TDS certificate under Section 195(2) barred default proceedings where it was never cancelled under Section 195(4).

A valid certificate issued under Section 195(2) of the Income-tax Act, 1961 continued to operate because it had never been cancelled under Section 195(4). On that basis, the assessee was not obliged to deduct tax at source and could not be treated as an assessee in default under Section 201(1). The Tribunal's unchallenged factual finding on non-cancellation was sufficient to sustain its order, so the further questions concerning the character of the payment and the impact of the double taxation avoidance agreement were not required to be decided.

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Issues: Whether the assessee could be treated as an assessee in default for failure to deduct tax at source when the certificate granted under Section 195(2) of the Income-tax Act, 1961 had not been cancelled under Section 195(4) of the Income-tax Act, 1961.

Analysis: The Tribunal had recorded an unchallenged finding that the certificate issued under Section 195(2) was never cancelled under Section 195(4). On that footing, the assessee was not required to deduct tax at source and could not be proceeded against as an assessee in default under Section 201(1). Since that finding was sufficient to sustain the Tribunal's order, the referred questions regarding the nature of the payment and the effect of the Double Taxation Avoidance Agreement did not require determination.

Conclusion: The assessee could not be treated as an assessee in default under Section 201(1) in the absence of cancellation of the certificate granted under Section 195(2); the reference was accordingly answered in favour of the assessee.

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