Introduction:

In a significant judgment, the Delhi High Court recently addressed the mandatory deposit requirement of 20% for staying the recovery of tax demands during the pendency of the first appeal. The case of Dabur India Limited vs. CIT (TDS) involved a writ petition filed by Dabur India Limited challenging the dismissal of their application for stay of demand by the tax authorities. The court's decision has far-reaching implications for taxpayers seeking relief from tax demands while their appeals are being resolved.

Background:

Dabur India Limited, a prominent company, appealed against the income tax authorities' orders that deemed them an "assessee in default" for alleged non-deduction of Tax Deducted at Source (TDS) under Section 194H of the Income Tax Act, 1961. The dispute revolved around whether the cost of free samples provided by Dabur under a sales promotion scheme should be classified as brokerage or commission, thereby attracting TDS liability. The tax authorities had raised a demand of Rs. 17,65,67,319/- for the assessment years 2013-14 to 2020-21.

Court's Decision:



On November 18, 2022, the Delhi High Court rendered its judgment after considering the arguments presented by both parties. The court held that the 20% deposit requirement for staying the recovery of disputed tax demand is not mandatory in all cases. It clarified that the deposit precondition can be relaxed in appropriate cases. The court referred to an Office Memorandum dated February 29, 2016, which outlines instances where the deposit requirement can be waived, such as when the appellate authorities have previously ruled in favor of the assessee on the same issue or when the decision of the Supreme Court or jurisdictional High Court favors the assessee.