Per D. Karunakara Rao AM The assessee filed the present Stay Application requesting for grant of stay till the disposal of their appeal before the Tribunal. In the application, the assessee mentioned about the lack of funds for payment of outstanding demand and likely deletion of the additions by the Tribunal.

2. In the Application, the assessee mentioned that the outstanding demand including the interest segment works out to Rs. 6,21,97,057/- (rounded off to Rs 6.22 cr) for A.Y 2006-07. Assessee also narrated various facts about him. Some of the facts are that the assessee trust is M/s Sinhgad Technical Educational Society (STES) and engaged in educational activities as evident from the documents filed before us. There was search action u/s 132 of the Act in the case of Shri M.N. Navale, the president of Sinhgad Technical Educational Society (STES) and also a survey action u/s 133A on the assessee too. These actions resulted in the discovery of incriminating papers and entries implicating the trust. This is the case where the CIT withdrew the registration is granted u/s. 12AA of the Act. This decision of the CIT led the AO to deny the benefits of section 11 of the Act to the trust in respect of its income for violation of the provisions of section 13(1)(c) and 13(1)(d) of the Act. However, on appeal by the assessee SA No. 30/PN/10 Arising out of ITA No. 320/PN/10 A.Y 2006-07 before the Honble ITAT, the withdrawal of the said registration u/s 12AA of the Act was restored the registration on technical grounds stating that the registration granted u/s 12A cannot be withdrawn u/s the provisions of section 12AA of the Act, which is a subsequent piece of legislation. Tribunal did not go in the merits while restoring the registration. Thus, the assessee got back its registration. During the assessment / reassessment proceedings u/s 147 /153C/143(3) of the Act, as the case may be, the matters was referred to special audit u/s 142A of the Income Tax Act. Assessment was completed u/s 153C r w s 143(3) of the Act and held the assessee is not eligible for exemption u/s 11 of the Act and raised the demand. During the first appellate proceedings itself, the recovery proceedings were commenced and the assessee filed a Writ Petition before the Honble High Court of Bombay and the demand in question was stayed subjected certain conditions ie filing of Bank Guarantee for Rs 1.5 crores. The revenue did not invoke the Bank guarantee after the demand was confirmed by the CIT(A) for the reasons better known to the revenue. Subsequently, the Bank Guarantee expired and the same was not renewed despite the requests of the revenue. In these circumstances, the assessee requested the revenue to stay the demand till the appeals before the Tribunal is decided and the said request was rejected by the authorities of the Department. Further, the revenue stated resorting to the recovery methods as per the provisions of the Act. In these circumstances, the assessee filed the present Stay Petition.

3. The Contents of the said Petition are reproduced as follows. In the SA assessee traced the developments leading to the creation of demand of. The relevant prayer is reproduced as under:- I, Maruti N. Navale, President of Sinhgad Technical Education Society, Pune state and confirm on oath as under:-

1. That the Assessee Officer passed the assessment u/s. 143(3) r.w.s 153C by his order dated 07/08/2008. The Assessing Officer has denied the exemption claim u/s. 11 basically on the ground that appellants registration granted u/s. 12A(a) was cancelled by the learned CIT (Central) and further on the ground that the petitioner had contravened the provisions of section 13(1)(c) of the properties taken on lease and belonging to Shri M.N. Navale, President of the appellant. On denying the exemption the Assessing Officer has further referred to the search action taken u/s. 132 on Shri M.N. Navale at his residence on 20/07/2005 and in the course of which the search party found and seized certain loose papers. According to the Assessing Officer the contents of these loose papers represent the donations collected by the petitioner while granting the admissions to the various courses. The Assessing Officer worked out such an amount of donations at Rs. 22,45,06,500/- and made the addition to the returned income treating the same as undisclosed income. Simultaneously, on the same date i.e. 20/07/2005 the survey action was conducted at the office of the petitioner and the survey party did not find any incriminating documents as well as any defects in the books of accounts maintained. Hence there was no seizure or even impounding of books of accounts. SA No. 30/PN/10 Arising out of ITA No. 320/PN/10 A.Y 2006-07 The learned CIT(Central) referring to the loose papers found and seized in an action u/s. 132 from the residence of Mr. M.N. Navale interpreted the contents of these loose papers as representing the collection of donations by the petitioner while granting the admissions. The CIT(Central) cancelled the registration of the petitioner granted u/s. 12A(a) by invoking the provision of section 1wAA(3) of the Act. The Assessing Officer before completion of the assessment u/s. 143(3) r.w.s. 153C and appointed the Special Auditor u/s. 142(2A) of the Act. The Assessing Officer, in a terms of reference for Special Audit informed the Special Auditor that the appellants registration u/s. 12AA(3) has been cancelled and further directed him to carry out necessary examination and give report on the same. Finally the Assessing Officer assessed the income at Rs. 34,79,98,520/- by his Assessment Order dated 07/08/2008.

