Company in Tax Dispute Ordered to Deposit 5%

The court directed the petitioner, a company facing income tax scrutiny for share premium categorization, to deposit 5% of the disputed demand within two weeks, expecting resolution of the appeal without further demands until disposal. This decision followed previous orders preventing coercive measures until appeal resolution and a directive for a 10% payment by the petitioner, emphasizing the need for compliance with modified instructions in the case.

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Issues:
Petition to quash demand notices for additional deposit and to prevent recovery of confirmed dues till appeal disposal.

Analysis:
The petitioner, a company engaged in manufacturing outdoor fitness equipment, faced scrutiny by Respondent No.2 for issuing shares to investors. Respondent No.2 categorized share premium as income and issued a demand notice for income tax. An appeal was filed challenging this order, with a stay application pending. Despite this, Respondent No.5 issued repeated notices for payment, leading to a previous writ petition directing no coercive measures until appeal disposal.

Subsequently, the appellate authority directed the petitioner to pay 10% of the disputed demand, which was done. However, new demands were made by Respondent No.5 based on modified instructions, requiring 20% payment. The petitioner argued that the previous 10% payment sufficed until appeal disposal, seeking to quash the new demands.

Both parties presented their arguments, with the petitioner contending that the 10% payment already made should cover the demand until appeal resolution. Respondent contended that as per modified instructions, 20% payment was required, justifying the new demands.

The court noted previous orders directing no coercive measures until appeal disposal and the subsequent directive for 10% payment by the petitioner. Considering the circumstances, the court directed the petitioner to deposit 5% of the disputed demand in the new orders within two weeks, expecting the appeal to be resolved promptly without further demands until its disposal.

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