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2019 (7) TMI 1503 - HC - Income TaxLower withholding certificate u/s 197 - existing and estimated liability - certificate for TDS for the immediate earlier AY @ 1.5% where as in current year it was directed TDS @ 5% - HELD THAT:- Two factors require to be noted here. One that without any change in the circumstances, between 24th May 2019 when he first saw the file and 28th May 2019 when he next saw it, the CIT reviewed his earlier decision instructing his subordinate to put up the file again proposing a 2% TDS. Secondly, his comments were cryptic. That there was a PE of the Petitioner in India was not a new development. The second, that accounts have not been given, he failed to acknowledge that till that date accounts were not even called for from the Petitioner. Yet the decision was given: “Issue at 5%’. The arbitrary nature of such decision is thus self-evident. In the present case the impugned withholding certificate which directs TDS to be deducted at 5% on the payments made by the Indian entities to the Petitioner is unsustainable in law, inasmuch as it is not based on valid reasons and is contrary to the legal requirement spelt out in Section 197(1) of the Act read with Rule 28AA of the Rules. The impugned certificate is hereby quashed. The Court directs Respondent No.1 to once again consider the application made by the Petitioner on 30th April 2019 for issuance of a lower withholding certificate under Section 197(1) afresh in accordance with law. - Till such time the fresh decision is communicated to the Petitioner, the decision in respect of TDS for the immediate earlier AY @ 1.5% will continue to apply. Requirement of reasoned order u/s 197 - application made for @ nil rate of TDS or alternative @ 1.04% - AO posted certificate @5% - no reasons communicated to assessee - Whether posting rate of TDS on Traces website is sufficient - HELD THAT:- Even if one were to accept the explanation offered by Mr. Bhatia that on the online portal only a certificate is posted and not the reasons for the decision, then surely there should be a separate written order communicated to the Petitioner giving the reasons for fixing the TDS rate under Section 197(1) since this is mandated by law. To reiterate, that decision which is quasi-judicial in nature, has to be taken by the AO u/s 197(1) on objective criteria and be based on relevant material provided by the applicant and available with the Department. It must be supported by reasons available on the file which conform to the requirement of Section 197 of the Act read with Rule 28 AA of the Rules. Those reasons must be communicated to the applicant.
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