The Delhi High Court ordered the Income Tax Authority to pass the benefit of revised TDS rates for the FY 2019-20 and a discount of 25%.
The order comes in the case where Manpower Services is the petitioner and has challenged the order passed by the respondent authority following section 197 of the Income Tax Act, 1961, which refuses to give the certificate of TDS at Nil rate to his company.
Mr. Piyush Kaushik is a lawyer on behalf of the petitioner and he disputed that the order imposed was contrary to the rule of consistency, as the order specified in the Act imposed with a rate of 1.50% in respect of payment under sections 194J and 194I the rate of tax deduction at the source determined in the previous year was determined three times the rate of 0.50% by the respondent.
He further stated that though, the defendant himself admitted for the reason that petitioner’s estimated tax liability for the financial year 2020-21 was nil; The average tax rate of turnover was 0.12% for the last 3 years; The current TAN demand was nil and the PAN demand was INR 1,49,530, against a huge refund of Rs 138 crore, yet the respondent specified TDS rate of 1.50% under Sections 194J and 194I and TDS rate of 0.50% under Section 194C on an arbitrary basis which was not based on any working.
He asserted that it is an accepted condition that complied with the orders/reasons applied, the conditions of the mandatory Rule 28AA were satisfied, yet the respondent quoted the offered TDS rates.
Ms. Lakshmi Gurung, senior standing counsel for respondent authority responded that the writ petition was not maintainable as the petitioner did not abolish the alternative effective remedy of amendment available under section 264 of the Act. She asserted that the petitioner had availed this measure in the immediately previous year. A division bench of Justice Manmohan and Justice Sanjeev Narula observed that there is a non-application of mind which eradicates the deteriorating order and reasons. Hence, the court quashed the order imposed and remand the case to authority for fresh judgment as per the law as expeditiously as possible preferably within a period of two weeks.
The court ordered that the benefit of the revised TDS rates set for the FY 2019-2020, read with a 25% discount provided by the Ministry of Finance to the COVID-19 epidemic account, from the rates applicable in the previous year 2019-20 with a press release issued on May 13, 2020, will be granted to the petitioner.
