The Delhi Bench of the Income-Tax Appellate Tribunal (‘Tribunal’) on May 18, 2020, in the matter of M/s Steria India Limited v. the Additional Commissioner of Income Tax[1], considered an application for extension of interim orders granted previously by the Tribunal (‘Interim Orders’), in ongoing recovery proceedings involving M/s Steria India Limited (‘Assessee’). The Tribunal heard this application via video conferencing and ordered an extension of the Interim Orders up to the date of hearing of the quantum appeals filed by the Assessee (‘Steria Order’). A brief analysis of the Steria Order is set out below.

A.  Brief Facts:

The appeals under consideration were filed by the Assessee against various transfer pricing and corporate tax additions imposed on it. The Assessee had previously preferred applications for a stay on the disputed outstanding demand in this regard, which was granted by the Tribunal and last extended on November 08, 2019 for a period of six months, i.e. till April 12, 2020.

In light of the nationwide lockdown on account of the COVID-19 pandemic (‘Lockdown’), the stay of demand stood extended up to May 15, 2020 by virtue of the order of the Hon’ble Supreme Court dated March 23, 2020[2], extending all limitations expiring during Lockdown; and the orders of the Hon’ble Delhi High Court dated March 25, 2020 and May 15, 2020, extending all interim orders/stay orders subsisting on March 16, 2020, up to May 15, 2020 and June 15, 2020, respectively (collectively ‘Extension Orders’). In this background, the Assessee approached the Tribunal seeking further extension of the interim protection granted to it, beyond May 15, 2020.

B.  Decision of the Tribunal:

The Tribunal, referring to the Extension Orders, extended the Interim Orders passed by it, to June 17, 2020 i.e. the next date of hearing of the quantum appeals in the case of the Assessee. The Tribunal followed this decision with another order granting a similar extension of stay in the case of Srimati Sangeeta Sawhney[3], pronounced subsequently.

C.  Impact on Power of the Tribunal:

The Finance Act, 2020 has brought in certain retrograde amendments to Section 254 of the Income-Tax Act, 1961, impeaching upon the discretion and powers of the Tribunal to make interim orders in appeals pending before it for disposal (‘Finance Act Amendments’). The Finance Act Amendments, effective from April 01, 2020 impose a: (i) pre-condition of minimum deposit of 20% of the disputed demands, including in cases of extension of interim orders earlier granted by the Tribunal; and (ii) cap on the aggregate period of stay orders, to 365 days.

Given the fact that the Steria matter was, in all likelihood, a case of extension beyond 365 days, the order would have been a fit precedent for other cases if the capping of the extension beyond 365 days was considered and dealt with and the judgment of the Delhi High Court in Pepsi Foods Private Limited v. Additional Commissioner of Income Tax^[4], was followed. However, given that the ruling of the Tribunal in this case is borne out of extraordinary circumstances, it is peculiar to the existing phase of COVID-19 and may not necessarily have persuasive value in challenging the above fetters on the stay granting powers of the Tribunal. This is more so because the Tribunal in this decision has not considered the amendment to Section 254 of the Income-Tax Act, 1961 and has merely relied on the orders of the Hon’ble Delhi High Court as well as the Hon’ble Supreme Court while extending the Interim Orders.

[1] ITA Nos.741/Del/2017, 3992/Del/2017 & 5745/Del/2018 dated May18,2020

[2] Suo Moto Writ Petition No. 3/2020.

[3] SA No. 228/Del/2020, dated May 19, 2020.

[4] (2015) 376 ITR 87.