Tlg India Private Limited v. Deputy Commissioner Of Income Tax(Tds)-2(3) & Ors

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTIONWRIT PETITION NO. 1719 OF 2019 TLG India Private LimitedVersusDeputy Commissioner of Income Tax(TDS)-2(3) & ors. ...Petitioner ...Respondents Mr. Vikram Nankani, Sr. Advocate, Mr. Fereshte Sethna, Mr.Anay Banhatti, Mr. Mrunal Parekh, Mr. Hasmukh Ravaria, Mr.Rishabh Dubey i/b. DMD Advocates, advocate for petitioner. Mr. P.C. Chhotaray, advocate for the respondent. CORAM : AKIL KURESHI & S.J. KATHAWALLA, JJ. DATE : 29TH JULY, 2019. P.C.: 1Heard the learned Counsel for the parties for fnaldisposal of the petition. 2 The Petitioner is a private limited company. The petitioner has challenged Certifcate issued vide an order dated4[th] June, 2019 passed by the Deputy Commissioner of IncomeTax (TDS), the Respondent herein. Such an order was passedon an application fled by the Petitioner under section 197 of theIncome Tax Act, 1961(hereinafter referred as “the Act” for short)requesting the said authority to permit the petitioner assesseenot to deduct tax at source or to deduct tax at lower rates. 3The learned Counsel for the petitioner pointed outthat in the previous order, same authority had permitteddeduction of tax at source at the rate of 0.02%. In the presentorder, impugned in this petition, the authority has prescribeddiferent rates of deduction of tax at source ranging from 1% to1.5%. The Counsel submitted that such prescription isexcessive. 4 Though the impugned order does not specify so, our attention was drawn to the documents produced by thePetitioner alongwith an additional afdavit dated 2[nd] June, 2019to contend that original proposal of the Income Tax Ofcer (TDS)was for deduction at the rate of 0.4%. However, subsequently,taking cognizance of an order dated 31[st] May, 2019, passedagainst the petitioner under section 201 of the Act, the fnalorder came to be passed in which the said prescription hadbeen made. 5The order dated 31[st] May, 2019 passed by theDeputy Commissioner of Income Tax (TDS)-2(3) under section201 of the Act was challenged by the Petitioner in separate Writ Petition No. 1788 of 2019. This Petition is disposed of today byholding that the order unde challenge was passed in breach ofprinciple of natural justice. Consequently, the order wasquashed and proceedings were remanded before the originalauthority for passing fresh order. 6We noticed that alongwith additional afdavit, thepetitioner has produdced an order sheet dated 15/5/2019, inwhich the Deputy Commissioner of Income Tax(TDS) hasrecorded that there was a proposal for issuing certifcate at therate of 0.4% in relation to sections 194C, 194J, 194H and 194IBof the Act. However, subsequently, before fnal order came tobe passed on 31[st] May, 2019, the Deputy Commissioner ofIncome Tax(TDS) made following further noting in his Ordersheet alongwith an afdavit : “6. As the amounts mentioned in the computationfled for Al 2020-21 including the amounts claimedare on the basis of projections and are subject tovariation based on the actual expenses which wouldbe incurred during the said year. Accordingly,considering the facts and submissions made, it isproposed to issue certifcate @ 1.14% in relation to19C, 194J, 194H and 194IB. 7If the application for Lower Deduction of Tax is allowed under section 197, the tax forgone onaccount of proposed certifcates works out to Rs.1238362755/-. PROPOSAL FOR 197 8In view of the above, and after considering thefacts and circumstances of the case, and on the basisof the material on records, I am satisfed that thetotal income of the assessee justifes lower deductionof tax at source @ 1.14% in relation to 194C, 194J,194H and 194IB. 7If the application for Lower Deduction of Tax is allowed under section 197, the tax forgone onaccount of proposed certifcates works out to Rs.1238362755/-. PROPOSAL FOR 197 8In view of the above, and after considering thefacts and circumstances of the case, and on the basisof the material on records, I am satisfed that thetotal income of the assessee justifes lower deductionof tax at source @ 1.14% in relation to 194C, 194J,194H and 194IB. 9Submitted for kind approval in view of CBDTNotifcation No. S.O. 647 dated 29.03.2011. Ifsatisfed and approved, certifcate for lowerdeduction of Tax u/s. 197 of the Income Tax Act, 1961shall be issued for deduction of TDS in relation to194C @ 1.00%, 194J @ 1.50%, 194H @ 1.00% and194IB @ 1.50%, if approved.” 7Subsequently, the Deputy Commissioner of IncomeTax(TDS) passed the impugned order, which, as can be clearlyseen, was infuenced by the order dated 31[st] May, 2019 passedunder section 201 of the Income Tax Act, 1961 against thePetitioner. The said order may not be the sole basis, wasundoubtedly an important element which went into the decisionmaking process. Therefore, now that the existence of orderdated 31[st] May, 2019 does not survive, the Deputy Commissioner of Income Tax (TDS) should undertake freshexercise and decide the rate of income tax to be deducted whilemaking payment to the Petitioner under diferent provisionsmentioned above. For such purpose, the impugned order is setaside. The Deputy Commissioner of Income Tax(TDS) shall passfresh order within four weeks from today in view of the changedcircumstances. 8However, till this is done, the petitioner cannot beleft to be verse of then when the impugned order was inoperation. Therefore, till fresh order is passed, the Petitionerwould continue to be governed by the prescription made in theimpugned order. This is purely by way of interim arrangementto protect the interest of the Petitioner as well as the Revenue. 9The Writ Petition is disposed of accordingly. ( S.J.KATHAWALLA, J. ) ( AKIL KURESHI, J.)