While providing relief to Grasim Industries, the Income Tax Appellate Tribunal (ITAT), Mumbai Bench stayed the recovery of demands on account of dividend distribution tax, and interest to the tune of Rs 3786.34 crores.
The assessee applicant, Grasim Industries has sought a stay on collection/ recovery of tax and interest demands aggregating to Rs 3,786.34 crores in respect of the dividend distribution tax, and interest thereon, under section 115O/115Q read with section 2(22)(a) of the Income Tax Act, 1961, on, what is termed as, a deemed dividend distribution of accumulated profits in the course of a demerger transaction which took place in the period relating to assessment year 2018-19.
The impugned demand is raised on the basis of at least three critical assumptions, namely, that the allotment of new shares by the resulting new company, coming into existence on account of demerger of an undertaking of the assessee, to the shareholders of the assessee, constitutes a distribution of accumulated profits by the applicant assessee- under section 2(22)(a); the value of such distribution of accumulated profits, by way of allocation of shares of the resulting new company, is to be computed on the basis of the market value of shares; and the assessee was under an obligation, under section 115 ‘O’, to pay dividend distribution tax in respect of the said deemed dividends in the hands of the shareholders of the assessee applicant company.
The assessee applicant had earlier also moved two stay applications and both these stay petitions were dismissed as infructuous.
The coram headed by Vice President Pramod Kumar directed the assessee to furnish securities worth Rs 760 crores, to the satisfaction of the Assessing Officer, which works out to almost 20% of disputed demands anyway and saw no need to deal with the broader question about the impact of amendment in the scheme of Section 254(2A) which is said to restrict powers of the Tribunal in granting the stay, unless the assessee makes a pre-deposit of 20% of the impugned demands or provides security in respect thereof.
The ITAT granted a stay on collection/ recovery of the disputed impugned demands on account of dividend distribution tax, and interest thereon, aggregating to Rs 3786.34 crores on the three conditions.
Firstly, the assessee shall provide reasonable security for a number of Rs 760 crores or more, to the satisfaction of the Assessing Officer, at the earliest possible, and, in no case, not later than two weeks from today; Provided, however, in case the Assessing Officer is, for any reasons whatsoever, not satisfied with the security offered by the assessee, the Assessing Officer shall pass a detailed speaking order in respect of the same, and will give a two-week notice to the assessee, on the same lines as was directed by Hon’ble jurisdictional High Court in assessee’s own case, before initiating any coercive recovery proceedings, so that the assessee can pursue appropriate legal remedies against the stand of the Assessing Officer if so advised.
Secondly, the assessee will fully cooperate in expeditious disposal of appeal before this Tribunal, and will not seek any adjournment of hearing; and
Thirdly, this stay will be in operation till 180 days from the date of this order, till the order on the related appeal is pronounced or till further orders- whichever is earlier.
Subscribe Taxscan Premium to view the Judgment
Support our journalism by subscribing to Taxscan AdFree. We welcome your comments at info@taxscan.in