2. The Honble ITAT Pune Bench vide its order dated 19/09/2008 restored the registration granted u/s. 12A(a).

3. The learned CIT(A)-II was informed that the ground taken by the Assessing Officer that appellants registration u/s. 12A(a) has been cancelled and that disentitles the petitioner to claim the exemption u/s. 11, is no more a valid ground because soon thereafter the Honourabe Tribunal Pune has restored the petitioners registration. Nevertheless the ground which was to be explained and defended was only with respect to a contravention of provision of section 13(1)(c) as, according to the Assessing Officer, unreasonable and excessive rent has been paid on the properties belonging to Shri M.N. Navale. The Assessing Officer also su-moto informed the learned CIT(A) that the petitioner has also contravened the provision of section 13(1)(d) which he had not considered while passing the assessment order. It includes the acquisitions of shares of Co-operative Bank, Public Ltd. Co., various deposits and advances to other educational institutions. The petitioner vehemently opposed to this action of the Assessing Officer contending that he cannot improve his Assessment Order in such a manner and particularly because there was no reason or cause for the learned CIT(A) to make any enquiry in this respect and obviously the learned CIT(A) never asked the Assessing Officer to re-examine and find out whether there is such a contravention of section 13(1)(d). The petitioner in the appeal proceedings explained and proved that rent paid is not reasonable and excessive and secondly on merit also contended that acquisition of shares of Co-operative Bank and of Public Ltd. Co., deposits and advances made to other educational institutions do not contravene the provisions of section 13(1)(d). The CIT(A) finally passed the order upholding the denial of exemption u/s. 11 by invoking the provisions of section 13(1)(c) and 13(1)(d). The CIT(A) however allowed our contention made without prejudice to our main ground that disallowance/ additions made by the Assessing Officer of interest on borrowings u/s. 36(1)(iii) of the Act is not correct and directed the Assessing Officer to verify this appeal and revise the claim of depreciation and the ultimate assessable income.

4. The Assessing Officer has given effect to the order of the learned CIT(A)-II and revised the assessed income at Rs. 24,26,09,153/- and has raised the demand of Rs. 10,76,66,251/-. However while raising this demand the Assessing Officer has erred in not setting off the unabsorbed assessed deficits of Assessment Years 2004-05 and 2005-

06. This aspect was brought to the notice of the Assessing Officer and petitioner requested the Assessing Officer to rectify and arrive at correct assessable income. This rectification application is allowed and that has resulted into the reduction of assessable income at Rs. 14,02,92,967/- and the revised demand of tax of Rs. 6,21,97,057/-. The Assessing Officer however did not rectify the assessed income by further deducting Rs. 10,15,22,340/- which amount has been added in the assessment made of Shri M.N. Navale for A.Y 2006-07 on the ground that it is siphoned off by him from the donations collected by the petitioner. This addition has been made on substantive basis. It was urged by the petitioner that this sum is taxed twice, both in the hand of the petitioner and Shri M.N. Navale. Therefore this sum is also required to be deducted from the assessable income of A.Y 2006-07. This will leave Rs. 3,87,70,627/- (140292967 101522340) as the assessed income tax payable around Rs. 1,71,87,019/-.

