M/s Kribhco Shyam Fertilizers Ltd. Vs ITO (TDS) (ITAT Luknow)
On general reading of provisions of section 197 of the Act, it authorizes the Assessing Officer to prescribe deduction of TDS at any lower rate provided the facts and circumstances justify such deduction. Clause (2) of section 197 of the Act further states that when such certificate is given, the person responsible for paying the income shall, until such certificate is cancelled by the Assessing Officer, deduct income tax at the rates specified in such certificate or deduct no tax, as the case may be.
In our understanding the facts on record clearly demonstrate that the assessee has deducted TDS as per the direction of the Department in form of section 197 certificate issued by the revenue authorities. It is not disputed by the Department. The relevant returns have already been filed. There is no default in paying of taxes and therefore, there is no loss to the Revenue. Even the deductee has filed their returns and the tax effect clearly complied with. Reading provisions of section 197(1) and (2) together the action of the Assessing Officer is unjustified and the addition thereof acquires the nature of being arbitrary, unjudicious, perverse and bad in law therefore, liable to be deleted.
FULL TEXT OF THE ITAT JUDGMENT
These appeals preferred by the assessee pertain to assessment year 2008-09 and 2009-10.
2. These appeals were originally disposed of in its first round by the I.T.A.T. vide common order dated 25/06/2013. At the time of hearing Learned A. R. of the assessee invited our attention that in the first round of appeal the I.T.A.T. had inadvertently omitted to decide grounds of appeal No. 11 & 12 of the grounds of appeal. Thereafter, Misc. Applications No.153 and 154/Lkw/2015 were preferred by the assessee which were allowed by the I.T.A.T. recalling the order to the extent of these two grounds i.e. ground No. 11 & 12 which were not adjudicated upon in the order passed dated 25/06/2013. The ground No. 11 & 12 are:
“Ground No. 11 – On the facts and circumstances of the case and in law, Ld. CIT(A) erred in holding the entire amount paid / credited as per Form 16A issued to Bihar State Warehousing Corporation as rent & thus holding that such entire amount is subjected to TDS u/s 194I ignoring the fact that amount paid/credited to Bihar State Warehousing Corporation included rake handling charges & handling & transportation charges which could be subjected to TDS u/s 194C and not under section 194I.
“Ground No. 12: On the facts and circumstances of the case and in law Ld. CIT(A) erred in holding that the rent so paid to Bihar State Warehousing Corporation was subject to TDS u/s 194I at the rate under that section ignoring the fact that there was an order u/s 197 issued by the ACIT(TDS), Patna for deduction of tax at a lower rates instead of rates prescribed u/s 194C & 194I respectively. ”
3. The facts coming out from the record are that the assessee had paid to Bihar State Warehousing Corporation, Patna towards rent, rake handling and transportation charges. It had deducted tax in accordance with certificate of TDS dated 01/08/2007 issued by Dy.CIT, Circle-2 (the Assessing Officer of Bihar State Warehousing Corporation, Patna) for the financial year 2007-08 u/s 197 of the Act and by ACIT (TDS, Patna) for the financial year 2008-09 dated 27/10/2008. That as per instruction No. 7/2009 dated 22/12/2009 the power to issue certificate u/s 197 of the Act can be exercised by TDS Circle after letter dated 06/10/2008 was issued by CBDT to this effect. Prior to this date the concerned Assessing Officer used to issue such certificates under section 197 of the Act. It is due to such change in the jurisdiction of the officers to issue certificate u/s 197 of the Act that the certificate dated 01/08/2007 was issued by the DCIT, Circle02 (the Assessing Officer of Bihar State Warehousing Corporation, Panta) and the certificate dated 27/10/2008 was issued by the ACIT (TDS). That in effect u/s 197 of the Act certificates were issued by the Revenue authorities to the assessee directing the rate at which the TDS were to be deducted. In financial year 2006-07 relevant to assessment year 2007-08 the DCIT, Patna had issued a general certificate of low TDS dated 29/06/2006 on the application made by Bihar State Warehousing Corporation u/s 197(1) of the Act for deduction of TDS @5% in case of payment of rent u/s 194I and @0.5% in case of payment by way of contracts. There is no dispute for this year. The Department has accepted the TDS deducted for the assessment year 2007-08. The only issue has cropped up for assessment year 2008-09 and 2009-10 on the basis of certificate issued to the assessee, the tax was deducted from the payments to Bihar State Warehousing Corporation towards rent of warehouse u/s 194I and towards contract receipt on account of handling and transportation charges and rake handling charges u/s 194C of the Act as under:
