Certificate for lower TDS is ‘person specific’ and not ‘income specific’, says Kolkata ITAT

Facts:

a) Assessee paid interest to two parties which was liable for TDS under section 194A. Both parties obtained a certificate from their respective Assessing Officers under section 197 for lower deductions of tax at source.

b) However, the amount mentioned in such certificate was lesser than the actual amount of interest paid and assessee had deducted tax at source at a lesser rate on the entire payment.

c) AO held that the lower deduction of tax was valid only in respect of amount specified in certificate and on the balance amount, assessee ought to have deducted tax at source at the normal applicable rate.

d) For the shortfall, AO treated assessee as an assessee-in-default and levied interest under section 201(1A).

e) Commissioner (Appeals) confirmed order of AO. Aggrieved-assessee filed instant appeal before the Tribunal.

Tribunal held in favour of assessee as under:

1) Deduction of tax at source at lower rate is 'person specific' and cannot be extended to amounts specified by recipient of payment while making an application for grant of certificate under section 197.

2) Section 197(2) along with relevant rule 28AA(2), clarifies that once certificate under section 197(2) is issued for lesser/no TDS deduction, person making payment is at liberty to deduct tax at rates specified in certificate and that it does not make any reference to any income specified in such certificate.

3) Thus, interest under section 201(1A) levied for alleged short deduction of TDS under section 194A on interest payments made by assessee was to be deleted. [2017] 78 taxmann.com 152 (Kolkata - Trib.)