In tax dispute cases, pay less to get a stay – The Hindu BusinessLine

Getting a stay on proceedings in the event of a tax dispute could cost less now. The Supreme Court has ruled that in case of a dispute, tax authorities can accept deposits of less than 20 per cent of the demand amount to stay proceedings.

In July 2017, the Central Board of Direct Taxes had issued a circular stating that in cases where the outstanding demand is disputed before the Commissioner of Income-Tax (Appeals), the Assessing Officer shall grant a stay on the demand till the case is disposed of, on payment of 20 per cent of the disputed demand. Earlier, this number was pegged at 15 per cent of the disputed amount.

“This will make the life of tax-payers easier while seeking a ‘complete stay’ from tax authorities based on the merits of the case,” said Sanjay Sanghvi, Partner, Khaitan & Co. “Higher-ups in the tax department will likely be more appreciative of the merits of a case where grant of ‘full stay’, or less than 20 per cent deposit, is pleaded on behalf of a tax-payer.”

Neha Malhotra, Executive Director (Taxation), Nangia & Co, said the ruling would give tax authorities more discretion in finalising the deposit order. “The deposit order can be for less than 20 per cent if the facts so require. The court has held that an Office Memorandum is not binding on a Commissioner, a quasi-judicial authority,” she said.

The ruling came in the case of ‘Principal Commissioner of Income Tax vs LG Electronics India Private Ltd’, in which the Supreme Court gave credence to the argument that an administrative circular will not “fetter” the Commissioner since it is a quasi-judicial authority.

“…in all cases like the present, it will be open to the authorities, on the facts of individual cases, to grant deposit orders of a lesser amount than 20 per cent, pending appeal,” the Court said.

The matter pertains to a tax demand of ₹32 crore against LG Electronics for the Assessment Year 2007-08, which had to be paid by July 31, 2017. The company had filed an appeal with the CIT and an application for stay of the recovery proceedings.

The Principal Commissioner of Income Tax had asked LG Electronics India to pay ₹6.4 crore, or 20 per cent of the tax demand of ₹32 crore by August 11, 2017 to get a stay of the demand up to December 15, 2017, pending the company’s appeal before the Commissioner of Income-Tax.

via In tax dispute cases, pay less to get a stay – The Hindu BusinessLine