2020 (7) TMI 632 - HC - Income Tax

Order u/s 197 - refusing to grant a certificate of deduction of tax at source at NIL rate, on payments to the petitioner company by its customers - HELD THAT - Respondents while issuing the impugned certificate has placed detailed reasons on record - the petitioner had in its own application for grant of certificate of deduction of tax at source at NIL rate under Section 197 had mentioned the applicable rates as 2% and/or 10% during Financial Year 2020-21. She also states that the projected gross receipts during this Financial Year 2020-21 is projected to be 78% more than the preceding year according to the petitioner itself. Since detailed reasons are stated to be available on record, the present writ petition and the pending application are disposed of with a direction to the respondents to furnish a copy of the reasons to the petitioner within a week. In the event the petitioner is aggrieved by the said reasoned order, it shall be open to the petitioner to file appropriate legal proceedings in accordance with law. It is clarified that all the rights and contentions of the parties are left open.

Summary

Issues:
Challenge to order under Section 197 of the Income Tax Act for refusal to grant a certificate of deduction of tax at source at NIL rate.

Analysis:
The petition challenges the order dated 29th June, 2020, passed under Section 197 of the Income Tax Act, which refused to grant a certificate of deduction of tax at source at NIL rate on payments to the petitioner company by its customers. The petitioner argues that the order lacks consistency as the specified tax deduction rates are significantly higher than the previous year's rates determined by the respondent. The petitioner emphasizes its low profit margins and minimal tax liabilities over the years, highlighting a substantial disparity between tax withholding and profits.

The court acknowledged the urgency expressed in listing the petition and conducted the hearing via video conferencing. The respondent's counsel accepted notice and mentioned that detailed reasons for the impugned certificate issuance were on record. The respondent pointed out that the petitioner had initially indicated higher applicable tax rates in its application for the certificate. Additionally, the projected gross receipts for the current financial year were expected to increase significantly compared to the previous year according to the petitioner's own estimates.

In response to the arguments presented, the court disposed of the petition and the pending application, directing the respondents to provide a copy of the reasons for the decision to the petitioner within a week. The court granted the petitioner the option to pursue further legal action if dissatisfied with the reasoned order, ensuring that all rights and contentions of the parties remained open. The court ordered the immediate uploading of the order on the website and the forwarding of a copy to the respective counsel via email for reference.