2023 (1) TMI 1220 - HC - Income Tax

Prompt disposal of tax appeals ordered, pending appeal decisions crucial for determining liability. Compliance required.

M/s. Dabur India Ltd. Versus Commissioner of Income Tax TDS & Anr.

The court directed the Commissioner of Income Tax (Appeals) to promptly dispose of appeals where written submissions were filed, allowing time for written ... Stay of demand - petitioner granted stay subject to payment of 15% of the demand - pending the decision in the appeals, the demand raised against the petitioner - HELD THAT:- The issue involved in all the appeals pending consideration before the CIT (A) is common. Six (6) of eight (8) appeals are ripe for a decision. The decision in these appeals would also govern, even according to Mr Rai, the remaining two (2) appeals. Secondly, Mr Rai has been unable to point out any provision in the Act, wherein demand can be raised against the petitioner with regard to withholding tax, for the failure to deduct the same at source. Petitioner’s contention that the cost of free samples handed over to its vendors cannot be construed as commission or brokerage, is also required to be examined in the pending appeals. At worst, the petitioner is an assessee in default, therefore, only consequences provided in the Act will attach to it. Under Section 191 of the Act, the liability for tax, prima facie, would rest on the assessee i.e., the vendors in this case. We do that not do not want to express any final view on the merits of this aspect of the matter, since the appeals are pending consideration before the CIT (A). Given the aforesaid position, we are of the view that the best way forward in these cases would be to direct the CIT(A) to dispose of the six (6) appeals in which written submissions have already been filed. Insofar as the remaining two (2) appeals are concerned, reference to which is made hereinabove, the CIT(A) should issue notice within the next five days, whereupon the petitioner should file its written submissions, as early as possible, though, not later than two (2) weeks from the date of receipt of notice. CIT(A) will, then, dispose of the eight (8) appeals pending before it within the next eight (8) weeks. Pending the disposal of the appeals, the impugned order in the above-captioned writ petitions i.e., the order dated 16.12.2022, shall remain stayed. Once CIT(A) passes an order in the pending appeals, the fate of the petitioner will be governed by the order that would be passed by the CIT(A). Issues Involved:1. Challenge to the order of the Commissioner of Income Tax (TDS) denying complete stay on demands raised by Assessing Officers.2. Applicability of Section 194H of the Income Tax Act, 1961 to the withholding tax demands.3. Dispute regarding the classification of free samples provided to distributors and stockists under a sales promotion scheme.4. Arguments on the liability for tax deduction at source on payments made for commission, professional fees, and contractor payments.5. Appeals filed with the Commissioner of Income Tax (Appeals) against the Assessing Officers' orders.6. Request for stay on demands pending the decision in the appeals.7. Legal implications of the demands raised and the consequences of non-deduction of tax at source.8. Court's direction on the disposal of the pending appeals and the stay on the impugned order.Detailed Analysis:1. The writ petitions challenged the order of the Commissioner of Income Tax (TDS) denying complete stay on demands raised by Assessing Officers, instead granting stay subject to payment of 15% of the demand. The petitions contested the applicability of Section 194H of the Income Tax Act to the withholding tax demands, particularly regarding free samples and other payments.2. The Assessing Officers concluded that tax should have been deducted at source on free samples provided to distributors and stockists under a sales promotion scheme. Additionally, there were disputes over tax deductions on payments for commission, professional fees, and contractor payments, leading to demands under Section 201(1)/201(1A) of the Act.3. The petitioner argued that the demands should not be enforced pending the appeals with the Commissioner of Income Tax (Appeals). They contended that the cost of free samples cannot be considered as commission or brokerage, and the withholding tax demands were not applicable, though other consequences like interest and prosecution might apply.4. The court directed the Commissioner of Income Tax (Appeals) to dispose of the appeals where written submissions had been filed promptly. For the remaining appeals, the petitioner was given time to submit written arguments. The court stayed the impugned order pending the appeal decisions and clarified that the outcome of the appeals would determine the petitioner's liability.5. The judgment emphasized that the liability for tax primarily rests on the vendors, and the petitioner would face consequences as an assessee in default, subject to provisions of the Act. The court refrained from expressing a final view on the matter pending the appeal decisions, highlighting the importance of the pending appeals in determining the petitioner's fate.6. The parties were instructed to act based on the digitally signed copy of the court's order, and the writ petitions were disposed of with the pending applications closed. The judgment reiterated that the appeal outcomes before the Commissioner of Income Tax (Appeals) would not be affected by the court's decision.