2003 (8) TMI 180 - AT - Income Tax

Summary

Issues Involved:
1. Entitlement to claim the refund of excess tax deducted at source.
2. Validity of the payer's right to appeal under section 248 of the Income-tax Act, 1961.
3. Legality of the order passed by the CIT(A).

Detailed Analysis:

1. Entitlement to Claim the Refund of Excess Tax Deducted at Source:
The primary issue was whether the appellant (payer) or the payee (Corning Inc.) was entitled to claim the refund of excess tax deducted at source. The Assessing Officer directed the appellant to deduct tax at source at 30% on the payment of fees for technical services. This was later contested, and a lower rate of deduction was approved. However, the refund claim was denied by the Assessing Officer and upheld by the CIT(A) on the grounds that:
- Once a TDS certificate is issued, the payer loses its claim over the money represented by the TDS certificate.
- Only the payee can claim the refund after the tax at source has been deducted and paid, as per section 199 of the I.T. Act.
- The validity of appeal under section 248 ceases once the TDS certificate is issued.
- The Assessing Officer must safeguard the interest of revenue.

The Tribunal agreed with the CIT(A)'s decision, emphasizing that the TDS certificate issued to the payee remains valid and entitles the payee to claim credit for the tax deducted. The Tribunal also noted that section 199 mandates that the deducted amount be treated as a payment of tax on behalf of the payee. The appellant's reliance on Circular No. 769 and the judgment in Frank Beaton's case was found inapplicable due to differing circumstances and subsequent clarifications by Circular No. 790. The Tribunal concluded that allowing the refund to the appellant would be prejudicial to the revenue's interest.

2. Validity of the Payer's Right to Appeal under Section 248 of the Income-tax Act, 1961:
The appellant contended that their right to appeal under section 248 should persist regardless of the issuance of a TDS certificate. However, the CIT(A) concluded that this right ceases once the TDS certificate is issued. The Tribunal upheld this view, stating that the issuance of the TDS certificate finalizes the deduction process, and the payer's right to appeal under section 248 is no longer applicable.

3. Legality of the Order Passed by the CIT(A):
The appellant argued that the order passed by the CIT(A) was bad in law and void ab initio. However, the Tribunal found no merit in this argument. The Tribunal's analysis confirmed that the CIT(A)'s decision was based on a correct interpretation of the law and relevant facts, ensuring the protection of revenue interests. The Tribunal noted that the appellant's claim for refund was not substantiated by any legal provision or precedent that would override the CIT(A)'s decision.

Conclusion:
The Tribunal dismissed the appeal, affirming the CIT(A)'s order and rejecting the appellant's grounds. The payer (appellant) was not entitled to claim the refund of excess tax deducted at source, the right to appeal under section 248 ceased with the issuance of the TDS certificate, and the CIT(A)'s order was legally sound.