Landmark Judgements of Supreme Court on Section Section 254(2A) [Grant of stay by Tribunal on Stay applications]

ITAT can grant extension of stay of demand beyond 365 days in deserving cases; Supreme Court dismissed SLP

Power of Appellate Tribunal to grant stay - SLP dismissed against High Court’s ruling that where delay in disposal of appeal is not attributable to assessee in any manner, Tribunal can grant extension of stay of demand beyond 365 days in deserving cases

High Court by impugned order held that where delay in disposal of appeal is not attributable to assessee in any manner, Tribunal can grant extension of stay of demand beyond 365 days in deserving cases. Special Leave Petition filed against impugned order was to be dismissed - [In favour of assessee] (Related Assessment year : 2012-13) – [PCIT v. Honda Motorcycle and Scooter India (P) Ltd. (2021) 129 taxmann.com 94 (SC)]

Third proviso to Section 254(2A), introduced by Finance Act, 2008, resulting in automatic vacation of a stay upon expiry of 365 days even if delay in disposing of appeal is not attributable to assessee, would be both arbitrary and discriminatory and, therefore, liable to be struck down as offending Article 14 of Constitution of India

Since the object of the third proviso to Section 254(2A) is the automatic vacation of a stay that has been granted on the completion of 365 days, whether or not the assessee is responsible for the delay caused in hearing the appeal, such object being itself discriminatory is liable to be struck down as violating Article 14 of the Constitution of India. Also, the said proviso would result in the automatic vacation of a stay upon the expiry of 365 days even if the Appellate Tribunal could not take up the appeal in time for no fault of the assessee. Further, vacation of stay in favour of the revenue would ensue even if the revenue is itself responsible for the delay in hearing the appeal. In this sense, the said proviso is also manifestly arbitrary being a provision which is capricious, irrational and disproportionate so far as the assessee is concerned.

Consequently, the third proviso to Section 254(2A) will now be read without the word “even” and the words “is not” after the words “delay in disposing of the appeal”. Any order of stay shall stand vacated after the expiry of the period or periods mentioned in the Section only if the delay in disposing of the appeal is attributable to the assessee. - [DCIT v. Pepsi Foods Ltd. (2021) 126 taxmann.com 69 (SC)]

High Court concluded that wherever appeal could not be decided by Tribunal due to pressure of pendency of cases and delay in disposal of appeal was not attributable to assessee in any manner, interim protection of stay could continue beyond 365 days in deserving cases, SLP filed against said decision was to be dismissed

Powers of (Power to Stay) - In course of assessment, TPO made certain transfer pricing adjustment to assessee’s ALP - Assessee filed appeal before Tribunal - During pendency of appellate proceedings, assessee filed an application for stay of tax demand. Assessee’s application was allowed. Thereupon, stay was extended from time-to-time. Lastly application was allowed and stay was extended for six months or