5. The petitioner has filed the appeal before this Honble ITAT on 24/02/2010 challenging the order of the CIT(A)-II.

6. The petitioner made an application to the Assessing Officer for granting the stay for the demand raised. The Assessing Officer rejected our request for granting the stay. SA No. 30/PN/10 Arising out of ITA No. 320/PN/10 A.Y 2006-07 The application is further moved before the learned CIT(C) who too rejected our request of granting the stay till the disposal of our appeal by the Honble ITAT.

7. The petitioner has no liquid assets and in fact is indebted to the various banks to the tune of Rs. 300 Crores. It has not been able to pay the salaries of the professors and the staff etc. If the stay is denied the petitioner will face the great hardships that may have serious impact on the running of the institutions and it will be quite detrimental to the career of around 44,000 students. The financial crunch is evidenced by the latest financial position.

8. On merit, both factual and legal, the petitioner strongly believes that prima-facie the denial of exemption is likely to be not acceptable by the Honble ITAT as the petitioner would prove that the rent paid is not excessive and unreasonable and that investments in Co-operative Bank, Public Ltd. Co. and Deposits by reason of peculiar facts necessitating such acquisition of shares and deposits it would be finally held that there is no contravention of section 13(1)(d) either. Finally the petitioner also believes that the addition made of Rs. 22,45,06,500/- will also be found to be not supported by any factual evidences and would be deleted by the Honble ITAT. Therefore don the facts and in the circumstances of the case explained above the balance of convenience tilts in favour of the petitioner.

9. The petitioner therefore prays that the Honble Tribunal Pune Bench be just and considerate in granting the stay till the disposal of our appeal and the hearing of the appeal may also be taken out of turn and early. The undersigned for and on behalf of the petitioner Sinhagad Technical Education Society further affirms that all that whatever is stated above is true and correct to the best of his knowledge.

4. During the proceedings before us, in tune with the written submission made in para 16 and 17 of the Stay Petitions, the assessees counsel narrated made various submissions. They are: (i) it is a fact that the assessee has not paid any amount till date; (ii) regarding the financial position, which mentions that the total liquidity of cash is 6.68 crores, the amounts payable is as 37.81cr and the amounts receivable from the assessee is RS 47.53 cr. Details as per the assessee are as under: Particulars Rs. In Lakh Liquidity Position Cash in Hand Balances in Current Accounts 14.00 654.45 Total 668.45 Amounts Payable Arrears of Salaries Payable Other Revenue Expenses Payable Sundry Creditors Advances Payable against purchase orders 383.60 1150.52 2218.79 28.21 Total 3781.12 Fixed Deposits In the sole name of the Society & against which no overdrafts Or Bank Guarantee is obtained 15.49 Amounts Receivable Fees receivable from Students Fees receivable from Social Welfare Dept. 2435.14 2318.39 Total 4753.53 SA No. 30/PN/10 Arising out of ITA No. 320/PN/10 A.Y 2006-07

(iii) Ld Counsel mentioned that the undisputed demand works out to Rs Rs. 1,71,87,019/- only if the assessee is given a set off of the sum of Rs 10,15,22,340/- as per the discussion given in para 4 of its stay application reproduced above. (iv) Further, the counsel referred to the judgment of the Bombay High Court in the said writ petition and mentioned that the Honble High Court considered the demand pending by the time of first appellate proceedings and ordered for providing the Bank Guarantee for the sum of Rs 1.5 crores only.

(v) In this regard, the assessees counsel made statement at bar stating that the assessee is a ready for providing bank guarantee for the 10% of the total demand of Rs 6.22 crores. (vi) Ld counsel also requested for grant of clear stay of recovery and collection of demand in arrears as same is the need of the hour and the financial institutions insists for such clear stay for release of funds which are urgently required for smooth running the institutions. (vii) Ld Counsel demonstrated that the need for maintaining of the fixed deposit with the statutory authorities, bank guarantees, etc and mentioned that assessee has to run educational activities and they shall come grinding halt in case the said FDs are encashed by the revenue. (viii) Mr Joshi, Ld counsel also mentioned that the assessee has the cash balance in the current account at Rs. 6.68 crores as on 15.9.10 and meanwhile, the said balance might have been partly used too, (ix) finally; Ld Counsel also mentioned that he has no mandate to offer towards the payment of impugned arrears. On merits, it is submitted that the core issue of denial of deduction of exemption u/s 11 of the Act merely because of alleged violation of the provisions of section 13(1)(c)/(d) is nor proper and he relied on various citation in this regard.

