THE HON’BLE SRI JUSTICE GODA RAGHURAM AND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION No. 23416 of 2011. ORDER: (Per Goda Raghuram, J) Heard the learned Advocate General for the petitioner and Sri.S.R.Ashok, learned Standing Counsel for the respondents. The disinclination to pay income tax demand of Rs. 639.93 Crores by the petitioner to the respondents pursuant to the order of assessment dt. 31.10.2010 for the assessment years 2008-09 is the trigger for this writ petition, directed against the order dt. 29.7.2011 of the 1st respondent and the earlier proceedings dt. 29.6.2011 of the 3rd respondent. The petitioner is a Government Company registered under the Companies Act, 1956. The State conferred its privilege in terms of the A.P. (Regulation of Trade in Indian Liquor, Foreign Liquor), Act 1993 (for shot ‘the 1993 Act’) including the exclusive privilege for importing, exporting and carrying on the wholesale trade and distribution of Indian Made Foreign liquor, Foreign Liquor, Wine, Beer. On 27.9.2008, the petitioner submitted its returns of income tax for the assessment year 2008-09 admitting profits of Rs. 2,85,642/- and loss of Rs.36,82,862/-. By the order dt. 31.10.2010, the Assessing Officer determined the liability to income tax at Rs. 639.93 Crores. Against the order of assessment, the petitioner preferred T.A.No. 69/CIT(A)-II/10-11 before the Commissioner of Income Tax (Appeals)-II on 18.1.2011. While so, the petitioner filed an application before the Income Tax Officer Ward-I seeking grant of stay of collection of demand till disposal of the appeal before the Commissioner of Income Tax which was scheduled for hearing on 15.2.2011. By a letter dt. 4.2.2011, a petitioner was informed that as the demand is substantial, stay of the entire demand is not possible and the petitioner was called upon to come up with suitable instalments proposal to consider the request, an unusual courtesy to the assessee but nevertheless. On 11.2.2011, the petitioner represented to the Chairman, Central Board of Direct Taxes (CBDT) seeking stay of collection of demand till disposal of the appeal by the Appellate Authority. On 20.6.2011, the CBDT advised the petitioner to present its application to the Assessing Officer i.e. the Additional Commissioner of Income Tax and thereafter, if required, to the Commissioner of Income Tax. Eventually, the 1st respondent, the Chief Commissioner of Income Tax-I by the impugned communication dt. 29.7.2011 intimated the Principal Secretary to the Government that since absolute stay of demand is not possible, 50% of the demand be paid in eight equal monthly instalments of Rs. 40 crores, commencing from August, 2011. The 2nd respondent by the endorsement dt. 3.8.2011 communicated the order of the 1st respondent to the petitioner calling upon the petitioner to pay instalments and submit proof of payment of monthly instalments to the 2nd respondent. Aggrieved thereof, the present writ petition is filed. Since the issue whether the petitioner, on whom the State has conferred exclusive privilege of importing, exporting and carrying on wholesale trade and distribution of Indian Made Foreign liquor, Foreign liquor, Wine, Beer under Section 17 of the Act r/w Section 23 of the A.P. Excise Act, 1968, is liable to income tax from out of the income derived from the business activity in respect of which privilege has been conferred by the State Government or whether the entire amount received by the petitioner by way of Special Privilege Fee, any other receipts and any other amount realised by the petitioner from whatever source after deducting the expenses incurred by the petitioner being liable to be made over to the State as privilege fee or special privilege fee or any other fee; and is deductible, is an issue substantially to be considered by the Appellate Authority in the appeal preferred by the petitioner against the order of assessment. Several contentions have been urged by the learned Advocate General and Sri.S.R.Ashok, learned Standing Counsel, as to the liability or otherwise of the petitioner to pay income tax. Sri.S.R.Ashok relies on Accounting Standard 22 which obligates tax expenditure to be included in the demand of net profit and loss for the assessment year in question to contend that the petitioner is liable to factor the expenditure on income tax also while drawing up its balance sheet and profit and loss account. Since the substantive appeal of the petitioner is pending before the Commissioner of Income Tax (Appeals)-II, we consider it inappropriate to analyse the rival contentions on the liability of the petitioner to income tax. Having regard to the fact that the petitioner is an instrumentality of the State, a public sector company and as the income tax liability of the petitioner has been assessed at Rs. 639- 93 Crs., we consider it just and equitable to direct the respondents not to initiate any coercive steps for recovery of demand under the order of assessment, which is the subject matter of appeal at the instance of the petitioner; on condition that the petitioner shall pay an amount of Rs. 160 crores in eight instalments @ Rs. 20 crores each commencing from October, 2011. The 1st instalment shall be paid by the 20th October, 2011 and other instalments shall be paid by 20th of each succeeding month till the eight instalments are paid. In default of any of the instalments, the entire liability as determined in the assessment order shall become due and the respondents shall be at liberty to take steps for recovery of the same, in accordance with law. In the circumstances and as the interest of the State’s revenue is involved, we request the Commissioner of Income Tax (Appeals) to expeditiously dispose of the appeal, preferably within a period of three months from the date of receipt of a copy of this order. The writ petition is disposed of as above. There shall be no order as to costs. ____________________ GODA RAGHURAM, J ____________________________ RAMESH RANGANATHAN, J 22.09.2011. THE HON’BLE SRI JUSTICE GODA RAGHURAM AND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION No. 23416 of 2011. ORDER: (Per Goda Raghuram, J) Dt. 22.9.2011.