In an interim relief to M/s Dabour India Limited, a division bench of the Delhi High Court has directed the income tax department to re-consider the stay applications.
The petitioner-Company approached the High Court contending that the income tax departmenthas passed orders holding that the Petitioner is an “assessee in default” on account of non-deduction of TDS under Section 194H of theAct with respect to cost of free samples/goods given by the Petitioner under sales promotion scheme to the stockists thereby treating the cost of items of free samples given under sales promotion scheme as brokerage/commission under Section 194H of the Act. The petitioner contended that a demand of Rs. 17,65,67,319/- is outstanding in the case of the Petitioner for the AY 2013- 14 to 2020-21.
The division bench comprising Justice Manmohan and Justice Manmeet Pritam Singh Arora accepted the plea that the Petitioner filed appeals against the orders passed under Section 201/201(1A) of the Act and also filed a consolidated application dated 9th September, 2022 for seeking a stay on the demand till the disposal of the appeals for all the AYs stating that the provisions of Section 194H of the Act are not applicable on the free samples given under the sales promotion scheme as the same is a trade incentive and not a commission/brokerage as held by this High Court in the case of CIT vs. Jai Drinks Pvt. Ltd. in 336 ITR 383 (Del).
The petitioner contended that the additional items allowed with the purchases are not commission/brokerage as contemplated under Section 194H of the Act because the purchaser has not rendered any service to the Petitioner.
The bench observed that the requirement of payment of twenty percent of disputed tax demand is not a pre-requisite for putting in abeyance recovery of demand pending first appeal in all cases.
“The said pre-condition of deposit of twenty percent of the demand can be relaxed in appropriate cases. Even the Office Memorandum dated 29th February, 2016 gives instances like where addition on the same issue has been deleted by the appellate authorities in earlier years or where the decision of the Supreme Court or jurisdictional High Court is in favour of the assessee.”
Directing a re-consideration of the applications, the division bench has held that “the impugned order is set aside and the matter is remanded back to the Commissioner of Income Tax for fresh decision on the application for stay. However, before deciding the stay application, the Commissioner of Income Tax shall grant a personal hearing to the authorised representative of the Petitioner. For this purpose, list the matter before the Commissioner of Income Tax on 05th December, 2022.”
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