TaxTMI 
TaxTMI 
2018 (2) TMI 192
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....ioner's pending Appeal for the assessment year 2012­13 in respect of a demand of Rs. 6.68 Crores. The hearing of which had taken on 15 February 2017, when detailed written submissions were filed, within a time frame; 3. So far as relief (b) above is concerned, Mr. Suresh Kumar, learned Counsel for the Revenue, on instructions of CIT(A)­Respondent No. 3 states that the pending Appeal in respect of assessment year 2012­13 would be disposed of on or before 1 March 2018. Statement accepted. In view of the above statement, this relief is not being pressed by the Petitioner. 4. The relevant facts leading to the filing of this Petition are that the Petitioner is engaged in providing telecommunication services. In the course of its business, Petitioner earns its revenue from sale of post and prepaid cards, sale/ lease of equipments and providing various value added services. Petitioner has huge accumulated losses. Its return of income for the Assessment Years 2014­15 to 2016­17, are loss returns aggregating to Rs. 1330.00 Crores and in which an aggregate claim to a refund of Rs. 121.00 Crores has been made. 5. In the course of its business, Petitioner receives va....
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...., they were examined by Respondent No. 1. Thereafter, on 4 May 2017, Respondent No. 1 issued a certificate under Section 197 of the Act, directing the deduction of tax at nil rate by the various persons listed in the certificate while making payments to the Petitioner under Sections 194, 194A, 194C, 194I, 194H and 194J of the Act. This would result in a relief of Rs. 238.90 Crores as the same would not be deducted as tax at source. Thus, obviating the need for filing of refund claim with the Revenue for the assessment year 2018­19. 8. Thereafter, on 16 August 2017, Respondent No. 1 informed the Petitioner that he is reviewing cases where certificate under Section 197 of the Act has been issued in cases where huge outstanding tax demand is pending. Consequently, the above communication requested the Petitioner to furnish the details of outstanding tax demands. The Petitioner responded to the same by its letter dated 20 August 2017, giving the details of the tax outstanding. It reiterated its submissions made in the application made on 27 February 2017. Besides pointing out that a further refund of Rs. 34.37 Crores was due to them from the Revenue for tax deducted at source in ....
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....;tax, as the case may be, the Assessing Officer shall, on an application made by the assessee in this behalf, give to him such certificate as may be appropriate. (2) Where any such certificate is given, the person-responsible for paying the income shall, until such certificate is cancelled by the Assessing Officer, deduct income­tax at the rates specified in such certificate or deduct no tax, as the case may be. (2A) The Board may, having regard to the convenience of assessees and the interests of revenue, by notification in the Official Gazette, make rules specifying the cases in which, and the circumstances under which, an application may be made for the grant of a certificate under sub­section (1) and the conditions subject to which such certificate may be granted and providing for all other matters connected therewith. Rule 28AA­ Certificate for deduction at lower rates or no deduction of tax from income other than dividends.­ (1) Where the Assessing Officer, on an application made by a person under sub­rule (1) of rule 28 is satisfied that existing and estimated tax liability of a person justifies the deduction of tax at lower rate or no deduction of ta....
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....rores. While undisputedly, Petitioner is entitled to refund of Rs. 7.30 Crores (being the deposit made), consequent to the order dated 27 May 2016 passed by the Tribunal in respect of Assessment Years 2009­10 to 2012­13. The aforesaid amount continues to be retained by the Revenue and it could be easily adjusted against the demand of Rs. 6.90 Crores. In any event, the relatively meagre amount of Rs. 6.90 Crores of tax demand as against a refund of over Rs. 121.00 Crores would not justify denial of the benefit of about Rs. 238.00 Crores as available under Section 197 of the Act.; (d) Lastly, it is submitted that the amount of Rs. 6.68 Crores is on account of an order for Assessment Year 2012­13 which is pending before the CIT(A). This issue to the knowledge of all concerned is concluded in favour of the Petitioner and kept pending deliberately. This, even after the hearing was completed, so far back as in February 2017. 13. On the other hand, Mr. Suresh Kumar, learned Counsel for the Revenue supports the impugned order dated 23 October 2017 and submits as under:­ (a) An equally efficacious alternative remedy under Section 264 of the Act as an by way of a Revision ....
