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TMI Blog2020 (12) TMI 934X X X X Extracts X X X X X X X X Extracts X X X X ..... petition before the CIT under Section 264 of the Act. To hold otherwise, would amount to directing the petitioner to file an appeal from Caesar to Caesar . In the present writ petition, the petitioner has not claimed that the payments received by it are in the nature of technical services subject to 2% rate. The respondent has itself admitted in the impugned reasons that the nature of services of petitioner is Consultancy which falls under definition of fees for technical services subject to TDS rate of 1.50% for the current financial year 2020-21. Consequently, there is no need for any direction to be given to the petitioner to file a fresh application under Section 197. This Court is also of the view that the reliance placed by the respondent upon para no.4 of the impugned reasons is misplaced inasmuch as the rates mentioned therein have been superseded by the subsequent order dated 7th November, 2019 passed by the CIT under Section 264 of the Act. Accordingly, the respondent could not have relied upon the initial rates of 2019-20, which have been set-aside/superseded, to determine the average rate of TDS. This Court is in agreement with the submission of learned s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Advocate Respondents Through: Ms. Lakshmi Gurung, Senior Standing Counsel with Ms Adeeba Mujahid, Jr. Standing Counsel. J U D G M E N T MANMOHAN, J: 1. Present writ petition has been filed challenging the order dated 29th June, 2020 passed by respondent No.2 under Section 197 of the Income Tax Act, 1961 (hereinafter referred to as Act ) refusing to grant a certificate of tax deduction at source at Nil rate to the petitioner company. BRIEF FACTS 2. Petitioner is a wholly owned subsidiary of Manpower Holdings Inc USA and is engaged in the business of providing manpower related services. In the petition, it has been averred that the petitioner has been operating on very low profit margin and as per the latest available audited accounts for financial year (FY) 2018-19, the net margin of petitioner is @ 0.26%. It is further averred that in the case of petitioner, the ratio of tax deduction at source (hereinafter referred to as TDS ) to profits has been as high as 1758% in the recent past and the petitioner company has refunds due and payable totalling to ₹ 128 crores, which have arisen essentially on account of high rate of TDS. 3. It is state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Per contra, Ms. Lakshmi Gurung, learned senior standing counsel for respondent submitted that the present writ petition was not maintainable as the petitioner had not exhausted the alternate efficacious remedy of revision available under Section 264 of the Act. She emphasized that the petitioner had availed this remedy in the immediately preceding year. She relied upon the judgment of this Court in the case of Sis Live vs. Income Tax Officer, (2011) 333 ITR 13 (Del.) wherein the Court declined to entertain a similar writ petition and directed the petitioner to file a revision petition. The relevant portion of the same is reproduced hereinbelow:- 6. Mr. Sanjeev Sabharwal, learned counsel appearing for the Revenue, submitted that the petitioner can challenge the said order in a revision under section 264(2) of the Act. 7. In view of the aforesaid, we are not inclined to entertain the writ petition at present. However, we state that if the petitioner would file a revision within a period of two weeks challenging the order passed by the Assessing Officer on all grounds including that the said authority could not have taken recourse qua the Act, the revisional autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etter dated 31st July, 2020 to contend that there had been a drastic decrease in the profit before tax as a percentage of Gross Revenue. She stated that while in the financial year 2016-17 profit before tax was 1.66%, in the financial year 2017-2018 it was 1.51%; while in 2019-2020 it was 0.25% and the projected ratio for financial year 2020-2021 was 0.19%. 12. Since Ms. Lakshmi Gurung had relied upon para 4 of the impugned reasons framed by respondent as provided vide letter dated 31st July, 2020, the same is reproduced hereinbelow:- 4. The applicant had been issued Lower Deduction certificate of 1% u/s l94C, 1% 194I(a), 4% u/s l94J, and 2% for 194I(b) for FY 2019-20 which was revised to 0.50% u/s I94C, 1941(a), 194J, 194I(b) with effect from 07.11.2019 by an order u/s 264 of the Income Tax Act, 1961 . Rate of Low Tax Deduction Certificate issued on 09.05.2019 Revised Order u/s 264 Dated 07.11.2019 Average Rate for the year (approx) FY 2019-20 1% u/s 194C 0.50% u/s 194C 0.78% 1% 194I(a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SINCE THE IMPUGNED ORDER WAS PASSED AFTER AN APPROVAL FROM THE CIT, IT CANNOT BE CHALLENGED BY WAY OF A REVISION PETITION BEFORE THE CIT UNDER SECTION 264 OF THE ACT. TO HOLD OTHERWISE, WOULD AMOUNT TO DIRECTING THE PETITIONER TO FILE AN APPEAL FROM CAESAR TO CAESAR 18. This Court is of the view that the present writ petition is maintainable as there is no efficacious alternate remedy available to the petitioner to challenge the impugned order. In fact, the Commissioner of Income Tax can entertain a revision petition under Section 264 only when the order, which is the subject matter of revision is passed by an authority subordinate to him. Further, the Notification No.08/2018 dated 31st December, 2018 issued by the CBDT mandates that the decision under Section 197 with effect from 31st December, 2018 has to be taken by the Commissioner i.e. after a conscious application of mind. It has also been unequivocally admitted by respondent in para 7 of the impugned order that approval of higher authorities was taken on the online TRACES portal. 