Stay of demand conditioned on deposit is improper where tribunal and earlier orders negated deduction liability; no deposit required.

The article addresses whether conditioning a stay of tax demand on payment of 20% was justified where the Tribunal and earlier orders found the assessee not required to deduct tax and not in default; it concludes the deposit condition was imposed without addressing those material factual findings and authorities and therefore could not be sustained. The operative effect stated is that the 20% deposit requirement is set aside and the stay is allowed, with the assessee not required to pay any part of the demand during the pendency of the appeal.

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Issues: Whether the Appellate Authority was justified in conditioning grant of stay of demand on payment of 20% of the outstanding demand, having regard to the Tribunal's order holding that tax deduction was not required and earlier orders holding the assessee not to be in default.

Analysis: The Tribunal's order dated 21.11.2025 in the assessee's own case on the same assessment year records a factual finding that the assessee was not required to deduct tax at source; earlier orders dated 31.03.2025 in the assessee's own case record the assessee as not in default. These findings are material to the question whether payment should be directed as a condition for stay, particularly where the demand arises under a provision that operates as a penalty. The Appellate Authority's order conditioning stay on deposit of 20% did not address or apply the Tribunal's finding or the earlier non-default determinations and therefore failed to take into account facts and authorities directly bearing on the necessity of a deposit during pendency of the appeal.

Conclusion: The condition requiring payment of 20% of the outstanding demand as a prerequisite to stay is set aside; the stay application is allowed and the assessee is not required to pay any part of the demand during the pendency of the appeal.

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