Assessing Officer shall pass a detailed speaking order in respect of the same, and will give a two week notice to the assessee, on the same lines as was directed by Hon’ble jurisdictional High Court in assesee’s own case (supra), before initiating any coercive recovery proceedings, so that the assessee can pursue appropriate legal remedies against the stand of the Assessing Officer, if so advised.

(b) The assessee will fully cooperate in expeditious disposal of appeal before this Tribunal, and will not seek any adjournment of hearing; and

(c) This stay will be in operation till 180 days from the date of this order, till the order on the related appeal is pronounced or till further orders- whichever is earlier.

11. In the result, the stay application is partly allowed in the terms indicated above. Pronounced in the open court today on the 12th day of April, 2021.

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