TaxTMI 
TaxTMI 
2017 (2) TMI 509
X X X X Extracts X X X X
X X X X Extracts X X X X
....terest paid. The Assessee however deducted tax at source at a lesser rate on the entire payment, i.e., over and above the sum specified in the certificate u/s.197 of the Act. The details of such payment are as follows: Amount of interest Specified in the certificate u/s.197 Amount of interest paid by the Assessee M/S.MKJ Enterprises Ltd. Rs.5,85,493 Rs. 6,26,559 M/S.Amrit Sales Promotion Pvt. Ltd. Rs.44,44,14,448 Rs.5,47,02,126 3. The AO was of the view that the deduction of tax at the rate specified in the certificate u/s.197 of the Act was valid only in respect of the amount specified in the certificate and in respect of the remaining sum, the Assessee ought to have deducted tax at source at the normal applicable rate. To the extent the Assessee failed to do, the AO held that there was short deduction of tax at source and he levied interest u/s.201(1A) of the Act in respect of such short deduction of tax at source, as per the following details: Deductee Payment made Specified as per 197(1) Excess amount paid Short deduction Date of payment Month of default Interest Amrit Sales Promotion P.L. 626....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the assessee-deductor, there was no short deduction of TDS. * That the Ld. A.O. admitted that in the instant case, the assessee was not an assessee- in-default in terms of sec.20 1(1) of the Act. * That the Ld. A.O. on erroneous interpretation took the estimated figure shown in the Annexure as gross payment of interest during the year and hence treatment of such an estimated figure as representing actual amount of interest liable for deduction of tax at normal rate was erroneous and reliance on the decision of Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverages (P) Ltd. (supra) was thus misplaced. * That the deductees had paid excess advance tax and/or had excess TDS credit and hence they claimed refund of tax. Hence interest could not be levied in such circumstances u/s.201(lA). Several case laws were relied upon in support of the above settled position in law. 9. The Ld. C.I.T.(A), however, found the explanation of the assessee not acceptable as, according to him, the Ld. A.O. has rightly considered the applicability of the decision of Hon'ble Supreme Court in the case of CIT vs. Hindustan Coco Cola Beverages Pvt. Ltd. [293 ITR 226 (SC)] to hol....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mentioned in such certificate. It was thus contended that neither in the Act nor in the Rules is there a bar for deducting tax at lesser rate on the sums paid over and above the sums specified in certificate u/s 197(1) of the Act. Our attention was also drawn to the decision of the Hon'ble Punjab and Haryana High Court in the case of CIT vs Parle Biscuits Pvt. Ltd. 351 ITR 138 (P&H). In the aforesaid case there were two units of the person deducting tax at source at Mumbai and Bahadurgarh. Certificate u/s 197 was issued in the name of Mumbai unit for short deduction of tax. The person making payment namely Bahadurgarh unit also deducted tax at source at a lesser rate. Proceedings were initiated for short deduction of tax against the Bahadurgarh Unit. The Hon'ble Punjab and Haryana High Court held that there was no short deduction of tax at source and the certificate u/s 197 of the Act was valid for both the units of the person making payment. Our attention was also drawn to the decision of the Hon'ble Supreme Court in the case of GE India Technology Centre P.Ltd. vs CIT 327 ITR 456 (SC) wherein it was held that in case where the AO himself had inferred a lower rate, there is no jus....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dy 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. (2) The certificate shall be valid for the assessment year to be specified in the certificate, unless it is cancelled by him at any time before the expiry of the specified period. An application for a fresh certificate may be made, if required, after the expiry of the period of validity of the earlier certificate. (3) The certificate shall be valid only for the person named therein. (4) The certificate shall be issued direct to the person responsible for paying the income under advice to the applicant. 13. Section 201(1) & (1A) of the Act reads thus: "Consequences of failure to deduct or pay. 201. (1) Where any person, including the principal officer of a company,- (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in sub-section (1A) of section 192, being an employer, does....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessee in default under the first proviso to sub- section (1), the interest under clause (i) shall be payable from the date on which such tax was deductible to the date of furnishing of return of income by such resident." 14. A perusal of the provision of section 197(1) of the Act shows that the recipient of the payment has to satisfy the AO that the total income of the recipient justifies deduction of tax at source at lower rate or no deduction of income tax. A reading of section 197(2) of the Act shows that once the AO issues a certificate for deduction of tax at a lower rate or no deduction of income tax then the person making the payment is at liberty to deduct tax at rates specified in the certificate or deduct no tax as the case may be. In our view the provision of section 197(2) of the Act does not make any reference to any income specified in such certificate. A perusal of Rule 28AA(2) of the Rules also shows that the certificate issued u/s 197 of the Act will be valid for the assessment year specified in the certificate. Even in the rules there is no reference to the payment without TDS or at lesser rate should be on the sums specified as payable in the certificate. It ....