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2020 (12) TMI 934 - HC - Income TaxRevision u/s 264 - Order u/s 197 refusing to grant a certificate of tax deduction at source at Nil rate to the petitioner company - Petitioner is a wholly owned subsidiary of Manpower Holdings Inc USA and is engaged in the business of providing manpower related services - case of petitioner, the ratio of tax deduction at source to profits has been as high as 1758% in the recent past and the petitioner company has refunds due and payable which have arisen essentially on account of high rate of TDS - petitioner contended that the impugned order was contrary to the rule of consistency as the 1.50% rate with respect to payment under Sections 194J and 194I of the Act specified in the impugned order was three times higher than the 0.50% rate of tax deduction at source determined in the immediately preceding year by the respondent - HELD THAT:- This Court finds merit in the submission of the petitioner that since the impugned order was passed after an approval from the CIT, it cannot be challenged by way of a revision petition before the CIT under Section 264 of the Act. To hold otherwise, would amount to directing the petitioner to file an ‘appeal from Caesar to Caesar’. In the present writ petition, the petitioner has not claimed that the payments received by it are in the nature of technical services subject to 2% rate. The respondent has itself admitted in the impugned reasons that the nature of services of petitioner is ‘Consultancy’ which falls under definition of "fees for technical services" subject to TDS rate of 1.50% for the current financial year 2020-21. Consequently, there is no need for any direction to be given to the petitioner to file a fresh application under Section 197. This Court is also of the view that the reliance placed by the respondent upon para no.4 of the impugned reasons is misplaced inasmuch as the rates mentioned therein have been superseded by the subsequent order dated 7th November, 2019 passed by the CIT under Section 264 of the Act. Accordingly, the respondent could not have relied upon the initial rates of 2019-20, which have been set-aside/superseded, to determine the average rate of TDS. This Court is in agreement with the submission of learned standing counsel for the respondent that it is the decision making process and not the decision that can be impugned in a writ petition. To appreciate the decision making process, it is necessary to outline the provision under which the TDS rates have to be determined under Section 197 of the Act. Rule 28AA of the Income Tax Rules prescribes the procedure to be followed by the assessing officer in determining the 'existing and estimated liability'. Perusal of Rule 28AA of the Income Tax Rules shows that the considerations prescribed under clause (2) are mandatory and the department is bound to determine the yearly TDS rates on the four parameters prescribed therein. It is settled law that the Government is bound to follow the rules and standards they themselves had set on pain of their action being invalidated. In the present case, the assessing officer has not followed the aforesaid rule as there is no reference in the impugned reason to any computation carried out under Rule 28AA. This Court vide order dated 8th December, 2020 had granted time to the respondent to place on record the computation of TDS rates under Rule 28AA, if any. Despite the said opportunity, neither any computation was filed nor was any reasonable explanation given as to why the computation under Rule 28AA was not carried out. Consequently, this Court is of the opinion that the impugned order is liable to be quashed on the ground that the decision making process in the present case is contrary to law. This Court finds that there is nonapplication of mind which vitiates the impugned order and reasons. Accordingly, we set aside the impugned order and reasons and remand the matter to respondent no.2 for fresh determination in accordance with law as expeditiously as possible preferably within a period of two weeks. In the interim, we direct that the benefit of revised TDS rates prescribed for financial year 2019-2020 (by respondent no.1 vide order dated 7th November, 2019) read with rebate of 25% given by Ministry of Finance on account of Covid-19 crisis from the rates applicable in the preceding year 2019-20 vide Press Release dated 13th May, 2020 be given to the petitioner.
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