Case Law Details
Larsen & Toubro Ltd Vs. ACIT (Bombay High Court)
The assessee, a consortium, was awarded a contract by MMRDA for the monorail project. The assessee filed an application u/s 197 for a certificate that MMRDA be directed to deduct tax at 0.11% on the ground that the percentage of total tax liability to revenue was estimated to be 0.11%.
The AO rejected the application on the ground that Rule 28AA required figures for three previous years which were unavailable and no eTDS returns were filed by the assessee. A revision application filed u/s 264 was rejected by the CIT on the ground that (i) an order rejecting a s. 197 application is not an “order” for purposes of s. 264 and (ii) by not giving the benefit of a lower rate for withholding u/s 197, no hardship or prejudice is caused to the assessee as the assessee would get a refund of the excess tax paid, if any, with interest. On a Writ Petition filed by the assessee, HELD, censuring the department:
(i) It is far fetched to accept the view that the rejection of a s. 197 application lies in the absolute discretion of the AO or that the AO is not bound to indicate reasons for the rejection of the application. The AO cannot be heard to urge that though an assessee fulfills all the requirements which are stipulated in Rule 28AA/29B, he possesses an unguided discretion to reject the application. In rejecting an application, he is bound to furnish reasons which demonstrate application of mind to the germane. Hence, It is impossible to accept the view that the rejection of an application u/s 197 does not result in an order. The expression “order” for purposes of s. 264 has a wide connotation and includes a determination by the AO on an application u/s 197;
(ii) The manner in which the application has been dealt with by the AO and the CIT leaves much to be desired. The approach of the CIT that no prejudice is caused to the assessee as the excess TDS would be refunded is specious because if the conditions for grant of a certificate u/s 197 are fulfilled, it was impermissible for the AO to reject the application merely on a whim and on caprice and for the CIT to hold that no prejudice is caused to the assessee since the TDS would be refunded later with interest. “We are constrained to observe that the application filed by the assessee has been rejected in a rather cavalier manner and without application of mind to circumstances which are germane to the statute“.
Controversy apart, the point that should attract the notice of the FINMIN bosses is the attitude of the officers administering the law-will these very officers tolerate such conduct of an officer if this were their own case? And, it may perhaps be found that the CIT as well as the underlings involved in the case have already been propmoted-and may be, even on the basis of the “outstanding category” awarded to then because of this very case!
Does the department have the courage to take action against such patently incompetent, inadequate and useless burdens on the taxpayers?
197 section is full of controversies, guess even after a decade, this battle between dept and taxpayer is not going to end. Its high time the FM gets involved and bring out suitable law in the place of the existing section.