IT tribunal stays Rs 100 crore tax demand against Tata Education and Development Trusts

IT tribunal stays Rs 100 crore tax demand against Tata Education and Development Trusts

Arguing the stay Tata Education and Development Trusts said that amendment, that puts a deposit condition before ITAT grants a stay, is "directive and not mandatory"

Tata Education and Development Trusts is one of the entities of Tata Trusts, which is a majority stakeholder in the group's holding company Tata Sons

The Income-Tax Appellate Tribunal (ITAT) on Thursday stayed a tax demand against Tata Education and Development Trust.

The Income-Tax department last year raised the Rs 100 crore tax demand owing to the annulment of registration on past exempted income. This was part of a bigger case involving cancellation of registration of six of Tata Trusts' entities with an estimated tax implication of Rs 10,000-12,000 crore.

Tata Education and Development Trusts is one of the entities of Tata Trusts, which is a majority stakeholder in the group's holding company Tata Sons.

While granting stay on Tata Education, ITAT said that the entity will have to file "an undertaking setting out investments of not less than Rs 99.75 crore which it will not encash till the application is disposed off."

However, the order by ITAT abstained from making any observations on legal implications of the new provision regarding the powers of the Tribunal to grant a stay.

The appellate tribunal has referred the matter to a larger bench to take a call on whether the amendment also limiting tribunal powers to grant stays is obligatory or just a directive and what type of assets should be produced by an assessee before the ITAT can grant them a stay.

Meanwhile, the matter has been tentatively listed for hearing on July 6.

Thursday's (June 17) order arises out of a new tax ruling {an amendment in the provision to Section 254 (A)} requiring a taxpayer to deposit 20% of the tax demand or produce security equal to the tax demand before ITAT grants a stay. The ruling came into effect on April 1.

Arguing the stay Tata Education said that amendment, that puts a deposit condition before ITAT grants a stay, is "directive and not mandatory". The entity contested that holding the provision as obligatory would evidently cause "incongruous legal position... a situation which is completely arbitrary, unconstitutional and contrary to the well settled scheme of law."

Identifying questions on whether the rule change has any effect on appeals filed before April 1, 2020, when the amendment came into force, ITAT said, "On such important pan-India issues of far-reaching consequence, it is desirable to have the benefit of arguments from stakeholders in different parts of the country."