Facts of the Case

  • The petitioner, M/s Dabur India Limited, distributed free samples and promotional goods to stockists.
  • The tax authorities treated such distribution as commission/brokerage, thereby attracting TDS under Section 194H.
  • Orders were passed under Section 201/201(1A) declaring the petitioner as an assessee in default.
  • A demand of approximately ₹17.65 crore was raised for AY 2013–14 to 2020–21.
  • The petitioner filed appeals and sought stay of demand, which was rejected unless 20% deposit was made.

Issues Involved

  1. Whether free samples given under sales promotion schemes constitute commission/brokerage under Section 194H?
  2. Whether mandatory deposit of 20% of disputed demand is required for grant of stay?
  3. Whether the impugned order rejecting stay application was legally sustainable?

Petitioner’s Arguments

  • Free samples are trade incentives, not commission or brokerage.
  • No service is rendered by stockists, hence Section 194H is not applicable.
  • Relied on precedent:
    • CIT vs Jai Drinks Pvt. Ltd. (336 ITR 383, Delhi HC)
  • The stay rejection order was:
    • Arbitrary
    • Non-speaking
    • Passed without considering financial hardship or merits
  • Appeals for earlier years were already heard, indicating a strong prima facie case.

Respondent’s Arguments

  • The requirement to deposit 20% of disputed demand is as per CBDT Office Memorandums (2016 & 2017).
  • The petitioner failed to justify non-payment or demonstrate hardship.

Court Findings / Judgment

  • The Court held that:
    • Deposit of 20% is NOT mandatory in all cases for grant of stay.
    • Authorities have discretion to relax the condition depending on facts.
  • Relied on Supreme Court judgment:
    • PCIT vs LG Electronics India Pvt. Ltd. (2018) 18 SCC 447
  • The impugned order was:
    • Non-reasoned
    • Failed to consider:
      • Prima facie case
      • Balance of convenience
      • Irreparable injury

Court Order

  • The impugned order was set aside.
  • Matter remanded back to the Commissioner of Income Tax for fresh decision.
  • Direction:
    • Provide personal hearing to the petitioner
  • Interim Protection:
    • No coercive action to be taken until stay application is decided

Important Clarifications by Court

  • The 20% deposit rule is not absolute and can be relaxed.
  • Authorities must apply judicial principles:
    • Prima facie case
    • Balance of convenience
    • Irreparable loss
  • Administrative circulars cannot override quasi-judicial discretion.

Sections Involved

  • Section 194H – TDS on Commission/Brokerage
  • Section 201 & 201(1A) – Assessee in Default
  • Income Tax Act, 1961

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/MMH18112022CW158502022_184943.pdf

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