Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2019 (5) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (5) TMI 557 - HC - Income TaxWrit against order of department rejecting issuance of certificate u/s 197 - certificate for lower rates or no deduction of income tax (TDS) - petitioner referred to the DTAA between India and Mauritius to argue that as per the provisions contained in the said treaty, the income out of sale of shares cannot be taxed in the hands of the assessee in India - in absence of the certificate issued by the Authority u/s 197 the payer would be under obligation to deduct tax at source in terms of Section 195 - HELD THAT:- Had the AO in the present case sufficient prima facie material to demonstrate that the entire transaction from the inception was sham and colourable device and a bogus transaction to simply avoid tax, it was still open for him to express his opinion accordingly and refuse to grant certificate u/s 197. In the present case, as perusal of the impugned order would convince us that the material at his command fell short of this requirement. We have summarized principle factors which the AO pressed in service. Mere fact that the assessee company has not transacted any other business by itself may not be conclusive. The reference to the assessee unable to produce TRC of the companies which hold shares in the assessee company is erroneous. The petitioner would point out that such certificates were produced before the AO. The observation that mere transfer of money though banking channel would not be conclusive, may be quite correct but the same cannot be a ground against the assessee unless there is adverse material. It is true that the extent of administrative expenditure and the employment structure may be some of the factors which eventually would go to establish whether the transaction was sham and the very existence of the assessee was fraudulent, however by themselves may not be sufficient. All these aspects can and need to be gone into in the assessment proceedings. Provisions contained in Section 197. One of the main benefits for an assessee who obtains a certificate u/s 197 for no deduction of tax at source or for deduction of tax at low rate would be to receive full payment from the payer without exposing the payer to the possibility of being declared as deemed defaulter. Yet another purpose of Section 197 would be to secure the interest of the Revenue. We fully share the anxiety of the Revenue that without adequate protection of recovery, the possible tax component should not be released in favour of the assessee. In view of the discussion above, we propose to quash the impugned order dated 20.6.2018 passed u/s 197 and after balancing the equities, direct the respondents to release the withheld payment subject to adjustment in the assessment. AO shall issue necessary certificate of no requirement of deducting tax at source to the petitioner u/s 197.The tax already deducted by the payer as per the directives of the Assessing officer and deposited in the Government revenue shall be released in favour of the petitioner along with interest if any payable as per law latest by 15.6.2019.
|