Madhya Pradesh High Court
Commissioner Of Income Tax Income Tax … vs Authority Of India Piu Narsinghpur … on 6 March, 2026
Author: Vivek Rusia
Bench: Vivek Rusia
NEUTRAL CITATION NO. 2026:MPHC-JBP:18033
1 ITA-32-2014
IN THE HIGH COURT OF MADHYA PRADESH
AT JABALPUR
BEFORE
HON'BLE SHRI JUSTICE VIVEK RUSIA
&
HON'BLE SHRI JUSTICE PRADEEP MITTAL
INCOME TAX APPEAL No. 32 of 2014
COMMISSIONER OF INCOME TAX TDS
Versus
PROJECT DIRECTOR NATIONAL HIGHWASYS AUTHORIY OF INDIA PIU
NARSINGHPUR SHRI RAMDAS BHAWAN
Appearance:
Shri Siddharth Sharma - Advocate for the appellant.
Shri Sumit Nema - Senior Advocate with Shri Abhijeet Shrivastava and
Shri Ayush Gupta - Advocates for the respondent.
WITH
INCOME TAX APPEAL No. 33 of 2014
COMMISSIONER OF INCOME TAX TDS
Versus
PROJECT DIRECTOR NATINAL HIGHWAYS AUTHORITY OF INDIA PIU
NARSINGHPUR S
Appearance:
Shri Siddharth Sharma - Advocate for the appellant.
Shri Sumit Nema - Senior Advocate with Shri Abhijeet Shrivastava and
Shri Ayush Gupta - Advocates for the respondent.
INCOME TAX APPEAL No. 34 of 2014
COMMISSIONER OF INCOME TAX TDS
Versus
PROJECT DIRECTOR NATIONAL HIGHWASY AUTHORITY OF INDIA PIU
NEUTRAL CITATION NO. 2026:MPHC-JBP:18033
2 ITA-32-2014
NARSINGHPUR
Appearance:
Shri Siddharth Sharma - Advocate for the appellant.
Shri Sumit Nema - Senior Advocate with Shri Abhijeet Shrivastava and
Shri Ayush Gupta - Advocates for the respondent.
INCOME TAX APPEAL No. 35 of 2014
COMMISSIONER OF INCOME TAX INCOME TAX DEPARTMENT
Versus
AUTHORITY OF INDIA PIU NARSINGHPUR PROJECT DIRECTOR
NATIONAL HIGHWAYS
Appearance:
Shri Siddharth Sharma - Advocate for the appellant.
Shri Sumit Nema - Senior Advocate with Shri Abhijeet Shrivastava and
Shri Ayush Gupta - Advocates for the respondent.
INCOME TAX APPEAL No. 36 of 2014
COMMISSIONER OF INCOME TAX TDS
Versus
PROJECT DIRECTOR NATIONAL HIGHWAYS AUTHORITY OF INDIA PIU
NARSINGHPUR
Appearance:
Shri Siddharth Sharma - Advocate for the appellant.
Shri Sumit Nema - Senior Advocate with Shri Abhijeet Shrivastava and
Shri Ayush Gupta - Advocates for the respondent.
INCOME TAX APPEAL No. 37 of 2014
COMMISSIONER OF INCOME TAX TDS
Versus
PROJECT DIRECTOR NATIONAL HIGHWAYS AUTHORITY OF INDIA PIU
NARSINGHPUR
NEUTRAL CITATION NO. 2026:MPHC-JBP:18033
3 ITA-32-2014
Appearance:
Shri Siddharth Sharma - Advocate for the appellant.
Shri Sumit Nema - Senior Advocate with Shri Abhijeet Shrivastava and
Shri Ayush Gupta - Advocates for the respondent.
INCOME TAX APPEAL No. 38 of 2014
COMMISSIONER OF INCOME TAX TDS
Versus
PROJECT DIRECTOR NATIONAL HIGHWASY AUTHORITY OF INDIA PIU
NARSINGHPUR
Appearance:
Shri Siddharth Sharma - Advocate for the appellant.
Shri Sumit Nema - Senior Advocate with Shri Abhijeet Shrivastava and
Shri Ayush Gupta - Advocates for the respondent.
INCOME TAX APPEAL No. 39 of 2014
COMMISSIONER OF INCOME TAX TDS
Versus
M/S NATIONAL HIGHWASY AUTHORTY OF INDIA NATIONAL
HIGHWAYS OF INDIA
Appearance:
Shri Siddharth Sharma - Advocate for the appellant.
Shri Sumit Nema - Senior Advocate with Shri Abhijeet Shrivastava and
Shri Ayush Gupta - Advocates for the respondent.
