Ajoy Nath Ray, Maharaj Sinha ( 1 ) ALTHOUGH we are not at present the regular tax Bench, we have been assembling specially and hearing this appeal under Section 260a of the Income-tax Act, 1961, and the stay application in relation thereto for the past nine days. ( 2 ) SINCE we have assembled only on Friday mornings the span of time which we have spent is nearly two and a half months. ( 3 ) WE had directed that the appeal and the stay application would be heard together. ( 4 ) CERTAIN events have occurred, by reason of which it is necessary to pass an interim order and allow the matter to be mentioned before the regular Bench, with liberty therefor being reserved for both sides, after a period of a fortnight from date. ( 5 ) THE stakes involved herein are very high. The assessees are three English companies, and their cases were dealt with by the impugned order of the Tribunal in a single judgment. ( 6 ) IF the Tribunal's judgment were to stand fully and completely today the rough liability of the three assessees taken in the aggregate would be as follows. ( 7 ) ON account of capital gains tax Rs. 21 crores ; on account of interest attracted thereon Rs. 12 crores ; and on account of penalty imposed Rs. 26 crores, but the penalty matter is before the Tribunal still, in a separate appeal. ( 8 ) THE brief facts upon which the parties appear to have proceeded in the Department are as follows. ( 9 ) THE three English assessees entered into an agreement with their French counterparts some time in the month of March, 1989. The agreement itself has not surfaced in the Department in spite of the same being requisitioned at every stage. ( 10 ) THE broad scheme of the agreement appears to have been this. A Dutch company would be floated at the instance of the assessees and their French collaborators by the incorporation of GEC Alsthom NV (GECANV ). ( 11 ) THE numerous shares held in different companies by the British companies and the French companies, numbering some 80 or so in the United Kingdom and some 320 or so in France and elsewhere in the world, would be transferred by both the existing British and French companies to the Dutch company. ( 11 ) THE numerous shares held in different companies by the British companies and the French companies, numbering some 80 or so in the United Kingdom and some 320 or so in France and elsewhere in the world, would be transferred by both the existing British and French companies to the Dutch company. ( 12 ) IN return therefor the Dutch company would issue the share capital of its to the British and the French companies in equal halves. ( 13 ) AS a result of this scheme, which has been called by the assessees to be a merger, the shares held by the three assessees in several Indian companies were transferred to the Dutch company. ( 14 ) IT was because of this transfer that the issue of the liability of the assessees to pay capital gains tax arose. ( 15 ) THE assessees had contended in the beginning, and they still so contend, that no capital gains tax whatsoever is payable. However, if the disputed issue were to be sorted out finally by exhausting of the legal forums available in India, the matter, as we gather, would be so delayed as to make the transfer delayed beyond the acceptable time limits of the assessees. ( 16 ) THUS by communications both to the Income-tax Department and to the Reserve Bank of India a provisional figure was worked out regarding payment of capital gains tax, and for obtaining the sanction of the Reserve Bank of India thereon for effecting the transfer. ( 17 ) THE sum which was worked out at that stage was a little above Rs. 10 crores. The bank guarantees were duly furnished therefor and permission obtained from the Reserve Bank of India, with this condition superadded, that the shares would not be retransferred by the Dutch company without further subsequent permission being had therefor once again from the Reserve Bank of India. ( 18 ) THE sum of Rs. 10 crores was thereafter converted from the form of bank guarantee to cash security. ( 19 ) THE tax matter being fought out before the Assessing Officer, the assessees lost their case. The Assessing Officer not merely confirmed the liability of above Rs. 10 crores, as payable on account of capital gains tax, but he also increased the quantum, on the basis of the market value of the shares transferred. ( 19 ) THE tax matter being fought out before the Assessing Officer, the assessees lost their case. The Assessing Officer not merely confirmed the liability of above Rs. 10 crores, as payable on account of capital gains tax, but he also increased the quantum, on the basis of the market value of the shares transferred. ( 20 ) IT is clear from the assessing orders that the assessee maintained all throughout that there was no money consideration received by the assessees for the transfer of the shares, and the only consideration was shares of the Dutch company. ( 21 ) IT is also quite clear, even if this involves a little bit of reading between the lines, that the assessment