The requirement for 20% payment of a disputed tax demand for stay can be relaxed based on the circumstances of the case, as clarified by applicable legal precedents.

JUDGMENT

Manmohan, J.:

1. Present writ petitions have been filed challenging the order dated 26th October, 2022 dismissing the Petitioner's application for stay of demand and directing the Petitioner to pay 20% of the total outstanding demand by 10th November, 2022. Petitioner also seeks stay of the demands raised by virtue of the orders dated 4th August, 2021 and 8th September, 2020 passed by Respondent No. 2 under Section 201/201(1A) of the Income Tax Act, 1961 [`the Act'] for Assessment Years [AY] 2013-14 to 2020-21 till the disposal of the appeals filed before the Commissioner of Income Tax (Appeals).

2. Learned counsel for the Petitioner states that the Respondent No. 2 passed orders dated 4th August, 2021 and 08th September, 2020 under Section 201/201(1A) of the Act holding that the Petitioner is an "assessee in default" on account of non-deduction of TDS under Section 194H of the Act 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. He states that a demand of Rs. 17,65,67,319/-is outstanding in the case of the Petitioner for the AY 201314 to 2020-21.

3. Learned counsel for the petitioner states 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). He points out 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.

4. Learned counsel for the petitioner states that the application for stay was dismissed vide order dated 14th September, 2022 holding that the Petitioner has not paid 20% of the disputed demand and has failed to produce any cogent reasons or financial constraints faced by it in payment of 20% of the outstanding demand. He states that the Petitioner filed another application dated 6th October, 2022 before the Respondent No. 2 seeking stay of the demand till the disposal of the appeal. He however states that the Petitioner's application for stay was dismissed vide the impugned order dated 26th October, 2022 in an arbitrary and non-speaking manner without dealing with the contentions raised by the Petitioner in its application. He lastly states that the Petitioner's appeals for the financial years 2012-13 and 2013-14 have already been heard and judgment(s) reserved.

5. Issue notice. Mr.Puneet Rai, learned senior counsel accepts notice on behalf of the Respondents-Revenue. He states that the direction to deposit 20% of the demand is in accordance with the Office Memorandums dated 29th February, 2016 and 31st July, 2017.

6. Having heard learned counsel for the parties and having perused the two Office Memorandums, in question, this Court is of the view 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