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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI M. BALAGANESH
PER SAKTIJIT DEY, J.M.
Captioned appeals by the assessee arise out of two separate orders, both dated 21st September 2017, passed by the learned Commissioner of Income Tax (Appeals)–60, Mumbai, which in turn arise out of orders passed under section 201(1) and 201(1A) of the Income-tax Act, 1961 (for short "the Act"), relating to the 2nd and 4th
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quarter of the assessment year 2013–14. The grounds raised in both the appeals are identical except the figures.
At the outset, Shri Nitesh Joshi, learned Counsel for the assessee expressed his intention not to press ground no.1 in both the appeals. Accordingly, ground no.1 in both the appeals are dismissed.
In ground no.2, the assessee has challenged the demand raised under section 201(1) of the Act on account of short deduction of tax at source and the interest levied on such amount under section 201(1A) of the Act.
Brief facts are, during the previous year relevant to the assessment year under dispute, the assessee was supposed to make payments to three parties viz. Tata Teleservices Maharashtra Ltd., Jahangir Hospital and Sir Gangaram Hospital which required deduction of tax at source. The concerned payees furnished certificates issued under section 197(2) of the Act permitting deduction of tax at lower rate i.e., 2%. On the strength of such certificates issued under section 197(2) of the Act, the assessee deducted tax @ 2% on the entire payment made to the concerned parties during the year. However, the Assessing Officer found that the deduction of tax at lower rate was to be made on the amount specified in the certificate issued under section 197(2) of the Act. Whereas, the assessee had deducted tax at
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lower rate even on the payments exceeding the amounts specified in the certificates issued under section 197(2) of the Act. Therefore, alleging short deduction of tax at source, the Assessing Officer raised demand under section 201(1) of the Act along with interest levied under section 201(1A) of the Act while processing the TDS statement / return filed by the assessee under section 200(A) of the Act for the 2nd and 4th quarter of assessment year 2013–14. Being aggrieved with the orders passed under section 201(1) and 201(1A) of the Act, the assessee preferred appeals before the first appellate authority.
Learned Commissioner (Appeals) after considering the submissions of the assessee in the context of facts and material on record found that in the certificates issued under section 197(2) of the Act in respect of three payees allowing deduction of tax at lower rate the officer concerned has specified the amount which is subject to deduction of tax at lower rate. However, the assessee had continued to deduct tax at lower rate in respect of payment over and above the amount stipulated in the certificates issued under section 197(2) of the Act. Thus, learned Commissioner (Appeals) held that default on the part of the assessee in adhering to the amount specified in the certificates issued under section 197(2) of the Act for the purpose of deduction of tax at lower rate would make the assessee a assessee in default for short deduction of tax and would also make it liable for levy
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of interest under section 201(1A) of the Act. However, considering assessee’s alternative submission that the payees have offered the amount received from the assessee as income in their return of income and looking at the evidence filed in Form no.26A, learned Commissioner (Appeals) directed the Assessing Officer to examine the claim of the assessee and decide the matter following the CBDT Notification no.11/2016, dated 2nd December 2016.
The learned Counsel for the assessee drawing our attention the provisions contained under section 197(2) of the Act submitted, the section does not provide for issuance of certificate for deduction of tax at lower rate in respect of any income, but it speaks of payment made to specific person. Thus, the certificate to be issued under section 197(2) of the Act, is person specific and not income specific. He submitted, the amount specified in the certificates issued in Form no.13, is irrelevant for the purpose of application of section 197 of the Act. He submitted, when the main provision contained under section 197 of the Act, does not require issuance of certificate for deduction of tax at lower rate in respect of specific income, the form prescribed under rule 28AA(2) cannot override the main provision. Thus, he submitted, for deducting tax at lower rate in excess of the amount specified in the certificate issued in Form no.13 r/w section 197(2) of the Act, it cannot be treated as assessee in default to raise demand
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under section 201(1) / 201(1A) of the Act. In support of such contention, he relied upon the decision of the Tribunal, Kolkata Bench, in 21st Century Securities Ltd. v/s ITO, [2017] 78 taxmann.com 152 (Kol.).
The learned Departmental Representative strongly relied upon the observations of learned Commissioner (Appeals).
We have heard considered rival submissions and perused material on record. We have also carefully examined the decision relied upon by the learned Counsel for the assessee. Insofar as the factual aspect of the issue is concerned, there is no dispute that in terms with section 197(2) of the Act r/w rule 28AA, the Assessing Officer had issued certificates in respect of three parties permitting deduction of tax at source at lower rate. It is a fact on record, in these certificates issued in Form no.13, the Assessing Officer has specified the payment which is subject to deduction of tax at lower rate. Admittedly, the assessee has deducted tax at the rates specified in the certificates issued in Form no.13, for the entire payment made to the concerned parties during the year under consideration even in respect of payments made in excess of amount specified in Form no.13. The issue before us is, whether for deducting tax at lower rate on the payments exceeding the amounts specified in the certificates issued in
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form no.13, r/w section 197(2) and rule 28AA, the assessee can be treated as assessee in default for short deduction of tax. In this regard, the specific contention of the assessee is, as per section 197 of the Act, the certificate to be issued by the Assessing Officer under sub–section (2) is person specific and not income specific. It is observed, the Tribunal, Kolkata Bench, in 21st Century Securities Ltd. (supra), after interpreting the provisions of section 197 of the Act as well as rule 28AA has held that neither under section 197 of the Act nor in rule 28AA, there is reference to any income to be specified in the certificate to be issued for deduction of tax at lower rate. The Tribunal has held that the statutory provisions providing for deduction of tax at source at lower rate is person specific and cannot be extended to the amounts specified by the recipients of the payment while making application for grant of certificate in Form no.13, in terms of section 197 of the Act. Thus, the Tribunal has ultimately held that in such circumstances, if the assessee continues to deduct tax at the rate specified in the certificate, even, in respect of payment made over and above the sum specified in the certificate, it cannot be treated as assessee in default for short deduction of tax. In our view, the aforesaid decision of the Co–ordinate Bench squarely applies to the facts of the present case. In the absence of any contrary decision having been brought to our notice by learned Departmental
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Representative, we are inclined to follow the decision of the Co– ordinate Bench referred to above and hold that the assessee cannot be treated as assessee in default for short deduction of tax. Accordingly, we reverse the impugned orders of learned Commissioner (Appeals) on this issue in both the appeals. Grounds raised are allowed.
In the result, appeals are allowed. Order pronounced in the open Court on 25.10.2019
Sd/- Sd/- M. BALAGANESH SAKTIJIT DEY ACCOUNTANT MEMBER JUDICIAL MEMBER
MUMBAI, DATED: 25.10.2019 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Mumbai City concerned; (5) The DR, ITAT, Mumbai; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary
Assistant Registrar ITAT, Mumbai