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Judgment
Learned advocate Mr. J. P. Shah states that in view of the interim orders passed by this Court, the petitioner has been given the benefits, and
therefore, this petition has become infructuous. This petition, therefore, stands disposed of accordingly.
Rule is discharged. No order as to costs.
Interim Order Dt. 21st January, 1998
R.K. Abichandani, J.
Rule. Matter to come up for final hearing on 1st April, 1998.
We have heard both the sides on the question of interim relief. The grievance of the petitioner is that there is no time-limit for making an
application for a certificate under s. 197 nor is there any time-limit for issuance of such certificate, and even though till now, in numerous cases,
certificates have been issued under s. 197 even where the applications are presented later than giving of credit the authorities have been granting
certificates. The case of the Department is that the CITs have been making mistakes and erroneously granting certificates and they have now
suddenly realized that certificates cannot be granted under s. 197(1) when applied for after the amount of interest was credited.
In the impugned order dt. 22nd July, 1997, the CIT had informed the chartered accountant of the petitioner that since the interest was supposed
to have been paid or credited before the application was made for certificate under s. 197(1), the question of permitting non-deduction of tax at
source from such payment or credit of interest does not arise and, therefore, the CIT regretted his inability to interfere with the action of the AO in
this regard. It appears that the CBDT in this regard wrote a letter dt. 9th October, 1997, a copy of which is at Annexure-K to the petition, to the
petitioner reiterating that since the certificate was applied for after the amount of interest was credited, the question of issuing certificate for non-
deduction of tax at source under s. 197(1) does not arise and that the grievance of the petitioner was to be treated as settled. From the said letter it
appears to us that this is not a general guideline and that the CBDT was answering only to the individual case of the petitioner. It transpires before
us from the affidavits which have been filed by and the submissions made on behalf of the Revenue that in numerous cases, the applications which
were made after the amount of interest was credited have been entertained and certificates issued. According to the Revenue, this was being done
erroneously and in violation of the express provisions of law. Assuming that this was being erroneously done by the Revenue and that issuance of
certificate after giving the credit of interest was not permissible, one important aspect that strikes is that, since so far certificates have been issued in
almost all cases are stated by the petitioner''s counsel and not seriously controverted by the other side, there would be a class of people, who
expecting similar treatment may have applied for the certificate after the credit of interest is given, expecting that the certificate will be issued in their
case also having been led to a bona fide belief that such practice has come to stay. We, therefore, believe that this is a case where the CBDT
should consider whether and under what circumstances such a practice has developed and that, if such practice is not permissible, to decide as to
what it should do and issue appropriate guidelines in the matter notwithstanding any individual reply sent to the petitioner, which guidelines, of
course, would operate so far the Assessing Officers are concerned in all such cases including in cases of those who expected the certificates to be
issued where the applications were made late and direct the CBDT to consider the matter and respond to this interim direction expeditiously
placing on record of the petition whatever decision it may take before the next date of hearing.
COPY OF CBDT''S LETTER F. No. 275/57/98-H(B)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
New Delhi
dt. 2nd February, 1999
To
The Chief Commissioner of Income Tax, Ahmedabad.
Sub : Certificate under s. 197(1) of IT Act.
Sir,
I am directed to request you to bring to the notice of all Assessing Officers in Gujarat region to admit and consider the applications already filed so
far under s. 197(1) of the IT Act even if they are filed after the end of the accounting year i.e. after the credit of interest amount subject to tax
deduction at source, and decide the same on merits, as per law.
This is being done in order to honour the direction of the Gujarat High Court given in the case of Sarika Estate & Investment (P) Ltd. in view of
the expectancy which has arisen in a class of assessees on account of a practice developed in the State of Gujarat in the matter of issue of
certificate under s. 197(1) of IT Act.
Yours faithfully,
Sd-
(Narottam Mishra) Deputy Secretary (Budget)