The Delhi High Court directed fresh adjudication because the deduction of Tax Deducted at Source (TDS) at a rate of 0.01% satisfying the mandate of Rule 28AA of the Income Tax Rules, 1961 denied due to non-application of mind by the Deputy Commissioner of Income Tax (DCIT).
Shreyash Retail pvt ltd., the petitioner is a company incorporated under the Companies Act, 2013 engaged in the business of retail trade of goods through e-commerce platforms seeks to challenge a certificate issued by Respondent No. 1 i.e., the Deputy Commissioner of Income Tax rendered under Section 197 of the Income Tax Act, 1961.
The Petitioner filed an application under Section 197 of the Income Tax Act along with Form-13 of the Income Tax Rules seeking a lower deduction of tax certificate (LDC) vis-à-vis the deduction of TDS at a rate of 1% under Section 194O of the Income Tax Act. The Petitioner vide the Application, sought the issuance of an LDC granting the Petitioner the relief of deducting TDS at a rate of 0.01%.
The Authorized Representative visited the office of Respondent No.1 and submitted inter alia that the Petitioner ought to be granted an LDC on account of the fact that the tax-to-turnover ratio of the Petitioner was 0.01% and the Petitioner has projected a tax refund to the extent of INR 45,05,00,000 under a 0.5% rate of deduction of TDS.
The Impugned Actions came to be issued by Respondent No. 1 whereunder the Petitioner was issued an LDC to the Petitioner permitting the deduction of TDS at a rate of 0.5% as against 0.01% sought by the Petitioner under the Application.
The counsel appearing on behalf of the Petitioner is that the Impugned Actions have come to be issued mechanically, without following the mandate of Rule 28AA of the Income Tax Rules. In this regard, the counsel placed reliance on Camions Logistics Solutions (P) Ltd. v. CIT. Therefore, it was contended that the Impugned Order is non-speaking and accordingly, ascribes no reasons qua the rejection of the Application seeking the grant of an LDC permitting the deduction of TDS at a rate of 0.01%.
The Division bench comprising of Chief Justice Satish Chandra Sharma and Justice Tushar Rao Gedela perused the Impugned Order read with the Impugned Letter and found that the reasons furnished by the Respondent No. 1 qua the Application, as to why the Petitioners’ request that TDS should not be deducted at a rate of 0.01%, hinges on broad generalizations in relation to the propriety of projected estimations of revenue and tax liability, and accordingly has been had been issued mechanically reflecting non-application of mind.
Thus, the court set aside the Impugned Actions and remand the matter back to Respondent No. 1 to conduct a fresh determination of the Application in accordance with law as expeditiously as possible.
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