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M/s. Twenty First Century Securities Ltd. Versus I.T.O. Ward-59 (4) (TDS) Kolkata

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 income specified in such certificate. A .....

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yment 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 assessee that certificate u/s 197 of the .....

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ee - 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 Enterprises Ltd., and M/S.Amrit Sales Promoti .....

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see 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 of tax at the rate specified in the certi .....

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nt 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 submitted their return of income on 14.10.200 .....

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t 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 the Act. 8. Before the Ld. C.LT.(A), the .....

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) 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. • That the Ld. A.O. admitted that i .....

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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 applicability of the decision of Hon'ble .....

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ure. 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 certificate has been issued in the case of .....

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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 of the assessee for the last three year .....

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tioned 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 at source at Mumbai and Bahadurgarh. Cert .....

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on 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 consideration to the rival submissions. Sec. .....

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[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 person responsible for paying the income shal .....

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quot;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 on estimated income, as reduced by the s .....

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lication 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 principal officer of a company,- (a) who i .....

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f 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 on the income declared by him in such r .....

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s 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 which such tax was deducted to the date on .....

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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 shows that once the AO issues a certificat .....

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