2015 (8) TMI 1279 - HC - Income Tax

Grant of stay of collection of demanded tax - Held that - Considering all these aspects and in the interest of justice, we are of the opinion that the 1st respondent- Deputy Commissioner ought to have exercised discretion as enjoined on him under Section 220(6) of the Act and granted stay. Inasmuch as the matter is ripe for hearing before the Supreme Court on 10.09.2015, this Court, instead of setting aside the impugned order and remanding the matter back for fresh consideration, deems it appropriate to dispose of the writ petitions with the following direction The 1st respondent Deputy Commissioner of Income-tax, TDS Circle, is directed not to take any coercive steps for recovery of the total disputed tax demand of ₹ 17,42,97,709/- for the assessment years from 2010-2011 to 2014-2015 subject to the condition that the petitioner deposits 40% of the demanded amount. Out of 40%, the petitioner shall pay 20% within a period of two weeks from the date of receipt of a copy of this order and remaining 20% shall be paid within a period of four weeks thereafter.

Summary

Issues involved:
1. Assessment of default under Section 220 of the Income-Tax Act, 1961.
2. Dispute regarding the classification of discounts given to dealers as commission/brokerage.
3. Grant of stay for the demanded tax pending Supreme Court hearing.
4. Consideration of conflicting judgments from different High Courts.

Analysis:
1. The petitioner, an assessee, was declared in default under Section 220 of the Income-Tax Act for not making TDS on discounts given to dealers. The petitioner argued that the discounts were not commission/brokerage, pending a Supreme Court decision. The Karnataka High Court had ruled in favor of the assessee, while other High Courts had conflicting views. The High Court noted the pending Supreme Court hearing and directed the Deputy Commissioner not to take coercive recovery steps, subject to a 40% deposit by the petitioner.

2. The main issue revolved around whether the discounts given to dealers constituted commission/brokerage, leading to a TDS liability. The petitioner cited the Karnataka High Court judgment supporting their stance, while the Revenue argued in favor of the prevailing jurisdictional High Court judgment. The High Court observed the unsettled nature of the issue pending Supreme Court resolution and granted relief to the petitioner by directing a partial deposit to stay coercive recovery.

3. The petitioner sought a stay on the demanded tax, emphasizing the pending Supreme Court hearing and conflicting High Court judgments. The Revenue opposed the stay, citing previous decisions against the petitioner. The High Court considered the evolving nature of the issue, the pending Supreme Court hearing, and past directions against coercive recovery, ultimately granting a conditional stay on recovery pending a deposit by the petitioner.

4. The High Court analyzed the conflicting judgments from different High Courts on the classification of discounts as commission/brokerage for TDS purposes. While some High Courts favored the Revenue, the Karnataka High Court ruled in favor of the assessee. The High Court acknowledged the pending Supreme Court hearing and the need for a balanced approach, leading to the decision to grant a stay on coercive recovery with a deposit condition.