proceeded really on best judgment basis and the assumption was that the shares were transferred in return for a consideration the value of which, as on a no profit no loss basis, would not fall short of the market value of the shares transferred. ( 22 ) FROM this receipt figure, so to speak, the knocking off of the acquiring price, together with the application of the inflation index, if any, was a matter of ordinary departmental arithmetical procedure. ( 23 ) THERE were also liabilities assessed for payment of interest. The Assessing Officer has also imposed nearly 100 per cent, penalty and the penalty aspect is a separate set of proceedings and the appeals are pending in regard thereto before the Tribunal. Needless to mention the decision on the substance might have a bearing upon the decision of the Tribunal on the aspect of the penalty leviable, if any. ( 24 ) THE assessees carried the appeal to the Appellate Commissioner in the Department and won there. Having won the first appeal, there was no liability upon them and the entire deposit of Rs. 10 crores plus was got released and taken away by the assessees. ( 25 ) THIS is exactly where we had carried a wrong impression with us for the last nine days. We make it clear that learned counsel of neither side is to blame for our wrong impression. 10 crores plus was got released and taken away by the assessees. ( 25 ) THIS is exactly where we had carried a wrong impression with us for the last nine days. We make it clear that learned counsel of neither side is to blame for our wrong impression. If anybody is to blame it is ourselves and perhaps a certain amount of haste which we showed in the matter in coming too soon to the points of law, interesting as those are, without ascertaining the mundane and peripheral facts, with a sufficient degree of accuracy. However, having discovered our own mistake after nine days, we must correct those now. The direction given by us for having the appeal and the stay application heard together was given on our erroneous impression, as far as we remember today, that Rs. 10 crores lies already secured and there is a lot of substance in the appeal both in law and from the financial point of view. ( 26 ) AS it appears the assessees are all in England. The stay application has not been disposed of and the points of appeal on law are being heard without the assessee having to put in any security for making proof the recoverability of the amounts which are due to be paid by it on the basis of the Tribunal's order. ( 27 ) THIS places the assessees in a position of discriminatory favour. People under the cloud of a money decree must furnish adequate security for the purpose of enjoying a stay during pendency of the appeal. ( 28 ) IN a Section 260a appeal, the position is particularly special because no departmental process is, in practice, likely to be issued on the basis of an order of the Tribunal which is being heard from week to week by a Division Bench of the jurisdictional High Court. ( 29 ) WE cannot allow this state of affairs to continue. Nor can we impose an order for security on the stay application without hearing it out first, if necessary on affidavits. ( 30 ) IN these circumstances, we make the following observations, bearing in mind that the tax liability is Rs. 21 crores, the interest liability is Rs. 12 crores; we forget for the present the penalty liability which is not really before us yet, because the Tribunal is still to decide on it. ( 30 ) IN these circumstances, we make the following observations, bearing in mind that the tax liability is Rs. 21 crores, the interest liability is Rs. 12 crores; we forget for the present the penalty liability which is not really before us yet, because the Tribunal is still to decide on it. ( 31 ) IT seems from the international wealth of Mr. Bajoria's clients that they might well be willing to put in a sufficient security and then have their appeal heard out. But some time has to be allowed in this regard to see whether the security would be furnished as a matter of course or the usual adversary system has to be followed in regard to the hearing out of the stay application before the hearing of the appeals. ( 32 ) IF we were to hear the matter further, our sense of justice would be quite satisfied if Mr. Bajoria's clients put in a sum of Rs. 20 crores with the Department and then have their appeals heard out in the usual course. ( 33 ) BUT as we are a Bench assembled by breaking up other Benches, we do not wish to keep the matter heard in part before us ; With the above observations the appeal and the stay application are both released from our list, not to be treated as part-heard before us. ( 34 ) ABOUT the deposit of Rs. 20 crores, or the alternative procedure of immediate adversary battle, the parties are allowed a fortnight's time. There will be liberty to mention on both sides before the Bench then taking up tax matters. ( 35 ) PARTIES and all others concerned to act on a signed copy of this dictated order pn the usual undertakings.