INCOME TAX APPEAL No. 40 of 2014
COMMISSIONER OF INCOME TAX TDS
Versus
M/S NATIONAL HIGHWAYS AUTHORITY OF INDIA NATIONAL
AUTHORITY OF INIDA
Appearance:
NEUTRAL CITATION NO. 2026:MPHC-JBP:18033
4 ITA-32-2014
Shri Siddharth Sharma - Advocate for the appellant.
Shri Sumit Nema - Senior Advocate with Shri Abhijeet Shrivastava and
Shri Ayush Gupta - Advocates for the respondent.
RESERVED ON: 25.02.2026
PRONOUNCED ON: 06.03.2026
--------------------------------------------------------------------------------------------------
ORDER
Per: Justice Vivek Rusia
These bunch of income tax appeals are filed by the Commissioner of Income
Tax, (TDS), Bhopal, (M.P.) under Section 260-A of the Income Tax Act, 1961 in
respect of assessment years 2008-09 and 2009-10 challenging the orders dated
12.09.2013 and 20.09.2013 passed by the Income Tax Appellate Tribunal,
Jabalpur (for short ‘Tribunal’) in I.T.A. No.70/Jbp/2013, 73/Jbp/2013,
69/Jbp/2013, 72/Jbp/2013, 67/Jbp/2013, 71/Jbp/2013, 68/Jbp/2013, 22/Jbp/2012
and 23/Jbp/2012. As these appeals involve an identical issue, they are heard
analogously and are being decided by this common order.
Facts of these cases are being taken from I.T.A. No.32/2014:-
2. M/s Ssangyong Engineering and Construction Company Ltd. (hereinafter
referred to as ‘deductee company’) entered into a contract with the respondent
assessee, i.e., the National Highway Authority of India (in short ‘NHAI’) for the
development of national highways. The NHAI, being an assessee, made a payment
to the deductee company with TDS as provided under Section 195 of the Income
Tax Act, 1961 (hereinafter referred to as the ‘Act’) at marginal rates after obtaining
orders under Section 197(1) from its Assessing Officer, ITO(TDS), Ward 2(1),
NEUTRAL CITATION NO. 2026:MPHC-JBP:180335 ITA-32-2014
International Taxation, New Delhi. By virtue of the aforesaid order passed under
Section 197, the deductee company was entitled to receive payment from the
respondent/assessee at a marginal rate @ of 2.1% for assessment year 2006-07, @
of 2.112% for the assessment year 2007-08, @ of 1% for the assessment year
2008-09 and @ of 0.75% for the assessment year 2009-10 and 2010-11.
3. The respondent/assessee was treated as a person responsible for making
payments to the foreign contractor, deducting tax at source and filing a return
under Section 206 of the Act. On verification, it was noticed that the
respondent/assessee had made payment of a contract worth of Rs.19,61,36,514/- to
the deductee company from 01.04.2008 to 30.06.2008 without proper deduction of
tax at source. Upon issuance of notice, the respondent/assessee filed an
explanation that the payments were made with a lower deduction of tax at source
as a consequence of the order issued under Section 195/197 by their A.O., New
Delhi, on 30.06.2008 for the F.Y. 2008-09.
4. The Assessing Officer opined that the payments were made by the
respondent/assessee for a sum of Rs.19,61,36,513/- for the period from 10.04.2008
to 24.06.2008, when no certificate for non-deduction of tax at source was in force,
meaning thereby, at the time of making such payment or crediting such payment,
there was no certificate. The certificate dated 30.06.2008 came into effect from the
date of its issuance. Therefore, the period prior to 30.06.2008 suffered a lower
deduction of tax at source than the rate prescribed under the Act. The Assistant
Commissioner of Income Tax (TDS), Jabalpur, being an Assessing Officer, passed
an order dated 04.03.2011, assessed Rs.31,03,54,504/- as total default of TDS and
imposed the interest and directed for initiation of proceedings for penalty, in total
of Rs.41,89,78,580/-.
NEUTRAL CITATION NO. 2026:MPHC-JBP:18033
6 ITA-32-2014
5. Being aggrieved by the order dated 04.03.2011, the respondent/assessee
preferred an appeal before the Commissioner of Income Tax (TDS), Jabalpur.
Vide order dated 12.04.2012, the appeal was dismissed. Thereafter, the
respondent/NHAI filed an appeal before the Income Tax Appellate Tribunal.
6. Vide order dated 12.09.2013, the learned ITAT has allowed the appeal by
holding that it is not a fit case for holding that the assessee deductor is in default
under Section 201(1) nor for interest under Section 201(1A) of the Act and set
aside the order passed by the Assessing Officer as well as CIT. Hence, these
appeals before this Court.
