The Board has rejected our representation and says we must deduct under s.194R on tea samples drawn for tasting. Can the writ court stop it in the meantime?
Not on this occasion. The Calcutta High Court held that the tea brokers' challenge to the CBDT's order of 22 December 2022 raised legal issues deserving adjudication at a final hearing after affidavits, and declined to interfere with that order at the interlocutory stage. Nothing was decided about whether a tea sample drawn for tasting and valuation is a benefit or perquisite in the broker's hands.
Decided by the High Court (Md. Nizamuddin J) on 2023-05-19, reported as WPA 12435 of 2023 (Calcutta High Court, Appellate Side). It bears on section 194R of the Income Tax Act 1961, in TDS Defaults and Appeals matters.
Section 194R has generated almost no adjudicated case law, and this batch of writs is the visible edge of the biggest live dispute under it: whether a person who handles goods for someone else — here a broker distributing tea samples on behalf of sellers — receives a benefit at all. It also shows how the Board's power under s.194R(2) works in practice: a representation was made, the Board decided it against the brokers by order dated 22 December 2022, and the only route left was a writ. A practitioner should take from it that interim relief against a s.194R determination is not readily given, and that the merits remain open.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The petitioners act as brokers at tea auctions. Tea samples are drawn specifically for tea tasting and valuation and distributed by the brokers to buyers on behalf of the sellers. The petitioners made a representation to the Central Board of Direct Taxes, which by order dated 22 December 2022 held them liable to deduct tax at source. They filed a writ petition challenging that order as ultra vires and unconstitutional in view of s.194R, contending that they are not the real beneficial owners of the goods, that they merely distribute samples of tea to buyers on behalf of the sellers, and that such free samples cannot be treated as a perquisite in the hands of the broker as income. The Tea Board India and others were respondents. A materially identical order was made by the same judge in the companion matter Paramount Tea Marketing Pvt Ltd (WPA 12437 of 2023, 20 June 2023).
No interim relief. The Court held that the issues raised are legal issues deserving adjudication at a final hearing after calling for affidavits from the respondents, and that at that stage it was not inclined to interfere with the CBDT's order. Liberty was granted to the petitioners to make an appropriate application during the pendency of the writ petition if occasion arose. The respondents were directed to file affidavits-in-opposition within three weeks after the summer vacation with a reply two weeks thereafter, and the matter was listed for final hearing in the August 2023 monthly list, with the parties to be ready with short written notes of argument.
The Court gave no reasons on the construction of s.194R. It recorded the petitioners' case, characterised the questions raised as legal issues requiring affidavits and a final hearing, and on that footing declined to interfere at the interlocutory stage.
Considering the facts and circumstances of the case and the issues involved in this writ petition I am of the considered view that the same are legal issues and deserve adjudication upon final hearing after calling for affidavits from the respondents and at this stage I am not inclined to interfere with the aforesaid impugned order of the CBDT.
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Handle my notice → Ask a CA on WhatsAppNot on this occasion. The Calcutta High Court held that the tea brokers' challenge to the CBDT's order of 22 December 2022 raised legal issues deserving adjudication at a final hearing after affidavits, and declined to interfere with that order at the interlocutory stage. Nothing was decided about whether a tea sample drawn for tasting and valuation is a benefit or perquisite in the broker's hands. This was decided by the High Court (Md. Nizamuddin J) and bears on section 194R of the Income Tax Act 1961. It is reported as WPA 12435 of 2023 (Calcutta High Court, Appellate Side). Section 194R has generated almost no adjudicated case law, and this batch of writs is the visible edge of the biggest live dispute under it: whether a person who handles goods for someone else — here a broker distributing tea samples on behalf of sellers — receives a benefit at all. It also shows how the Board's power under s.194R(2) works in practice: a representation was made, the Board decided it against the brokers by order dated 22 December 2022, and the only route left was a writ. A practitioner should take from it that interim relief against a s.194R determination is not readily given, and that the merits remain open. If it applies to you, the first step is this: Do not cite this order for any proposition about the scope of s.194R; the Court expressly reserved the legal issues for final hearing.
The petitioners act as brokers at tea auctions. Tea samples are drawn specifically for tea tasting and valuation and distributed by the brokers to buyers on behalf of the sellers. The petitioners made a representation to the Central Board of Direct Taxes, which by order dated 22 December 2022 held them liable to deduct tax at source. They filed a writ petition challenging that order as ultra vires and unconstitutional in view of s.194R, contending that they are not the real beneficial owners of the goods, that they merely distribute samples of tea to buyers on behalf of the sellers, and that such free samples cannot be treated as a perquisite in the hands of the broker as income. The Tea Board India and others were respondents. A materially identical order was made by the same judge in the companion matter Paramount Tea Marketing Pvt Ltd (WPA 12437 of 2023, 20 June 2023). The matter was decided on 2023-05-19 by the High Court (Md. Nizamuddin J). On those facts the High Court held as follows. No interim relief. The Court held that the issues raised are legal issues deserving adjudication at a final hearing after calling for affidavits from the respondents, and that at that stage it was not inclined to interfere with the CBDT's order. Liberty was granted to the petitioners to make an appropriate application during the pendency of the writ petition if occasion arose. The respondents were directed to file affidavits-in-opposition within three weeks after the summer vacation with a reply two weeks thereafter, and the matter was listed for final hearing in the August 2023 monthly list, with the parties to be ready with short written notes of argument.
