2019 (12) TMI 442 - AT - Income Tax

Assessee not in default for tax short deduction exceeding certificate limits

The Tribunal held that the assessee cannot be treated as in default for short deduction of tax under section 201(1) of the Income-tax Act when the ... Short deduction of tax at source over and above the amount specified in the lower TDS certificate - scope of certificate issued u/s 197 - interest levied on such amount u/s 201(1A) of the Act - Whether for deducting tax at lower rate on the payments exceeding the amounts specified in the certificates issued in 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? - HELD THAT:- 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 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 M/S. TWENTY FIRST CENTURY SECURITIES LTD. VERSUS I.T.O. WARD-59 (4) (TDS) KOLKATA [2017 (2) TMI 509 - ITAT KOLKATA], 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. The assessee cannot be treated as assessee in default for short deduction of tax - Appeal allowed. Issues:Challenging demand under section 201(1) for short deduction of tax at source and interest levied under section 201(1A).Detailed Analysis:Issue 1: Challenging demand under section 201(1) for short deduction of tax at source and interest levied under section 201(1A)The appeals arose from orders passed by the Commissioner of Income Tax (Appeals) relating to the 2nd and 4th quarter of the assessment year 2013-14. The assessee challenged the demand raised under section 201(1) of the Income-tax Act due to alleged short deduction of tax at source and interest levied under section 201(1A). The Assessing Officer found that the assessee had deducted tax at a lower rate on payments exceeding the amounts specified in certificates issued under section 197(2) of the Act. The Commissioner (Appeals) upheld the default finding but directed the Assessing Officer to examine the matter considering the payees' income declarations and evidence filed. The assessee argued that section 197(2) does not require income-specific certificates but person-specific ones. Citing a Tribunal decision, the assessee contended that the deduction of tax at the specified rate cannot be extended to amounts exceeding the certificate's sum. The Tribunal agreed, holding that the assessee cannot be treated as in default for short deduction of tax in such cases, reversing the Commissioner's orders.This judgment clarifies the interpretation of section 197(2) of the Income-tax Act regarding tax deduction at source. It emphasizes that certificates issued under this section are person-specific, not income-specific. The decision provides guidance on the treatment of tax deductions exceeding the specified certificate amounts, protecting assesses from being deemed in default for short deduction of tax.