9911796707
TMI Blog2005 (4) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... turn under section 206 was filed with the Income-tax Officer (TDS), Chittorgarh. On scrutiny of the same, it was noticed by the Assessing Officer that the assessee had made total payment of contract worth Rs. 4,16,41,107 to one M/s. Associated Transport Co., Indore. These payments were made without deduction of tax at source. On being called upon to explain the reasons for not deducting tax at source it was stated on behalf of the assessee that the payments were made without deduction of tax at source as a consequence of certificate issued under section 197(1) by the ACIT, Circle-2, Indore. In support of this contention, the assessee furnished copies of such certificates dated 11-4-1997 and 6-1-1998. On the perusal of the first certificate, it was observed by the Assessing Officer that the assessee was authorized not to deduct tax up to the payment of Rs. 2,50,00,000 only. This limit was found to have been exhausted on 16-10-1997. The second certificate under section 197(1) was issued on 6-1-1998 again authorizing payment without deduction of tax at source for a further sum of Rs. 2,50,00,000. On going through the details of payments made by the assessee, it was noticed that a sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 15AA which was again to remain in force up to 31-3-1998, unless cancelled by the Issuing Officer. A sum of Rs. 2.50 crores is mentioned against column "Sums expected to be credited paid..." in the succeeding certificate as well. The total payments made by the appellant to M/s. Associated Transport Company, Indore, during the period 1-4-1997 to 31-3-1998 amounted to Rs. 4,16,41,107. The case of the Revenue is that the ceiling of Rs. 2.50 crores vanished on payments made up to 16-10-1997 and further payments made prior to the issuance of certificate on 6-1-1998 were liable for deduction of tax at source and the person responsible having not deducted tax at source was to be considered as the assessee in default. In order to appreciate the core of controversy, it would be apt to consider the provisions of section 197 which are reproduced as under: "197. Certificate for deduction at lower rate. (1) Subject to rules made under sub-section (2A), where, in the case of any income of any person or sum payable to any person, income-tax is required to be deducted at the time of credit or, as the case may be, at the time of payment at the rates in force under the provisions of sections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... named therein. (4) The certificate shall be issued direct to the person responsible for paying the income under advice to the applicant. (5) The certificate shall be issued in Form No. 15AA." 7. From a plain reading of sub-section (1) of section 197, it becomes palpable that the certificate in Form No. 15AA is issued by the Assessing Officer if he is satisfied that the "total income" of the recipient justifies deduction of Income-tax at any lower rate or non-deduction of Income-tax is required. Sub-section (2) clearly provides that where such certificate is issued, the person responsible shall deduct income-tax at lower specified rate or shall not deduct any tax, as the case may be, until such certificate is cancelled by the Assessing Officer. Sub-rule (2) of Rule 28AA enshrines that the certificate shall be valid for the assessment year to be specified in the certificate. It is further provided that the application for a fresh certificate may be made, if required, after the expiry of period of validity of earlier certificate. When section 197 is read in conjunction with Rule 28AA, the following salient features emerge: (i) The satisfaction of the Assessing Officer for non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the currency of the period up to the close of the financial year, which is stipulated in the original certificate. (iv) Rule 28AA(1)(i) refers to the 'estimated income' for the purpose of issuance of certificate by the Assessing Officer. Such certificate is issued in Form No. 15AA. Appropriate column in para 3 of this Form bears the title "Sums expected to be credited paid in pursuance of the contract during the current previous year and each of the three immediately succeeding years." It is this column, under which the amount is specified by the Assessing Officer. The obvious reference to the figure in this column is to the expected sum to be paid or credited during the current year to the account of the creditor. It nowhere contains any ceiling or cap, being the amount beyond which no payment can be made without deduction of tax at source for deduction at lower rate. The employing of the expressions "Sums expected" and "during the current previous year" clearly demonstrates that the figure mentioned in this column is an expected sum, which would be received by the recipient on which, the Assessing Officer is satisfied that the "total income" of the recipient justifies non-ded ..... X X X X Extracts X X X X X X X X Extracts X X X X
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