5. On the other hand, in principle, learned DR strongly opposed to grant of stay to the assessee. Relying on the financials provided by the assessee, the DR argued stating that the amounts payable by the assessee is as 37.81cr and the amounts receivable by the assessee is RS 47.53 cr and therefore, the receivable is on the higher side. In view of the fact assessee is an educational institutional trust and the admissions, which would provide lot of cash to the assessee can be the source for payment of the tax arrears. DR mentioned that the Government needs money to run the governmental machineries and the assessee is under obligation to clear the arrears of the State first and the others later. Regarding the merits of the additions, the CIT DR for the revenue mentioned that the said judgments relied upon by the assessee are distinguishable as the denial of SA No. 30/PN/10 Arising out of ITA No. 320/PN/10 A.Y 2006-07 exemption is due to the factual reasoning the assessee violated the provisions of section 13(1)(c) in matters of rentals and also invested in shares against the express provisions of section 13(1)(d) and such investment is not in accordance with the forms or modes specified in sub section (5) of section 11 of the Act. As per the Revenue that the contractual obligation to make investment for availing the loan is also to be avoided in order not to be a defaulter under the provisions of section 13(1)(d) of the Act. Further, the DR mentioned that the said writ petition was filed during the pendency of first appellate proceedings and High Court ordered for providing the Bank guarantee for Rs 1.5 crores and now the demand is confirmed by the CIT(A), the assessee needs to clear at least 50% of the arrears immediately. DR is of the view that the it is expected that the revenue shall succeed in the appeal as there is evidence to prove the violation of the provisions of section 13(1)(c) of the Act where the assessees trustee is alleged of siphoning of the assessees funds. Finally, the DR insists that the assessees stay of recovery must not be allowed and the assessee must be directed to pay the whole of the demand immediately.

6. We have heard both the parties and perused the paperbook / documents filed before us. From the perusal of the same, we have noticed that (i) there is no dispute on the figures relating to the quantum of pending arrears at this point of time and the same is 6.22 crores; however, the clear undisputed demand is Rs 1.71 crores and details are given above. (ii) there is no direct judicial pronouncement to cover the core disputes of the appeal ie issue of applicability of section 13(1)(d)/13(1)(c) of the Act; (iii) trust has need for funds and also need for raising the resources for meeting the overheads and others; (iv) the charitable purpose of the assessee and registration related disputes are finally decided in favour of the assessee; (v) the siphoning of the assessees funds by the prohibited persons specified in section 13(3) of the Act in violation of the provisions of section 13(1)(c) (for AYs 2005-06 & 2006-07) and the volition of the provisions of section 13(1)(d) of the Act are the core issues and decisions of the Tribunal in this regard on merits of the additions may go in favour of any of the two side in the appeals; (iv) the assessee has a current account balance as on 15.09.10 to the tune of Rs 6.22 crores. (v) the amounts payable by the assessee at 37.81cr is on lessor side vis avis the amounts receivable at Rs 47.53 cr; (vi) it is every bodies responsibility to encourage or promote the educational and noble causes of the assessee-trust etc. (vii) Further, we find SA No. 30/PN/10 Arising out of ITA No. 320/PN/10 A.Y 2006-07 that the additions which is under consideration at the time of pronouncement of the judgment of the Honble High court of Bombay are confirmed by the CIT(A) substantially in principle. Further, we find that the order of the CIT(A) relating to the request for stay was not set aside by the High Court and it was merely modified as seen from para 18(a) of the judgment. Para 18(a) read as under:

a) The order of the CIT(A) dated 12.1.2009 is modified to the extent that the say of recovery of tax payable in respect of AYs 2005-06 and 2006-07 shall be subject to the petition furnishing within a period of four weeks from today, a bank guarantee for the sum of Rs 1.5 crores and valid till the disposal of the appeals and eight weeks thereafter.