The Court gave no reasons on the construction of s.194R. It recorded the petitioners' case, characterised the questions raised as legal issues requiring affidavits and a final hearing, and on that footing declined to interfere at the interlocutory stage. In the words reproduced by the source cited on this page: "Considering the facts and circumstances of the case and the issues involved in this writ petition I am of the considered view that the same are legal issues and deserve adjudication upon final hearing after calling for affidavits from the respondents and at this stage I am not inclined to interfere with the aforesaid impugned order of the CBDT."
It was decided by the High Court on 2023-05-19 and is reported as WPA 12435 of 2023 (Calcutta High Court, Appellate Side). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 194R, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. No interim relief. The Court held that the issues raised are legal issues deserving adjudication at a final hearing after calling for affidavits from the respondents, and that at that stage it was not inclined to interfere with the CBDT's order. Liberty was granted to the petitioners to make an appropriate application during the pendency of the writ petition if occasion arose. The respondents were directed to file affidavits-in-opposition within three weeks after the summer vacation with a reply two weeks thereafter, and the matter was listed for final hearing in the August 2023 monthly list, with the parties to be ready with short written notes of argument. It arises in TDS Defaults and Appeals matters, on section 194R of the Income Tax Act 1961, and was decided by Md. Nizamuddin J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. If your client is in the same position, put on record why he is not the beneficial owner of the goods and merely passes them on for the principal, which is the argument the petitioners advanced. Assume no interim protection while the challenge is pending, and budget for compliance or for a demand; the Court declined to interfere with the Board's order. Track the outcome of the final hearing, which was listed for the August 2023 monthly list, before advising on the same facts. Read s.194R with CBDT Circular 12/2022, which this library holds. Guidelines issued by the Board under s.194R(2) are, by s.194R(3), laid before each House of Parliament and binding on the income-tax authorities and on the person providing the benefit or perquisite. A further guidance circular of 2022 is referred to in practice; its existence, the provision it was issued under and its contents are not established here.
Searched for later treatment; none was found. That is not the same as a source affirming it. A citator search on citedby:106755033 returns nothing. A second search for "Contemporary Brokers" returns 58 documents, all Calcutta High Court execution and company matters between the same company and Williamson Magor & Co.; none concerns s.194R and none cites this order. No Supreme Court matter and no later decision on the s.194R challenge to the tea-sample circular was found. The order was an interim refusal of relief, which may explain the silence. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
This is an interim order, not a decision on the merits, and it is entered only because s.194R judicial authority is so scarce and because it records a CBDT order of 22 December 2022 that a practitioner will not otherwise find. The order has no numbered paragraphs, so the key quote is located by its opening words rather than by a paragraph number, and any paragraph citation for it would be invented. A materially identical order of the same judge in Paramount Tea Marketing Pvt Ltd (WPA 12437 of 2023, 20 June 2023) says the same thing, which is why the two are treated together here. The order as reported contains an evident transcription error — 'it is not they are not real beneficial and owner of the goods' — which is left unquoted. No final judgment in this matter is established here, and no claim is made about the outcome. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
No interim relief. The Court held that the issues raised are legal issues deserving adjudication at a final hearing after calling for affidavits from the respondents, and that at that stage it was not inclined to interfere with the CBDT's order. Liberty was granted to the petitioners to make an appropriate application during the pendency of the writ petition if occasion arose. The respondents were directed to file affidavits-in-opposition within three weeks after the summer vacation with a reply two weeks thereafter, and the matter was listed for final hearing in the August 2023 monthly list, with the parties to be ready with short written notes of argument.
TaxSphere, “Contemporary Brokers Pvt Ltd v CBDT”, https://taxnotice.vittsphere.com/caselaw/case/contemporary-brokers-v-cbdt-194r-tea-samples-no-interim-relief/ (validity last checked 2026-09-08)
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I have been held an assessee in default under s.201 for not deducting s.194C and s.194LA tax when I issued TDR certificates instead of paying money. Is there an answer where the payment is wholly in kind?
My associated enterprise sends me equipment free of cost for testing and I return or destroy it. Is that a benefit I have to bring to tax?
I'm giving dealers free samples and discounts. Do I have to deduct TDS under s.194R?
I deducted 1% under s.194S on a peer-to-peer purchase. Which challan and which certificate, and by when?
