Facts of the Case

The Petitioner, M/s Dabur India Limited, challenged an order dated 26 October 2022 whereby its application for stay of tax demand was dismissed and it was directed to deposit 20% of the outstanding demand.

The tax authorities had earlier passed orders under Section 201/201(1A) for Assessment Years 2013–14 to 2020–21, treating the Petitioner as an “assessee in default” for non-deduction of TDS under Section 194H.

The dispute arose because the Revenue treated free samples and goods provided under sales promotion schemes as commission/brokerage, thereby attracting TDS liability.

A total demand of approximately ₹17.65 crore was raised.

Issues Involved

  1. Whether free samples and promotional goods constitute commission/brokerage under Section 194H.
  2. Whether mandatory deposit of 20% of disputed tax demand is required for granting stay.
  3. Whether the impugned order rejecting stay application was arbitrary and non-speaking.

Petitioner’s Arguments

  • Free samples given under sales promotion schemes are trade incentives, not commission or brokerage.
  • Section 194H is not applicable as no service is rendered by stockists.
  • Reliance was placed on CIT vs. Jai Drinks Pvt. Ltd. (336 ITR 383), where similar benefits were not treated as commission.
  • The order rejecting stay was arbitrary and non-speaking, ignoring relevant contentions.
  • Appeals were already pending before CIT(A), and recovery should be stayed till disposal.

Respondent’s Arguments

  • The direction to deposit 20% of the disputed demand is in line with CBDT Office Memorandums dated 29.02.2016 and 31.07.2017.
  • The Petitioner failed to demonstrate sufficient grounds for waiver or relaxation of the standard requirement.

Court’s Findings / Order

  • The Court held that deposit of 20% is NOT a mandatory pre-condition in all cases for granting stay.
  • The condition can be relaxed depending on facts and circumstances.
  • Reliance was placed on PCIT vs. LG Electronics India Pvt. Ltd. (2018) 18 SCC 447, where it was held that lesser deposit may be permitted.
  • The impugned order was found to be non-reasoned, as it failed to consider:
    • Prima facie case
    • Balance of convenience
    • Irreparable injury
  • The impugned order was set aside.
  • Matter remanded to CIT for fresh decision after granting hearing.
  • No coercive action to be taken until disposal of stay application.

Important Clarification

  • The 20% deposit rule is directory, not mandatory.
  • Tax authorities must apply judicial discretion.
  • Stay applications must be decided based on reasoned orders considering established legal principles.


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

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.