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....& Toubro (supra). It is also not disputed before us that in this case, the Revision would be before the same authority who gave the concurrence or to an authority of equal rank/designation. 16. In the above view, the decision of this Court in Larsen & Toubro Ltd., (supra) would not apply to the present facts. As in this case, the Revision i.e. alternative remedy would in facts be from "Caesar to Caesar." Therefore, in such a case an alternative remedy would be a futile/empty formality and not an efficacious remedy. (Please see Ram & Shyam Co. v/s. State of Haryana 1985 (3) SCC 267). 17. In the above circumstances and in the present facts, there is no merit in preliminary objection taken by the Revenue. Therefore, we proceed to examine the issue arising herein and decide the same. 18. Section 197 of the Act permits/ allows an assessee to make an application to the Assessing Officer, that in its case, the deduction of tax under the Sections specified therein should be at lower rates or at nil rates instead of the normal rate prescribed under the Act. The Assessing Officer, if satisfied, with the application made, bearing in mind the provisions of the Act and the Rules, is obliged ....
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....it filed by the Revenue. This Court in Larsen & Toubro Ltd., (supra) has held that an issue of certificate must necessarily be preceded by an order under Section 197(1) of the Act. In fact the issue of certificate is the result of an order holding that the applicant is entitled to a certificate under Section 197 of the Act. It must of necessity be so, as in the absence of the reasons being recorded, the Certificate under Section 197 of the Act, would not be open to challenge by the Revenue, as it would be impossible to state that it is erroneous and prejudicial to the Revenue. The Revenue would be helpless. Therefore, the recording of reasons is necessary as only then it could be subject to Revision by the Commissioner of Income Tax under Section 263 of the Act. 21. Therefore, it appeared to us while correcting the order which was dictated in Court on 16 January 2017 that the order prior to issuing the certificate dated 4 May 2017 ought to have been communicated to the Petitioner along with the notice, seeking to review the earlier certificate on account of mistake. In the above circumstances we kept the petition on board for directions on 23 January 2018 as this issue was not add....
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....certificate. This is particularly so as in the present facts the show cause notices dated 16 August 2017 and 30 August 2017 seeking to review the Certificate dated 4 May 2017 did not indicate that the review is being done as the Certificate dated 4 May 2017 was granted without considering the applicability of Rule 28 AA of the Rules in the context of the petitioner's facts. Therefore, there was no opportunity/occasion for the petitioner to seek a copy of the reasons recorded while issuing a certificate dated 4 May 2017. Moreover, this becomes all the more important as we have found on examination of facts that there is no change in facts as existing on 4 May 2017 and as existing when the impugned order dated 23 October 2017 was passed. Thus, in the present facts, according to us, there is a flaw in the decision making process which vitiates the impugned order dated 23 October 2017. 23. Apart from the above, we shall examine the issue of cancellation of certificate dated 4 May 2017 by the impugned order dated 23 October 2017 and examine whether the same can be sustained on grounds specified therein, de hors the issue of breach of natural justice. However, before examining the other....
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....nt is completed, it is not open to the Assessee therein to contend that it is not liable to tax till its claim to exemption is determined during assessment proceedings. In the present facts, the carry forward loss of the Petitioner are so huge that even if the Petitioner makes any profits in the subject assessment year, there would be no taxable income for the subject Assessment Year. Thus, the aforesaid decision of the Madras High Court in Ansaldo Energia SpA. (supra) would have no application to the present facts. 25. The impugned order dated 23 October 2017 cancels the certificate dated 4 May 2017 on the following two grounds:­ (a) the financial condition of the Petitioner is such that any future tax payable may not be recoverable from the Petitioner; and (b) there is outstanding tax demand of Rs. 6.90 Crores payable by the Petitioner. 26. So far as ground (a) above viz: the earlier certificate is cancelled because of the current financial health/ condition of the Petitioner is such that it would be difficult to recover any future liability raised against the Petitioner-Company. A mere averment is made to above effect without indicating any basis for the conclusion. 27.....
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....o be made on valid and cogent reasons, i.e. when there is material on record to justify the departure. The impugned order does not indicate any such material, nor Revenue is able to show us any such change in circumstances which would warrant canceling certificate dated 4 May 2017. Therefore, the basis/ ground (a) of the impugned order is not sustainable in the facts and renders the order bad. 29. So far as ground (b) above viz. outstanding tax demand of Rs. 6.90 Crores is payable to the revenue by the petitioner. Therefore, the certificate dated 4 May 2017 cannot be sustained, resulting in its cancellation. We note that neither Section 197 of the Act nor Rule 28AA of the Rules provide that no certificate of nil/lower rate of withholding tax can be granted if any demand, howsoever minuscule, is outstanding. In fact Rule 28 AA(2) of the Rules requires the authority to determine the existing/estimated liability taking into consideration various aspects including the estimated tax payable for the subject assessment year and also the existing liability. The existing and estimated liability would also require taking into account the demands likely to be upheld by the appellate authorit....