Grant benefit of revised TDS rates and rebate of 25% for FY 2019-2020, directed Delhi High Court to ITA

Grant benefit of revised TDS rates and rebate of 25% for FY 2019-2020, directed Delhi High Court to ITA

The High Court of Delhi (HC) gave directions to the Income Tax Authority (ITA) to grant benefits related to revised Tax Deducted at Source (TDS) rates for the years financial years (FY) 2019- 2020 and also permit a rebate of 25 per cent

M/s Manpower Group Services India Pvt. Ltd. (Petitioner) filed a writ petition before the High Court of Delhi (HC) against the Commissioner of Income Tax (Respondent).The petitioner challenged the order dated 29 June 2020 passed by the respondent under Section 197 of the Income Tax Act, 1961 (IT Act). In the impugned order the respondent refused to grant a certificate of tax deduction at source at Nil rate to the petitioner.

The petitioner contended that the order passed by the respondent was in contradiction to the rule of consistency as the 1.50 per cent concerning the payment under Sections 194J and 194I of the IT Act specified in the impugned order was three times higher than the 0.50 per cent rate of tax deduction at source determined in the immediately preceding year by the respondent.

It was averred that the respondent had already admitted that the tax liability of the petitioner for FY 2020-2021 was Nil and for the last three years the average tax rate to turnover was 0.12 per cent. It was further mentioned that the existing Tax Deduction Account Number (TAN) demand was Nil and the Permanent Account Number (PAN) demand was Rs.1,49,530.

The respondent had wrongfully stipulated a TDS rate of 1.50 per cent under Sections 194J and 194I of the IT Act. It also charged a TDS rate of 0.50 per cent under Section 194C of the IT Act on an arbitrary basis and without any grounds.

The respondent agreed in the impugned order that the conditions of mandatory Rule 28AA were satisfied, even though he had arbitrarily prescribed the TDS rates.

The petitioner filed a writ petition before the HC and the matter was listed before the division bench of Justices Manmohan and Sanjeev Narula. The Judges found that there was non-application of mind by the respondent while deciding the said matter.

The HC referred to the judgments Amarjit Singh Ahluwalia v. State of Punjab & Ors.; 1975 (3) SCR 82 and Ramana Dayaram Shetty v. International Airport Authority of India & Ors.; (1979) 3 SCC 489 and stated, "It is settled law that the Government is bound to follow the rules and standards they themselves had set on pain of their action being invalidated. Consequently, the assessing officer cannot ignore the mandate of Rule 28AA and proceed on any other basis."

The HC directed the benefit of revised TDS rates prescribed for the financial year 2019-2020 (by the respondent vide order dated 7 November 2019) read with a rebate of 25 per cent given by Ministry of Finance on account of Covid-19 crisis from the rates applicable in the preceding year 2019-20.

The HC quashed the order passed by the respondent and remand the said matter to the concerned authority for determining the issues afresh within a timeline of two weeks.