Tax deduction at source cannot be raised arbitrarily when an earlier binding view supports a lower withholding rate.

The Assessing Officer could not depart from the earlier determination on tax deduction at source without cogent, objective reasons, and the fresh insistence on deduction at 15% on gross payments was held arbitrary. The court noted that earlier assessment years had been dealt with on the basis that only the income element was taxable and a much lower withholding rate had been applied. The availability of a revision remedy did not bar writ jurisdiction where the subordinate authority acted in manifest disregard of a superior authority's considered order. The impugned withholding direction was quashed, and the assessee was entitled to a certificate under section 197(1) in line with the earlier order.

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Issues: Whether the Assessing Officer could depart from the earlier determination of tax deduction at source and insist on deduction at 15% on gross payments, or whether the assessee was entitled to a certificate under section 197(1) in line with the earlier order of the higher authority.

Analysis: The record showed that for earlier assessment years the tax deduction question had already been considered and the receipts from firm function services had been subjected to a much lower withholding rate on the footing that only the income element was taxable. The impugned order, however, adopted a fresh and substantially higher rate without any cogent material or satisfactory basis for departing from the prior considered determination. The availability of a revision remedy did not bar writ jurisdiction where the subordinate authority acted in manifest departure from a superior authority's order and the exercise of discretion became arbitrary. In fiscal administration, departures from an earlier binding or considered view must rest on valid and objective reasons.

Conclusion: The petitioner succeeded. The order directing withholding at 15% was quashed and the authority was directed to issue the certificate under section 197(1) in accordance with the earlier order.

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