- (1.) In this petition filed under Art. 226/ 227 of the Constitution of India, the petitioner a private limited company has sought issuance of directions by way of a writ of mandamus to the respondent to issue tax deduction certificate (TDC) under s. 197 of the IT Act, 1961 (in short, "the Act") for the financial year 2012-13. A few facts relevant for the decision of this case, as narrated in the petition may be noticed. The petitioner is a company incorporated under the provisions of the Companies Act, 1956 and is subsidiary of Serco BPO Holdings (P) Ltd. It is engaged in providing business support services to domestic customers through its business processing outsourcing units in India. Provision of business support services to customers in the domestic Indian market involves aggressive price competition with relatively low margins due to existence of multiple players in the market. The same has resulted in significant losses to the petitioner. According to the petitioner, in view of substantial losses incurred by it during the financial years 2008-09 to 2011-12, the estimated taxable income shall be nil. The petitioner is also likely to incur losses during the financial year 2012-13. Delayed issuance of tax deduction certificates under s. 197 of the Act has adversely impacted the cash flow position of the petitioner, thereby causing significant financial hardship to the petitioner. Accordingly, the petitioner filed an application dt. 3rd April, 2012 under s. 197 of the Act for issuance of a nil tax deduction certificate in respect of revenues receivable from its customers during the financial year 2012-13, Annex. P.7. A show-cause notice dt. 25th April, 2012, Annex. P.8 was issued to the petitioner. The petitioner filed its reply to the notice, Annex. P.9. On 21st May, 2012, the application under s. 197 of the Act filed by the petitioner was rejected primarily on the ground of pendency of proceedings under ss. 276B and 271C of the Act. Hence this petition.
(2.) Notice of the petition was issued to the respondent. In The written statement filed on behalf of the respondent, the action has been sought to be justified on the ground that the penalty proceedings under s. 271C and prosecution proceedings under s. 276B of the Act are pending against the petitioner for not complying with the provisions of tax deduction at source (IDS). It has been further stated that though the petitioner has incurred losses in the past, yet the estimated tax liability did not justify the issuance of certificate under s. 197 of the Act r/w r. 28AA of the IT Rules, 1962 (for brevity, "the Rules"). Further, the petitioner has not availed the statutory remedy of revision under s. 264 of the Act. On the above premises, prayer for dismissal of the petition has been made.
(3.) Learned counsel for the petitioner submitted that under s. 197 r/w r. 28AA of the Rules, the respondent-Department can decline issuance of TDC in following two eventualities : (i) in case the AO was not satisfied that the recipient had justified the deduction of income-tax at any lower rates; or (ii) no deduction of income-tax was to be made on the income of the recipient. According to the counsel, any other consideration was legally not permissible and the respondent has tried to justify the rejection of application for issuance of TDC under s. 197 of the Act which is legally not justified. Learned counsel has relied upon judgment of the Bombay High Court in Larsen & Toubro Ltd. & Anr. vs. Asstt. CIT & Ors.,2010 232 CTR 295 to substantiate his contention.;