M/S WELCOME FOODS LIMITED, vs. THE PRINCIPAL COMMISSIONER OF INCOME-TAX

WP/13729/2023HC KarnatakaKAHC01032333202326 July 2023Author: S SUNIL DUTT YADAV5 pages

AI SummaryPartly Allowed

What did the High Court hold?

The High Court modified the order of the Principal Commissioner of Income-Tax (Central), Bengaluru, dated 23.06.2023. The court directed that there would be a stay of the balance disputed demand until the disposal of the appeal by the Commissioner of Income-Tax (Appeals), subject to the following conditions: 7.5% of the disputed demand, after deducting the Rs. 19,07,890/- already paid, amounting to Rs. 52,46,688/-, is to be paid in eight equal installments, with the first installment due by July 30, 2023, and subsequent installments on or before the 30th of each succeeding month. Furthermore, the remaining 12.5% of the disputed demand, totaling Rs. 1,19,24,299/-, is to be secured by a personal guarantee of one of the Directors of the company, to be filed with the authority within two weeks of receiving the certified copy of the order, accompanied by official records detailing the Director's standing in the company. The court clarified that these observations were solely for the purpose of disposing of the stay application and not conclusive findings on the merits of the case. All contentions on the merits of the appeal were kept open.

What were the facts?

The petitioner, M/s. Welcome Foods Limited, filed a writ petition before the High Court of Karnataka challenging an order dated 23.06.2023 passed by the Principal Commissioner of Income-Tax (Central), Bengaluru. This order had disposed of the petitioner's application for stay by imposing conditions, including the deposit of 20% of the disputed amount and payment of the balance in eight equal installments. The petitioner contended that its financial position was dire and sought relaxation of these conditions. During the proceedings, the petitioner proposed revised conditions for the stay.

What were the issues?

1. Whether the conditions imposed by the Principal Commissioner of Income-Tax for granting a stay on the disputed demand are appropriate, considering the petitioner's financial condition? Assessee's Contentions: The petitioner argued that its financial position was dire and required relaxation of the stay conditions. The petitioner proposed a revised payment plan, agreeing to pay 7.5% of the disputed demand (Rs. 71,54,579/-) less the amount already paid (Rs. 19,07,890/-), resulting in a balance of Rs. 52,46,688/- to be paid in 8 equal monthly installments of Rs. 6,55,836/-. Additionally, the petitioner agreed to provide a personal guarantee from one of the Directors for the balance 12.5% of the disputed demand (Rs. 1,19,24,299/-). Revenue's Contentions: The judgment does not record any specific contentions made by the revenue during the proceedings before the High Court. The court considered the proposal by the assessee to take care of the interest of the revenue.

AI-generated summary — verify with the full judgment below

Before: SMT. HEMAMALINI,

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 26TH DAY OF JULY, 2023 BEFORE THE HON'BLE MR JUSTICE S SUNIL DUTT YADAV WRIT PETITION NO. 13729 OF 2023 (T-IT) BETWEEN: M/S. WELCOME FOODS LIMITED, REPRESENTED BY ITS DIRECTOR, SMT. HEMAMALINI, W/O. SRI. ANAND, AGED ABOUT 53 YEARS, GROUND FLOOR, NO. 249, 14TH CROSS STREET, 2ND BLOCK, R.T. NAGAR, BANGALORE - 560 032. COMMUNICATION ADDRESS: NO.2/1, NORTH CRESCENT ROAD, T. NAGAR, CHENNAI - 600 017. (A LIMITED COMPANY UNDER REGISTERED COMPANIES ACT 1956) …PETITIONER (BY SRI. ANNAMALAI S., ADVOCATE) AND: 1. THE PRINCIPAL COMMISSIONER OF INCOME-TAX (CENTRAL), BENGALURU. CENTRAL REVENUE BUILDING, QUEENS ROAD, BENGALURU - 560 001. Digitally signed by LAKSHMINARAYAN N Location: High Court of Karnataka

THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 1(2), BENGALURU. CENTRAL REVENUE BUILDING, QUEENS ROAD, BENGALURU - 560 001. …RESPONDENTS (BY SRI. M. DILIP, ADVOCATE)

THIS W.P IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER PASSED BY THE R-1 VIDE DIN NO.ITBA/COM/M/17/2023- 24/1053906529(1) DATED 23-6-2023 HEREIN ENCLOSED AND MARKED AS ANNEXURE-A AND ETC.,

THIS PETITION, COMING ON FOR PRELIMINARY HEARING, THIS DAY, THE COURT MADE THE FOLLOWING: ORDER The petitioner has sought for issuance of writ in the nature of certiorari and to quash the Order dated 23.06.2023 at Annexure-A passed by respondent No.1, whereby the application of stay was disposed off by imposing conditions to deposit 20% of the disputed

amount and balance amount was required to be paid in eight equal instalments. 2. The learned counsel for the petitioner submits that the petitioners’ financial position being in dire state, the petitioner requires some indulgence and relaxation in the condition to be imposed. 3. The learned counsel for the petitioner during the course of the proceedings has submitted that the order at Annexure-A can be revoked by imposing the following conditions: "Agreed by the Assessee: 7.5% of the disputed demand Less : Payment already made Balance Amount to be paid - Rs.71,54,579/- - Rs.19,07,890/- - Rs.52,46,688/- In 8 equal instalments. Each instalment - Rs. 6,55,836/- Balance 12.5% of the disputed demand - personal Guarantee by the one of the Director of the Company. - Rs. 1,19,24,299/-"

After hearing the matter for sometime, considering that the present proceedings are only against the order of stay that is granted and the proposal by the assessee would take care of interest of the Revenue, the matter could be disposed off by directing that there would be stay of the balance disputed demand till disposal of appeal by the Commissioner of Income Tax (Appeals) subject to the payment as below: a) 7.5% of the dispute demand after deducting of Rs.19,07,890/- which would be Rs.52,46,688/- to be paid in the eight equal instalments and each instalment to be paid on 30th of each month. 5. Accordingly, the first of the instalment will be paid by 30th July, 2023 and the remaining balance to be paid in seven equal instalments and each instalment to be paid on or before 30th of each month. 6. As regards, the balance of 12.5% which would make upto 20%, the personal guarantee of one of the Directors of the Company to be filed with the authority

within a period of two weeks after receipt of certified copy of the order. The details of the Director and its standing in the company must be accompanied by official records. 7. Accordingly, the order at Annexure-A is modified in terms of the order made above. 8. Needless to state that the observations made in the order at Annexure-A are made only for the purpose of disposal of the application for stay and cannot be taken to be a conclusive finding as regards to merits of the matter. 9. Accordingly, the petition is disposed off. All contentions are kept open. Sd/- JUDGE MCR List No.: 1 Sl No.: 24

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