2005 (11) TMI 223 - AT - Income Tax

Summary

Issues:
1. Whether TDS demand under s. 201(1) of the IT Act, 1961, and consequential interest under s. 201(1A) of the Act can be raised despite a certificate issued by the AO to the beneficiary under s. 194C(4) of the Act.

Analysis:
The appeal involved a dispute regarding the TDS demand raised by the AO and confirmed by the CIT(A) against the assessee for non-deduction of tax on payments made to a beneficiary company, M/s GTV Spinners Ltd., for conversion charges. The assessee argued that the beneficiary had obtained a certificate from the AO under s. 197(1) of the Act, authorizing non-deduction of tax. The key contention was whether the certificate issued by the AO could have retrospective effect and absolve the assessee from TDS obligations.

The Tribunal examined the relevant provisions of s. 194C(4) and (5) of the Act, which govern the issuance and operation of certificates for lower deduction or non-deduction of tax. It was noted that once such a certificate is issued, the person responsible for payment is obligated to adhere to the rates specified unless the certificate is canceled by the AO. In this case, the certificate in question was issued after the period for which the payments were made, leading to a crucial question of retrospective application.

The Tribunal emphasized that the certificate issued by the AO on 25th April, 2001, could not operate retrospectively for the period from 1st July, 2000, to 31st March, 2001, during which the conversion charges were paid. The Tribunal distinguished the present case from previous case law cited by the assessee, highlighting that the issue of retrospective operation of a certificate was not addressed in those judgments. Consequently, the Tribunal upheld the orders of the lower authorities, affirming the TDS demand and interest imposed on the assessee.

In conclusion, the Tribunal dismissed the appeal of the assessee, ruling that the certificate issued post the payment period could not absolve the assessee from TDS obligations for the relevant transactions. The decision underscored the importance of timely compliance with TDS provisions and the limitations on the retrospective effect of certificates issued by tax authorities.