The rates prescribed in the certificate issued u/s. 197 of the Act, the deductor or the person responsible for paying has to apply the rates as per that certificate as provided u/s. 197 clause (2) of the Act.
IN THE ITAT LUCKNOW BENCH ‘A’
Kribhco Shyam Fertilizers Ltd.
Income-tax Officer, (TDS) Bareilly
AND PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER
IT APPEAL NOS. 79 ,80 (LKW.) OF 2013 AND 723 & 724 (LKW.) OF 2015
[ASSESSMENT YEARS 2008-09 AND 2009-10]
JULY 27, 2018
R.B. Shukla, Advocate and Ashish Raj Shukla, Advocate for the Appellant. Rajesh Tiwari, DR for the Respondent.
Partha Sarathi Chaudhury, Judicial Member – 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 Nos. 11 & 12 which were not adjudicated upon in the order passed dated 25/06/2013. The ground Nos. 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:
|Nature of payments: F.Y. 2007-08/A.Y. 2008-09||Amount||TDS as per certificate of Dy. CIT Cir. 2, Patna||Section|
|Handling & transport charges||4185092||86216||194C|
|Rake handling charges||136456||702||194C|
|F.Y. 2008-09/A.Y. 2009-10:||TDS as per certificate of ACIT (TDS), Patna||Section|
|Handling & transport charges.||1472065||7580||194C|
|Rake handling charges.||990954||10620||194C|
The deductee i.e. Bihar State Warehousing Corporation has paid all the taxes in respect of payments received from this assessee as per its assessment order dated 12/12/2011 annexed at page 4 of the paper book. Thus there was no tax default u/s. 201(1) of the Act since it was directly paid by the deductee.
Despite the certificate u/s. 197(1) of the Act and the fact that the deductee had paid all taxes as per its return of income (copy of assessment order annexed as A-8 in the paper book) and also despite the fact that specific rates of deduction mentioned in that certificate, the Income Tax Officer (TDS) held the assessee in default for tax u/s. 201(1) in regard to short deduction of tax on the entire payments made to Bihar State Warehousing Corporation on the presumed liability u/s. 194I of the Act and charged consequential interest. Since according to the ITO (TDS) all the payments including handling and transport charges and rake handling charges on account of rent liable for TDS deduction u/s. 194I regardless of its treatment as contract receipts liable to TDS u/s. 194C as per certificate u/s. 197 of the Act. The ITO (TDS) worked out the liabilities and made the additions and against those additions the assessee went in appeal before learned CIT (A).
4. Learned A. R. of the assessee submitted that without going into merits of the case with reference to TDS as per certificate u/s. 197 of the Act or the nature of payments liable to TDS u/s. 194C of the Act, the learned CIT (A) summarily rejected the appeal and had upheld the version of Income Tax Officer (TDS), Bareilly regarding the applicability of section 194I for all the payments made. At the of hearing before us, Learned A. R. vehemently argued that once as per the statute i.e. section 197 of the Act, certificate has been issued then they are liable to deduct the TDS only as per that certificate and not on any higher rate. The grievance of the assessee is that learned CIT (A) has not dealt with the issue of certificate u/s. 197 nor on merits where the certificate already issued states that only warehousing charges TDS to be deducted u/s. 194I whereas for handling and transport charges the TDS to be deducted is on the basis of section 194C of the Act. The learned CIT (A) was absolutely silent on these issues and has summarily accepted the version of the Assessing Officer.
5. Learned D. R., on the other hand, relied on the orders of the authorities below.
6. We have perused the case records, heard the rival submissions and analyzed the facts and circumstances of the case. That 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 this case of the assessee, we find in the paper book a chart is annexed where the assessee has deducted the rates as provided to them by the certificate issued by the revenue authorities u/s. 197 of the Act. The relevant certificate for assessment years 2008-09 and 2009-10 are annexed in the paper book filed before us at pages 6 & 7. Learned D. R. did not bring out any facts whereby it can be shown or demonstrated that after issuance of certificate u/s. 197 the Department has again cancelled it. In absence of such action, the rates prescribed in the certificate issued u/s. 197 of the Act, the deductor or the person responsible for paying has to apply the rates as per that certificate as provided u/s. 197 clause (2) of the Act. We further find the learned CIT (A) is absolutely silent upon the applicability of section 197 where he has not at all adjudicated on merits with regard to why in all cases of deduction only 194I will be applicable. The learned CIT (A) has summarily accepted the version of the Income Tax Officer (TDS). 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. In view of the matter, we set aside the order of learned CIT (A) on these issues and allow the appeal of the assessee. These appeals i.e. I.T.A. No.79 and 80 regarding ground Nos. 11 & 12 pertaining to assessment years 2008-09 and 2009-10 are allowed and other appeals i.e. I.T.A. Nos.723 and 724 for same assessment years and on same issues, facts and circumstances therefore, becomes infructuous.
7. In the result, ground Nos. 11 & 12 of the appeals in I.T.A. Nos.78 & 79 for assessment years 2008-09 and 2009-10 are allowed and appeals in I.T.A. Nos. 723 & 724 becomes infructuous hence, dismissed.