2015 (1) TMI 747 - HC - Income Tax

Lower deduction certificate under section 197 r.w.r 28AA rejected - petitioner submitted that Rule 28AA would not apply and it is Rule 28AB which would be applicable - Held that - We agree with the submissions made by petitioner that Rule 28AA which would generally apply would not apply in the present case because the petitioner s case is covered under the specific instances provided under Rule 28AB. Therefore, the consideration which was given by the Deputy Commissioner of Income-tax under rule 28AA was under a wrong provision. The parameters which have to be examined under Rule 28AA and the parameters under Rule 28AB are entirely different. The result is that the application of the petitioner has been examined under parameters which were not applicable to the petitioner and therefore the rejection based thereupon would be liable to be set aside. Set aside the impugned order of rejection and remit the matter to the concerned DCIT for consideration afresh under Rule 28AB after giving an opportunity of hearing to the petitioner/ representative of the petitioner. Decided in favour of assessee for statistical purposes.

Summary

Issues:
Challenge to rejection of lower deduction certificate under section 197 of the Income-tax Act, 1961 for FY 2014-15 based on Rule 28AA, applicability of Rule 28AB for a trust wholly for charitable purposes, and the need for a fresh consideration.

Analysis:
The judgment pertains to a writ petition challenging the rejection of a lower deduction certificate under section 197 of the Income-tax Act, 1961 for the Financial Year 2014-15 by the Deputy Commissioner of Income-tax. The rejection was based on Rule 28AA, which the petitioner contended was not applicable as a trust wholly for charitable purposes. The petitioner also highlighted their exemption under sections 11, 12, and 10(23C)(vi) of the Act. The court agreed with the petitioner's counsel that Rule 28AA was not applicable in this case, and Rule 28AB should be considered instead, as the petitioner's case fell under specific instances provided under Rule 28AB. The court emphasized that the parameters under Rule 28AA and Rule 28AB are distinct, and the rejection based on the wrong provision was deemed unjustified. Consequently, the court set aside the rejection order and remitted the matter to the concerned Deputy Commissioner of Income-tax for fresh consideration under Rule 28AB, directing an expeditious review with a hearing opportunity for the petitioner or their representative.

Moreover, the court instructed the petitioner to appear before the concerned Deputy Commissioner on a specified date for the review, with a directive to pass the order within two weeks thereafter. The judgment concluded by allowing the writ petition and issuing necessary instructions for the further proceedings. The decision emphasizes the importance of applying the correct provisions and parameters in such cases to ensure a fair and accurate evaluation of the petitioner's eligibility for a lower deduction certificate under the Income-tax Act.