19. Consequently, this Court finds merit in the submission of the petitioner that since the impugned order was passed after an appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on subsequently obtained may all the same validate the previous Act. Approval of a person means that, and only that, which he has, with full knowledge, approved. Approve. To accept as good or sufficient for the purpose intended. To pronounce good. To accept as good or sufficient for the purpose intended; to confirm authoritatively. Approved. When one of the parties to a bargain writes 'approved' at the end of the draft of the agreement and adds his signature, he thereby makes the draft a binding contract, and does not merely express approval of its form after the manner of conveyances. 14. Therefore, it is clear approval means to agree with full knowledge of the contents of what is approved and pronounce it as good. In other words confirm authoritatively. When the power of such approval is vested in a higher authority, when such higher authority approves an order of the lower authority, which means he has gone through the order of the lower authority, he has no reason to disagree he finds no fault with that order and therefore he confirms the order by his approval. It is to be seen that the statute has not used merely the word approval . The word used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, 2018 requiring approval of the CIT for the purpose of an application under Section 197 of the Act. Consequently, the decision in Sis Live (supra) does not apply to the present case. THERE IS NO NEED FOR ANY DIRECTION TO BE GIVEN TO THE PETITIONER TO FILE A FRESH APPLICATION UNDER SECTION 197 OF THE ACT AS THE PETITIONER HAS NOT CLAIMED THAT THE PAYMENTS RECEIVED BY IT ARE IN THE NATURE OF TECHNICAL SERVICES SUBJECT TO 2% RATE. FURTHER, THE RESPONDENT HAS ITSELF ADMITTED IN PARA 7 OF THE IMPUGNED REASONS THAT THE NATURE OF SERVICES OF PETITIONER IS CONSULTANCY WHICH FALLS UNDER DEFINITION OF FEES FOR TECHNICAL SERVICES 23. In the present writ petition, the petitioner has not claimed that the payments received by it are in the nature of technical services subject to 2% rate. Further, the respondent has itself admitted in para 7 of the impugned reasons that the nature of services of petitioner is Consultancy which falls under definition of fees for technical services subject to TDS rate of 1.50% for the current financial year 2020-21. Consequently, there is no need for any direction to be given to the petitioner to file a fresh application under Section 197 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 66200000 210239198 265872434 (under MAT) 56741431 (under MAT) 0.38 2018-2019 19543760722 115230429 Nil Nil 0 2019-20(prov.) 20463730388 86830446 Nil Nil 0 2020-21(Prov.) 36396214893 109972137 Nil Nil 0 2. Comparison of projected and provisional for last two FY: FY 2019-20 FY 2018-19 Turnover Total income Turnover Total income Projected (last year) Provisional (this year) Projected (last year) Provisional (this year) Projected (last year) Audited (this year) Projected (last year) Audited (this year) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was @ 1% u/s 194C, 1% 1941(a) and 4% u/s 194J and 2% for 1941(b) for FY 2019-20. However, revenue foregone was ₹ 106,14,44,080/-. Order u/s 264 was passed u/s 1941(a), 1941(b) 194C @ 0.50% for FY 2019-20. 7.Revenue forgone: Proposed rate by AO is @ 0.50% u/s 194C, @ 1.50% 194J 1941(b) for FY 2020-21. The revenue foregone as per propose rate will be ₹ 2426403350/- The case of the applicant has been selected under scrutiny for AY 18-19 with CASS reasons which include claim of large value refund and substantial deduction under Chapter VI-A/ The propose rate will protect revenue interest and it is proposed after consideration of facts of the case. So, the application is being forwarded for your kind consideration and direction. For your kind information. Your s sincerely Sd/- ACIT C-75(1) TDS, Delhi THE ASSESSING OFFICER CANNOT IGNORE THE MANDATE OF RULE 28AA AND PROCEED ON ANY OTHER BASIS AS THE GOVERNMENT IS BOUND TO FOLLOW THE RULES AND STANDARDS THEY THEMSELVES HAD SET ON PAIN OF THEIR ACTION BEING INVALIDATED. CONSEQUENTLY, THE IMPUGNED ORDER IS QUASHED ON THE GROUND THAT THE DECISION MAKING PRO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot ignore the mandate of Rule 28AA and proceed on any other basis. 28. However, in the present case, the assessing officer has not followed the aforesaid rule as there is no reference in the impugned reason to any computation carried out under Rule 28AA. 29. In fact, this Court vide order dated 8th December, 2020 had granted time to the respondent to place on record the computation of TDS rates under Rule 28AA, if any. Despite the said opportunity, neither any computation was filed nor was any reasonable explanation given as to why the computation under Rule 28AA was not carried out. Consequently, this Court is of the opinion that the impugned order is liable to be quashed on the ground that the decision making process in the present case is contrary to law. RELIEF 30. In view of the aforesaid discussion, this Court finds that there is nonapplication of mind which vitiates the impugned order and reasons. Accordingly, we set aside the impugned order and reasons and remand the matter to respondent no.2 for fresh determination in accordance with law as expeditiously as possible preferably within a period of two weeks. 31. In the interim, we direct that the bene ..... X X X X Extracts X X X X X X X X Extracts X X X X
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