TaxTMI 
TaxTMI 
TaxTMI 
2010 (4) TMI 414
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....9, the petitioner filed an application under section 197 of the Income-tax Act, 1961, requesting the first respondent to issue a certificate authorising MMRDA to deduct tax at the rate of 0.11 per cent. from the payments made by it to the petitioner under the contract. The case of the petitioner is that the shares of Larsen and Toubro and of its Malaysian partner in the taxable income are determinate ; the profit sharing ratio between the members of the consortium being 60 (L&T) : 40 (Scomi). The case of the petitioner is that the AOP would be charged to tax, to the extent of the share of L&T in the taxable income, at 33.99 per cent. and to the extent of Scomi's share in the taxable income, at 42.23 per cent. Based on the tax computation, the percentage of total tax liability to the Revenue was estimated at 0.11 per cent. It was on this basis that the first respondent was requested to issue a certificate granting a rate of 0.11 per cent. for withholding tax in respect of payments received by the AOP from MMRDA. Form No. 13 appended to the application, inter alia, contained an entry requiring a disclosure of the total income assessed in the last three assessment years and the ....
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....ejection was maintained. 5. The petitioner moved the Commissioner of Income-tax (TDS), in revision under section 264. By an order dated January 29, 2010, the Commissioner rejected the revision application holding, inter alia, that where the Assessing Officer rejects an application under section 197, no approval of the Commissioner is necessary. In terms of Circular 7 of 2009, issued by the Central Board of Direct Taxes, the alternative plea of the assessee for directing a deduction at 2 per cent. under section 194C was also rejected. The assessee once again sought a reconsideration of the rejection by the Commissioner. The application for reconsideration has also been dismissed by an order dated February 9, 2010. The Commissioner has furnished two reasons for the rejection. Firstly, the Commissioner has formed the view that if the benefit of a lower rate for withholding tax is not granted under section 197 to the assessee, no hardship or prejudice would be caused to the assessee as a result of the rejection of the application because, the assessee would be entitled to get a refund of excess tax paid, if any, together with interest. The second reason which weighed with the Co....
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....lready paid and tax already deducted at source, as a percentage of the payment referred to in section 197 for which the application under sub-rule(1) of rule 28 has been made ; or (ii) at the average of the average rates of tax paid by the assessee in the last three years ; whichever is higher." 7. Rule 29B governs applications for certificates authorising receipt of interest and other sums without deduction of tax. The Assessing Officer, when he decides an application under section 197(1) must of necessity pass an order on the application. Where the application is allowed, that application culminates in the grant of a certificate in accordance with the provisions of sub-section (1) of section 197. But it would be far-fetched to accept the view that the rejection of an application must lie in the absolute discretion of the Assessing Officer or that the Assessing Officer is not bound to indicate reasons or a basis for the rejection of the application. The fact that Parliament has empowered the Board to frame Rules under subsection (2A), having due regard to the convenience of assessees and the interests of the Revenue specifying the cases and circumstances under which an applica....
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.... the mechanism under rule 28AA would fail in the case of the assessee for the reason that the financial statements of the assessee for the three previous years were unavailable. The assessee had brought to the notice of the Assessing Officer, the circumstance that during the financial year 2008-09, it had not earned any revenue for executing the project. That is necessarily as a result of the fact that the project was awarded by MMRDA on January 9, 2009. Sub-rule (1) of rule 28AA to which a reference has been made earlier would indicate that the Assessing Officer, on an application made in Form No. 13 under section 197 may issue a certificate in accordance with the provisions of sub-section (1) of section 197 for deduction of tax at source at the rate or rates calculated in the manner specified thereafter. Sub-clauses (i) and (ii) which follow thereafter, provide the mode for computing the rate at which the tax is to be deducted at source. Sub-clause (i) refers to the average rate of tax as determined by the total tax payable on estimated income as reduced by the sum of advance tax already paid and tax deducted at source as a percentage of the payment referred to in section 1....