7. Vide order dated 26.06.2014, these appeals were admitted on the
following substantial questions of law:-
“1. Whether on the facts and in the circumstances of the case, the ITAT
was justified in law in holding that the assessee could not be held to be
assessee in default u/s 201(1) ? and 201(1A) of the Act and thereby
granting the relief?
2. Whether, on the facts and in the circumstances of the case, the ITAT
was justified in law in deleting the interest levied u/s 201(1A) of the
Act, while failing to appreciate that the deductor cannot consider the
assessment status of the deductee unless and until a certificate u/s 197
of the Act is granted by the Assessing Officer ?”
8. We have heard learned counsel for the parties.
9. Shri Siddharth Sharma, Advocate, submits that the sole issue, which
requires consideration, is whether the benefit and effect of the certificate dated
30.06.2008 is liable to be given from the date of issuance of the certificate or for
NEUTRAL CITATION NO. 2026:MPHC-JBP:18033
7 ITA-32-2014
the entire assessment year. Learned counsel submits that the ITAT has committed
a serious error of law, while appreciating the order passed by the learned A.O. and
CIT, as both the Authorities have categorically held that the effect of the said
certificate under Section 197(1) can only be given prospectively and not
retrospectively. The respondent/assessee was in default on the date of deduction of
tax, because the deductor had to deduct the tax irrespective of the income, in the
absence of any valid certificate of lower deduction/no deduction.
10. Per contra, Shri Sumit Nema, Senior Advocate, submits that as per the
language of Section 197 of the Income Tax Act, the certificate is liable to be
issued for the entire financial year. Therefore, the learned ITAT has rightly held
that the respondent/assessee cannot be held in default of deducting the tax at
source. In support of his contentions, learned counsel for the respondent has placed
reliance on a judgment passed by the Division Bench of the High Court of Delhi at
New Delhi in the case of Conner Institute of Health Care and Research Center Pvt.
Ltd. Vs. DCIT, Circle – 73(1), Delhi in W.P.(C) No.16978/2022 dated 30.04.2025 ,
where the similar controversy has been put to rest. He has also placed reliance on a
judgment passed by the Apex Court in the case of Commissioner of Income-tax
Vs. Bovis Lend Lease (I) Ltd. [2016] 72 taxmann.com 137 (SC) , whereby the
judgment passed by High Court of Karnataka has been upheld by dismissing the
SLP, in which, the High Court has held that under Section 197, there is no
obligation on part of payer to pay tax as long as the certificate issued under Section
197 is enforced and not cancelled.
Appreciation & Conclusions
11. The facts of the aforesaid case are not in dispute. Let the respondent
NEUTRAL CITATION NO. 2026:MPHC-JBP:18033
8 ITA-32-2014
obtain a certificate under Section 197 on 30.06.2008 for the assessment year 2008-
09. The only issue which requires consideration is whether the certificate will be
treated as effective from the date of issuance or for the entire assessment year.
12. Section 197 of the Act is reproduced below:-
197. Certificate for deduction at lower rate
(1) Subject to rules made under sub-section (2A), where, in
the case of any income of any person or sum payable to any
person, income-tax is required to be deducted at the time of
credit or, as the case may be, at the time of payment at the
rates in force under the provisions of sections 192, 193, 194,
194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA,
194LBA, 194LBB, 194LBC, 194M, 194-O, 194Q and 195,
the Assessing Officer is satisfied that the total income of the
recipient justifies the deduction of income-tax at any lower
rates or no deduction of income-tax, as the case may be, the
Assessing Officer shall, on an application made by the
assessee in this behalf, give to him such certificate as may be
appropriate.
(2) Where any such certificate is given, the person
responsible for paying the income shall, until such certificate
is cancelled by the Assessing Officer, deduct income-tax at
the rates specified in such certificate or deduct no tax, as the
case may be.
(2A) The Board may, having regard to the convenience of
assessees and the interests of revenue, by notification in the
Official Gazette, make rules specifying the cases in which,
and the circumstances under which, an application may be
made for the grant of a certificate under sub-section (1) and
the conditions subject to which such certificate may be
granted and providing for all other matters connected
NEUTRAL CITATION NO. 2026:MPHC-JBP:18033
9 ITA-32-2014
therewith.
13. It is clear from the language of Section 197 that if the Assessing Officer
is satisfied that the total income of the recipient justifies the deduction of income
tax at any lower rate or no deduction of income tax, as the case may be, the A.O.
shall on an application made by the assessee in his behalf, give him such
certificate as may be appropriate. Under Sub-section (2), where any such
certificate is given, the person responsible for paying the income tax shall deduct
the income tax at the rate specified in such certificate unless the same is cancelled
by the A.O throughout the assessment year. As per sub-rule (2) of Rule 28AA, the
certificate shall be valid for the assessment year to be specified in the certificate,
unless it is cancelled at any time before the expiry of the specified period. The
assessment in income tax is always for the entire assessment year. Every provision
of the Income Tax Act is liable to be applied for a particular assessment year. Even
the tax liabilities are fixed on the assessee for the entire assessment year.
