Case Law

[sunil mehta]

Suppose a lic agent submits lower tds certificate ,issued by I.Tax authorities, to lic authorities.The limit prescribed is Rs.20 lacs against lic commission income for f.y.2008-09 @ 3%.If commission payment exceeds rs.20 lacs during f.y.2008-09 at ant time ,say rs.22 lacs, then lic auth. deducts TDS @ 10.3 % on full amt. of rs.22 lacs and not on balance amt. of rs.2 lacs.(22lacs-20 lacs limit).Actually, the practice followed and accepted by the I.Tax dept. is that upto the limit prescribed by IT dept,TDS is deducted at a lower rate and thereafter TDS is deducted at 10.3 % on amt. exceeding Prescribed limit (in our case it is rs.20 lacs). The lic authorities are not ready to change this practice. They want to refer actual legal text matter which we submit as defence. I require any old circular or instructions from CBDT where the present practice followed is narrated.or Is there any case law supporting agent's view.

[Surender Gupta]

Statutory provisions like section 197 and rule 28 and 28A regarding deduction of tax at lower rate of salient on this issue. I think, it should be clear from the bare reading of the certificate issued by income tax department about the manner in which TDS to be deducted. Alternatively, it would be a better option if you approach the certificate issuing authority to clarify the manner in which TDS is to be deducted once the maximum limit prescribed in the certificate is crossed.

I agree with the view expressed by Mr. Surender Gupta. Only a mutual negotiation with the LIC or department would solve your problem in a better way. Last resort is judiciary.

AI Summary

Tax Deduction Certificate treatment: clarify whether lower TDS applies only up to threshold or on entire payment when exceeded
The central issue is whether a Tax Deduction Certificate's lower rate applies only to amounts up to its prescribed threshold with the higher withholding rate applying solely to the excess, or whether exceeding the threshold requires applying the higher rate to the entire payment. The operative guidance is that the certificate's plain wording governs the manner of deduction and that the taxpayer should seek clarification from the issuing authority; negotiation with the payer or administrative or judicial remedy are practical options.