2019 (3) TMI 229 - AT - Income Tax

TDS u/s 194C OR u/s 194I - TDS deducted on amount paid / credited to Bihar State Warehousing Corporation as per certificate issued 197 - TDS deducted on rent of warehouse u/s 194I and towards contract receipt on account of handling and transportation charges and rake handling charges u/s 194C - HELD THAT - 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). 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 6 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. We set aside the order of learned CIT(A) on these issues and allow the appeal of the assessee.

Summary

Issues:
Appeal pertaining to assessment years 2008-09 and 2009-10 regarding TDS deductions under sections 194I and 194C.

Analysis:
The appeal involved two grounds related to TDS deductions. Ground No. 11 questioned the CIT(A)'s decision to treat the entire amount paid to Bihar State Warehousing Corporation as rent subject to TDS under section 194I, despite including handling and transportation charges that could fall under section 194C. Ground No. 12 challenged the CIT(A)'s ruling that the rent paid was subject to TDS under section 194I, ignoring a lower tax deduction order issued under section 197 by the ACIT(TDS), Patna. The assessee had deducted tax based on certificates issued by the revenue authorities for the respective financial years. The dispute arose for assessment years 2008-09 and 2009-10, with the Income Tax Officer (TDS) holding the assessee in default for short deduction of tax under section 201(1) for payments made to Bihar State Warehousing Corporation.

The assessee argued that the CIT(A) summarily rejected the appeal without considering the TDS certificate issued under section 197 or the nature of payments subject to TDS under section 194C. The CIT(A) upheld the Income Tax Officer's decision on applying section 194I for all payments. The assessee contended that once a certificate under section 197 is issued, TDS should be deducted only as per that certificate. The CIT(A) did not address the certificate's specifics, causing the assessee to challenge the decision.

Upon review, the ITAT found that section 197 authorized the Assessing Officer to prescribe lower TDS rates based on justifiable circumstances. The ITAT noted that the assessee had deducted TDS as per the certificate issued under section 197, and there was no evidence of its cancellation. The ITAT criticized the CIT(A) for not analyzing the applicability of section 197 and accepting the Income Tax Officer's stance without merit. The ITAT concluded that the assessee's TDS deductions were in line with the certificate's rates, and there was no tax default or revenue loss. The ITAT deemed the Income Tax Officer's actions as arbitrary and unjustified, leading to the decision to set aside the CIT(A)'s order and allow the appeal.

In the final judgment, the ITAT allowed grounds 11 & 12 of the appeals for assessment years 2008-09 and 2009-10, rendering other related appeals infructuous. The order was pronounced on 27/07/2018.