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2017 (2) TMI 509 - ITAT KOLKATA

2017 (2) TMI 509 - ITAT KOLKATA - TMI - Deduction of tax at a lower rate - levy of interest u/s 201(1A) - submission of the Assessee that the certificate issued by the AO u/s 197(1) clearly specifies that the assessee was authorised to pay any sum by way of interest other than interest on securities as referred to in section 194A after deducting the tax at source @ 1% plus surcharge and education cess thereon - Held that:- Provision of section 197(2) of the Act does not make any reference to any .....

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nts specified by the recipient of the payment while making an application for grant of certificate u/s 197 of the Act in Form No.13. - AO has annexed the details in Schedule-II of Form No.13 to the certificate issued u/s.197 of the Act. By doing so, the AO cannot treat the assessee as a person who has not deducted tax at source to the extent of the payments made by the assessee over and above the sum specified in the certificate u/s 197 of the Act. We therefore agree with the arguments of a .....

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e deleted. - Decided in favour of assessee - I.T.A Nos 464 & 465/Kol/2014 - Dated:- 3-2-2017 - Sri N. V. Vasudevan, JM And Shri Waseem Ahmed, AM For the Appellant : Shri Ravi Tulsiyan, FCA For the Respondent : Shri Sallong Yaden, Addl. CIT(DR) ORDER Per N. V. Vasudevan, JM These are appeals by the Assessee against two orders both dated.28.11.2013 of CIT(A) -I, Kolkata, relating to AYs 2008-09 & 2009-10 respectively. 2. The undisputed facts are that the Assessee paid interest to M/S.MKJ Enter .....

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ctual amount of interest 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 ₹ 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 o .....

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made Specified as per 197(1) Excess amount paid Short deduction Date of payment Month of default Interest Amrit Sales Promotion P.L. 626559 585493 41066 8036 @ 19.57%) 31/03/2008 6 482 MKJ Ent.Ltd. 54792126 44441448 10350678 2228500 @ 21.53% 31/03/2008 7 155995 4. On the excess amount as specified in the 197(1) certificate, Tax was deducted @ 1.03% instead of 20.6% in the case of Amrit Sales Promotion P.Ltd and @ 1.13% instead of 22.66% in the case of MKJ Enterprises Limited. The deductees submi .....

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01(1A) of the Act for both the Assessment years, the CIT(A) confirmed the order of the AO. Hence these appeals by the Assessee before the Tribunal. 7. The plea of the Assessee before the AO was that the payees had paid taxes on the interest income and had filed their returns of income for the respective AYs and therefore there was no default or loss to the revenue. This argument was held to be not acceptable by the revenue authorities in so far as it concerns the levy of interest u/s.201(1A) of .....

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her, in consequence of such action as (1) above, the A.O. was justified in raising interest demand of ₹ 1,55,995/ - u/s.20 l(lA) of the Act on the assessee? The arguments advanced before the Ld. C.I.T.(A), in brief, were on following counts: • That a perusal of 197(1) certificate would reveal that the Principal Officers of the organizations as per attached Annexure were authorized to deduct tax @ 1 % and hence in the case of the assessee-deductor, there was no short deduction of TDS. .....

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ase 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 appli .....

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is mandatory and is compensatory in nature. The interest charged upon the assessee u/s.201(IA) was thus upheld. 10. Before us the submission of the learned counsel for the Assessee was that the certificate issued by the AO u/s 197(1) of the Act clearly specifies that the assessee was authorised to pay any sum by way of interest other than interest on securities as referred to in section 194A of the Act after deducting the tax at source @ 1% plus surcharge and education cess thereon. Similar cer .....

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n other words it was contended that the certificate u/s 197(1) of the Act is person specific and is not with reference to any sum on which TDS has to be made at a lower rates. It was further submitted that it was the person to whom the payment is made i.e., the payee who has to obtain a certificate u/s.197 of the Act. Before issue of a certificate u/s.197 of the Act, the payee has to make an application to the AO in Form No.13. Form No.13 amongst other details also requires the details of income .....

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deducting the tax and whose name is 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 a .....

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r 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 justification whatsoever for the AO to infer short deduction in respect of similar payments not covered by the certificate. 11. The ld. DR reiterated the stand of the revenue as reflected in the orders of the revenue authorities. 12. We have given a careful cons .....

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er the provisions of sections 192, 193, [194,] 194A, [194C,] 194D, [194G] [, 194H] [, 194-I] [, 194J] [, 194K], 194LA] and 195, the Assessing Officer is satisfied] that the total income of the recipient justifies the deduction of income-tax at any lower rates or no deduction of income-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 perso .....

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2011, w.e.f. 1-4-2011 read as under : "28AA. Certificate of no deduction of tax or deduction at lower rates from income other than dividends.-(1) The Assessing Officer, on an application made by a person under sub-rule (1) of rule 28, may issue a certificate in accordance with the provisions of sub- section (1) of section 197 for deduction of tax at source at the rate or rates calculated in the manner specified below : (i) at such average rate of tax as determined by the total tax payable .....

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e 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 pr .....

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erson, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default in respect of such tax if such resident- (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due .....

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s is referred to in that sub-section does not deduct the whole or any part of the tax or after deducting fails to pay the tax as required by or under this Act, he or it shall be liable to pay simple interest,- (i) at one per cent for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and (ii) at one and one-half per cent for every month or part of a month on the amount of such tax from the date on whi .....

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e 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 sh .....

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