7. Thus, it is evident that the tax payable in respect of AYs 2005-06 is not the issue before us in the present applications. Siphoning of the trusts funds is the core issue before the Honble High Court of Bombay, the applicability of the provisions of section 13(1)(d) in matters relating to the adequacy of the rentals payments to the persons covered u/s 13(3) of the Act are the core issues. Regarding the violation of the provisions of section 11(5) relating to the investment of loan in shares with cooperative Bank, the SMC decision of Mumbai Bench in the case of Bai Dayambai Adamji Rangwala Charity Trust (66 ITD59) does not prima facie helps the assessee. In that case, the issue revolved around the fact of disinvestment by the trust the host of shares and debentures. Therefore, we are of the opinion, the stay application for the year under consideration has to be disposed of independent of the said decisions considering the judgment of the Honble High court in the writ proceedings.

8. Generally, for deciding the stay applications, we have to see the following aspects (i) liquidity of the funds of the assessee to clear the tax arrears out of own funds at the relevant point of time based on the assessees financial status at the time of the stay petition hearing; (ii) credit-worthiness of the assessee to outsource the funds to clear the departmental dues; (iii) prima facie views on the likely decision of the Tribunal on the issues raised in the appeal; (iv) departmental urgencies in matters of collection and recovery; (v) guarantees provided by the assessee to safe guard the interest of the revenue etc.

9. Examining the facts of the assessee from the shades of the above aspects, it is noticed that the appeals of the assessee on the quantum additions or denial of exemption u/s 11 may go any of the side of the appeal and therefore, nothing can be said of the decision of the Tribunal on the merits of the SA No. 30/PN/10 Arising out of ITA No. 320/PN/10 A.Y 2006-07 additions and denial of exemption u/s 11 of the Act to the assessee. Considering the long history and educational activities of the assessee as well as the trustees attached to the trust, in our opinion, the assessee can be said to be capable of raising the requite funds for the objects of the trust. In so far as the liquidity of the funds for clearing the impugned tax arrears are concerned, there is no dispute on the fact the receivable and payables by the assessee is a continuous process and it is for the financial experts to manage the fund flow. We also find that the assessee is in better position financially so far as the receivable are concerned. However, it is also a fact that the revenue needs funds to run the Governmental systems and it is an admitted position the sum of Rs 1.71 crores would be the final demand after alleged corrections if any are allowed.

10. Thus, there is clear demand of Rs 1.71 crores, the assessee has current cash balance of Rs 6.68 crores and the receivables are on higher side. Assessee is ready to provide the bank guarantee to the tune of 10% of the total demand o Rs 6.68 crores. Thus, in our opinion the assessee needs to pay part of the demand immediately. The Bank guarantees does not provide money for the Government. Considering the noble objects of the trust as well as educational future of the said 45,000 students of 75 institutions on one side and the requirements of the revenue on the other, we are of the opinion and in principle, the stay application for the AY in question must be allowed conditionally granting the stay for the period of six months as per the provisions of the Act, so that the assessee may be free to manage the funds for running the institutions for achieving the objects of the trust. However, the grant of stay is subjected to the following conditions and they are:

(i) Assessee shall pay 50% of the clear demand of Rs 1.71 crores (ie 85.50 lakhs) during the period of stay of six months in six equal monthly installments;

(ii) Taking cue from the para 18(a) of the judgment of the Honble High Court discussed, the assessee shall furnish bank guarantee for the balance of the 50% of the demand of Rs 85.50 lakhs;

(iii) Assessees request for the early hearing of the appeals is approved favourably and all the appeals in question shall be heard on 06.10.2010. Thus, the Registry is directed to post the appeal accordingly. SA No. 30/PN/10 Arising out of ITA No. 320/PN/10 A.Y 2006-07

11. In the result, the stay application is allowed. Order pronounced in the open court on 24th September, 2010. Sd/- Sd/- (SAILENDRA KUMAR YADAV) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER Pune dated the 24th September, 2010 Copy of the order is forwarded to :

1. Assessee

2. Department

3. ACIT, Cir-2(2), Pune

4. Addl.CIT,Cen.R-2,Pune

5. D.R. ITAT Bench

6. Guard File By order Asstt. Registrar

I.T.A.T Pune