2024 (6) TMI 529 - AT - Income Tax

Determining short collection of TDS - lower TDS certificates issued by the TDS officers of the deductees contained TAN different from TDS returns filed under TAN - While processing the TDS returns in Form No. 26Q, the Central Processing Centre (CPC), Bengaluru had ignored the lower TDS certificates and the demand for short deduction of tax and interest was raised - CIT(A) noted that assessee was duty bound to intimate all its suppliers about the other TAN obtained subsequently and request them to resubmit their lower deduction tax certificate from their respective jurisdictional AO(TDS) quoting the new TAN of the assessee - as argued merely because assessee company has got separate TAN for two locations will not render the certificates issued u/s. 197 as redundant, since such certificates are issued to the Principle Officer of the company as the person responsible for deduction of tax. HELD THAT - From the sub-section (2) of Section 197, it is noted that person responsible for paying the income is entrusted with the responsibility to deduct income tax at the rates specified in the certificate or deduct no tax as the case may be until such certificate is cancelled by the AO. The term person responsible for paying is defined in Section 204. Assessee being a company is the person who is responsible for TDS at the rates prescribed in the certificates issued by the respective AO(TDS) of the suppliers of the assessee which were issued in terms of provision of Section 197. It is fact on record that assessee had deducted tax at source at the rates prescribed in the certificates for each of the suppliers and had complied with the necessary requirements of their deposit and filing of returns. The genuineness of issuance of certificate u/s. 197 has not been doubted. Accordingly, there is no justification to hold that the assessee is in default, merely on the ground that the certificates have not been issued on the subsequent TAN obtained by it, though all the necessary compliances had been made by the assessee by using the other TAN, from the date from which it was obtained. It is also worthwhile to take note of the procedure for obtaining certificate for deduction at lower rate prescribed in Rule 28(AA) of the Income tax Rules, 1962 ( The Rules ). Sub-Rule 4 of the said Rule contemplates that certificate issued in terms of section 197 is valid only with regard to person responsible for deducting the tax and specified therein. Sub-Rule 5 of the same rule contemplates that the certificate shall be valid only with regard to the person responsible for deducting the tax and named therein under advice to the person who made an application for issue of such certificate. Thus in the present case, the certificates are in the name of the assessee company directing it to deduct TDS at lower rates. Merely because, assessee has separate TANs will not render the said certificates issued in terms of Section 197(2) as redundant resulting in tainting the assessee as assessee in default. Thus as per applicable provisions u/s.197 and 204 of the Act and Rule 28AA of the Rules as well as judicial precedent of Parle Biscuits Ltd. 2013 (2) TMI 152 - PUNJAB HARYANA HIGH COURT we hold that there is no short deduction of tax at source and therefore the demand so raised both towards tax and interest is deleted - Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Confirmation of short collection of TDS.
2. Rejection of application u/s 154.
3. Validity of lower TDS certificates.
4. Levying of interest on alleged short deduction of TDS.

Summary:

Issue 1: Confirmation of Short Collection of TDS
The Learned CIT (Appeals) confirmed the orders passed by the Assistant Commissioner of Income Tax, CPC-TDS, determining short collection of TDS for various periods. The amounts involved were Rs. 29,86,447/- for Quarter-4, Rs. 9,84,564/- for Quarter-3, and Rs. 5,20,214/- for Quarter-2. The CIT (Appeals) upheld the action of the Assessing Officer, rejecting the application of the appellant filed on 17.02.2018, u/s 154 of the Income Tax Act, 1961, despite the appellant's consistent plea that lower TDS certificates had been obtained.

Issue 2: Rejection of Application u/s 154
The CIT (Appeals) erred in upholding the action of the Assessing Officer in rejecting the application u/s 154. The appellant argued that having obtained lower TDS certificates, there was no short deduction of tax at source, and no demand should have been raised. The CIT (Appeals) did not appreciate that the TDS Officers of the Deductees had issued certificates u/s 197 of the Act to the Principal Officer of the appellant, mandating lower tax deduction rates.

Issue 3: Validity of Lower TDS Certificates
The CIT (Appeals) failed to appreciate that the lower TDS certificates issued u/s 197(2) were valid despite the change in TAN due to a change in TDS jurisdiction. The certificates were issued to the Principal Officer of the company having a specific PAN, not based on TAN. The Tribunal noted that the certificates were issued to the person responsible for paying, as defined in Section 204 of the Act, which includes the company itself and the principal officer thereof.

Issue 4: Levying of Interest on Alleged Short Deduction of TDS
The CIT (Appeals) confirmed the action of the Assessing Officer in levying interest on alleged short deduction of TDS. The amounts involved were Rs. 14,34,097/- for Quarter-4, Rs. 5,08,490/- for Quarter-3, and Rs. 2,78,201/- for Quarter-2. The Tribunal held that there was no justification to hold the appellant in default merely because the certificates were not issued on the subsequent TAN obtained by it, as all necessary compliances had been made using the other TAN.

Conclusion:
The Tribunal allowed all three appeals of the assessee, holding that there was no short deduction of tax at source and deleting the demand raised both towards tax and interest. The Tribunal's observations and findings in ITA No. 4458/Mum/2023 applied mutatis mutandis to the other two appeals, ITA No. 4461/Mum/2023 and ITA No. 4464/Mum/2023. The order was pronounced in the open court on 16 May, 2024.