|The Tax Publishers2021 TaxPub(DT) 0012 (Del-HC)
INCOME TAX ACT, 1961
Section 197(1) Rule 28AA
AO cannot ignore the mandate of rule 28AA and proceed on any other basis as the Government is bound to follow the rules and standards they themselves had set on plan of their action being invalid.
Tax deductions at source - Certificate under section 197(1) - Non consideration of mandatory requirement of Rule 28AA -
Assessee company filed appeal challenging the Certificate issued by revenue under section 197(1) refusing to grant a certificate of deduction of tax at source at NIL rate, on payments received by it from its customers on the ground that revenue did not compute the tax liability of it which is a mandatory requirement of rule 28AA and had arbitrarily concluded on mere guess work that there would be increase in tax liability as the assessee's turnover was projected to increase. Held: The considerations and parameters prescribed under clause (2) of rule 28AA are mandatory and the department is bound to take the same into consideration for the purpose of computation of existing and estimated liability referred in sub-rule (1). It was noted that as opposed to estimation of tax liability, AO had, instead, rejected the estimates provided by the assessee, on a broad and generalized reasoning. Thus, in absence of determination, as provided under the above-noted rule, the reasons for rejections could not be termed as valid in eyes of law.
FAVOUR : In favour of assessee.
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