CIT TDS Vs National Highways Authority of India (Madhya Pradesh High Court)
The case involves a batch of appeals filed by the Revenue under Section 260A of the Income Tax Act for Assessment Years 2008–09 and 2009–10, challenging orders of the Income Tax Appellate Tribunal (ITAT) which had granted relief to the assessee in respect of alleged default in deduction of tax at source (TDS).
The assessee had entered into a contract with a foreign company for development of national highways and made payments after deducting tax at source at concessional rates based on certificates issued under Section 197. These certificates permitted deduction at lower rates for specified assessment years. During verification, the Assessing Officer (AO) observed that payments made between April 2008 and June 2008 were subject to lower TDS even though the certificate under Section 197 was issued only on 30.06.2008. The AO held that the certificate could operate only prospectively and not retrospectively, and therefore treated the assessee as in default under Section 201(1), levied interest under Section 201(1A), and initiated penalty proceedings.
The assessee’s appeal before the Commissioner of Income Tax (Appeals) was dismissed. However, the ITAT allowed the appeal, holding that the assessee could not be treated as in default and that interest under Section 201(1A) was not leviable. The Revenue challenged this finding before the High Court.
