The Delhi High Court in the case Shreyash Retail Private Ltd Versus Deputy Commissioner Of Income Tax TDS Circle observed and has quashed the non-speaking order wherein the court rejected the grant of a lower deduction of tax certificate, LDC permitting the deduction of 0.01% TDS.
The bench comprising of Justice Satish Chandra Sharma and Justice Tushar Rao Gedela in the case observed and has stated that the reasons furnished by the Respondent or the department qua the Application i.e., as to why the Petitioners’ request that TDS should not be deducted at a rate of 0.01%, hinges on broad generalisations 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.
In the present case, the petitioner or assessee is in the business of retail trade of goods through e-commerce platforms.
Therefore, the assessee challenged a certificate issued by the Deputy Commissioner of Income Tax, TDS Circle 77(1), rendered under Section 197 of the Income Tax Act, 1961, reading with a letter addressed to the petitioner by the respondent.
The petitioner filed an application under Section 197 of the Income Tax Act along with Form 13 of the Income Tax Rules, 1961, wherein seeking the lower deduction of tax certificate, LDC vis-à-vis a 1% deduction of tax deducted at source, TDS as under Section 194O of the Income Tax Act.
The petitioner in the plea seeks the issuance of an LDC granting the petitioner the relief of deducting TDS at a rate of 0.01%. Certain queries were raised by the respondent, wherein it seeks details of the nature of the business activity undertaken by the petitioner, details of previous issuance of LDCs, financial statements for identified FYs, copies of income tax returns, ITRs, details of advance tax, and details of outstanding tax demands.
The petitioner in the plea argued before the court that that its projected tax-to-turnover ratio is 0.012%, i.e., significantly lower than TDS, to be deducted at a rate of 1%.
Therefore, the said actions came to be issued by the respondent, under which the petitioner was issued an LDC permitting the deduction of TDS at a rate of 0.5% as against the 0.01% sought by the petitioner under the application.
On the other hand, the assessee contended before the court that the actions have come to be issued mechanically without following the mandate of Rule 28AA of the Income Tax Rules.
The court in the case observed and has held that order read with the letter suffers from non-application of mind, which would certainly result in grave prejudice to the petitioner.
The court stated that the impugned actions and remand the matter back to the respondent to conduct a fresh determination of the application in accordance with the law as expeditiously as possible.
The counsel, Advocate Tarun Gulati appeared for the Petitioner.
The counsel, Advocate Sanjay Kumar represented the respondent.