By C. N. Vaze
Shailesh Kamdar
Jagdish T. Punjabi
Bhadresh Doshi, Chartered Accountants
Sections 197, 201(1A) – Certificate u/s. 197 is with
reference to the person to whom the income is paid and is not with reference to
any sum as may be specified in the certificate. Levy of interest u/s. 201(1A)
cannot be sustained on the amount of tax not deducted on difference between the
amount paid to the assessee and the amount stated in the certificate.
FACTS
The assessee company paid interest to two persons who had
obtained certificate u/s.197 of the Act authorizing the assessee to deduct tax
at lower rate. The amount of interest paid by the assessee to these two persons
exceeded the amount mentioned in the certificate issued u/s. 197. The assessee,
however, deducted tax at a lower rate on the entire amount paid. The Assessing
Officer (AO) held that the assessee ought to have deducted tax at normal rate
on the amount of interest in excess of what was stated in the certificate
issued u/s. 197. The AO levied interest u/s. 201(1A) on amount of tax short
deducted.
Aggrieved, the assessee preferred an appeal to the CIT(A) who
upheld the action of the AO.
Aggrieved, the assessee preferred an appeal to the Tribunal.
HELD
The Tribunal after going through the provisions of section
197, section 201(1) & 201(1A) and Rule 28AA held that the statutory
provision of deduction of tax at source at lower rate is “person specific” and
cannot be extended to the amounts specified by the recipient of the payment
while making an application for grant of certificate u/s. 197 of the Act in
Form No. 13. The Tribunal observed that the AO has annexed the details in
Schedule II of Form No. 13 to the certificate issued u/s. 197 of the Act. It
held that by doing so, the AO cannot treat the assessee as a person who has not
deducted tax at source to the extent of payments made by the assessee over and
above the sum specified in the certificate u/s. 197 of the Act. It concurred
with the arguments on behalf of the assessee that the certificate u/s. 197 of
the Act is with reference to the person to whom the income is paid and not with
reference to any sum as may be specified in the certificate. It held that,
therefore, the assessee cannot be treated as a person who has not deducted tax
at source on the difference between the amounts specified in the certificate
issued under s.197 of the Act and the amounts actually paid by the assessee.
Consequently, the levy of interest u/s. 201(1A) of the Act was held to be
unsustainable and directed to be deleted.
The appeals filed by
the assessee were allowed.
