Case Note & Summary
The Petitioner, Slum Rehabilitation Authority, a statutory body under the Maharashtra Slum Areas (Improvement, Clearance and Redevelopment) Act, 1971, filed a writ petition challenging orders dated 30 May 2014 and 25 July 2014 passed by the Assessing Officer and Director of Income Tax Exemption respectively, which rejected its application for stay of demand of Rs.53.71 Crores arising from an assessment order dated 19 February 2014 for Assessment Year 2011-12. The Petitioner had been claiming exemption under Section 11 of the Income Tax Act, 1961 from Assessment Year 2003-04 onwards. For earlier years, the CIT(A) had upheld the exemption, and the Tribunal had dismissed the Revenue's appeals for Assessment Years 2005-06, 2007-08, and 2008-09, holding that the Petitioner's activities fell within the definition of 'charitable purpose' under Section 2(15). However, by Finance (No.2) Act, 2009, a proviso was added to Section 2(15) w.e.f. 1 April 2009, which excluded advancement of any other object of general public utility if it involved carrying on of any activity for profit. The Assessing Officer denied exemption for AY 2011-12 on the ground that the Petitioner's activities were for profit. The Petitioner appealed to CIT(A) and sought stay of demand. The stay was rejected on the ground that the Petitioner had not made out a prima facie case. The High Court held that the Petitioner had a strong prima facie case because the Tribunal had consistently held that the Petitioner's predominant object was not profit but providing residence to slum dwellers without profit motive. The proviso to Section 2(15) would not apply as the Petitioner's activities were not for profit. The balance of convenience was in favor of the Petitioner, and irreparable loss would be caused if the demand was enforced. The Court directed the Respondents to stay the demand of Rs.53.71 Crores till the disposal of the appeal by CIT(A), subject to the Petitioner furnishing security to the satisfaction of the Assessing Officer within four weeks.
Headnote
A) Income Tax - Stay of Demand - Prima Facie Case - Section 11, Section 2(15) Income Tax Act, 1961 - Petitioner, a statutory slum rehabilitation authority, challenged rejection of stay of demand pending appeal - Court held that Petitioner had a strong prima facie case for exemption under Section 11 as its activities were charitable under Section 2(15) - The proviso added by Finance (No.2) Act, 2009 did not apply as the predominant object was not profit - Balance of convenience in favor of Petitioner and irreparable loss would be caused if stay not granted - Directed stay of demand till disposal of appeal by CIT(A) (Paras 2-10).
Issue of Consideration
Whether the Petitioner is entitled to stay of demand of Rs.53.71 Crores pending appeal before CIT(A), considering the prima facie case for exemption under Section 11 of the Income Tax Act, 1961.
Final Decision
The Court allowed the petition and directed the Respondents to stay the demand of Rs.53.71 Crores till the disposal of the appeal by CIT(A), subject to the Petitioner furnishing security to the satisfaction of the Assessing Officer within four weeks.
Law Points
- Stay of demand
- prima facie case
- balance of convenience
- irreparable loss
- Section 11 exemption
- charitable purpose
- Section 2(15) proviso
- slum rehabilitation