14. Section 201 of the I.T. Act deals with the consequences of failure to
deduct or pay the income tax. It is reproduced below:-
Consequences of failure to deduct or pay.
(1) Where any person, including the principal officer of a
company,–
a) who is required to deduct any sum in
accordance with the provisions of this Act; or
(b) referred to in sub-section (1A) of section 192,
being an employer, does not deduct, or does not
pay, or after so deducting fails to pay, the whole or
any part of the tax, as required by or under this
NEUTRAL CITATION NO. 2026:MPHC-JBP:1803310 ITA-32-2014
Act, then, such person, shall, without prejudice to
any other consequences which he may incur, be
deemed to be an assessee in default in respect of
such tax:
Provided that any person, including the principal officer of a company,
who fails to deduct the whole or any part of the tax in accordance with
the provisions of this Chapter on the sum paid to a resident or on the
sum credited to the account of a resident shall not be deemed to be an
assessee in default in respect of such tax if such payee–
(i) has furnished his return of income under section 139;
(ii) has taken into account such sum for computing income in
such return of income; and
(iii) has paid the tax due on the income declared by him in
such return of income, and the person furnishes a certificate
to this effect from an accountant in such form as may be
prescribed:
Provided further that no penalty shall be charged under section 221
from such person, unless the Assessing Officer is satisfied that such
person, without good and sufficient reasons, has failed to deduct and
pay such tax.
(1A) Without prejudice to the provisions of sub-section (1), if
any such person, principal officer or company as is referred
to in that sub-section does not deduct the whole or any part of
the tax or after deducting fails to pay the tax as required by or
under this Act, he or it shall be liable to pay simple interest,
—
(i) at one per cent for every month or part of a
month on the amount of such tax from the date on
which such tax was deductible to the date on
which such tax is deducted; and
NEUTRAL CITATION NO. 2026:MPHC-JBP:1803311 ITA-32-2014
(ii) at one and one-half per cent for every month or
part of a month on the amount of such tax from the
date on which such tax was deducted to the date on
which such tax is actually paid, and such interest
shall be paid before furnishing the statement in
accordance with the provisions of subsection (3) of
section 200:
Provided that in case any person, including the principal officer of a
company fails to deduct the whole or any part of the tax in accordance
with the provisions of this Chapter on the sum paid to a resident or on
the sum credited to the account of a resident but is not deemed to be an
assessee in default under the first proviso to sub-section (1), the interest
under clause (i) shall be payable from the date on which such tax was
deductible to the date of furnishing of return of income by such payee:
Provided further that where an order is made by the Assessing Officer
for the default under sub-section (1), the interest shall be paid by the
person in accordance with such order.
(2) Where the tax has not been paid as aforesaid after it is
deducted, the amount of the tax together with the amount of
simple interest thereon referred to in sub-section (1A) shall
be a charge upon all the assets of the person, or the company,
as the case may be, referred to in sub-section (1).
(3) No order shall be made under sub-section (1) deeming a
person to be an assessee in default for failure to deduct the
whole or any part of the tax from a person resident in India, at
any time after the expiry of seven years from the end of the
financial year in which payment is made or credit is given.
(4) The provisions of sub-clause (ii) of sub-section (3) of
section 153 and of Explanation 1 to section 153 shall, so far
as may, apply to the time limit prescribed in sub-section (3).
15. As per the proviso to Section 201, any person, including Principal
NEUTRAL CITATION NO. 2026:MPHC-JBP:18033
12 ITA-32-2014
Officer or Company, shall not be deemed to be an assessee in default in respect of
such tax, if he furnishes a certificate to this effect from the accountant in such
form. In view of the above, the question of law No.1 is answered against the
revenue that the respondent cannot be held as an assessee in default under Section
201 and Section 201(1A); and so far as the question of law No.2 is concerned, the
ITAT was justified in deleting the interest levied under Section 201(1A) of the Act
because the assessee had certificate under Section 197 for an entire assessment
year.
16. Accordingly, the present income tax appeals are dismissed. A photocopy
of this order be kept in all the income tax appeals.
(VIVEK RUSIA) (PRADEEP MITTAL)
JUDGE JUDGE
Shruti
SHRU
Digitally signed by SHRUTI JHA
DN: c=IN, o=HIGH COURT OF MADHYA
PRADESH JABALPUR,
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MADHYA PRADESH JABALPUR,CID -
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st=Madhya Pradesh,
serialNumber=975d0201b09c3847354
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Date: 2026.03.06 17:09:57 +05'30'
