AOs Mandated to Issue Low TDS Certificates Based on Rule 28AA Principles



Quick Summary
This article explains Rule 28AA of the Income Tax Rules, which governs the issuance of certificates for lower or no tax deduction at source (TDS). It clarifies that an Assessing Officer (AO) must objectively determine a person's existing and estimated tax liability based on specific factors before issuing such a certificate. These factors include tax payable on estimated income, past income, existing liabilities, and advance tax/TDS paid.

Rule 28AA of Income Tax Rules for Certificate for deduction at lower rates or no deduction of tax from income other than dividends specifies, interrail as follows -

28AA. (1) Where the Assessing Officer, on an application made by a person under sub-rule (1) of rule 28 is satisfied that existing and estimated tax liability of a person justifies the deduction of tax at lower rate or no deduction of tax, as the case may be, the Assessing Officer shall issue a certificate in accordance with the provisions of sub-section (1) of section 197 for deduction of tax at such lower rate or no deduction of tax.

Low TDS Certificates: Rule 28AA Explained

(2) The existing and estimated liability referred to in sub-rule (1) shall be determined by the Assessing Officer after taking into consideration the following: -

  1. tax payable on estimated income of the previous year relevant to the assessment year;
  2. tax payable on the assessed or returned 3[or estimated income, as the case may be, of last four] previous years;
  3. existing liability under the Income-tax Act,1961 and Wealth-tax Act,1957;
  4. advance tax payment 4[tax deducted at source and tax collected at source] for the assessment year relevant to the previous year till the date of making application under sub-rule (1) of rule 28;
 

Hence, Under Rule 28AA of The Income Tax Rules, it clear that the ‘satisfaction’ needs to be recorded/determined by A.O. after taking into consideration the four factors mentioned in sub-rule (2) of Rule 28-AA. Thus, it is not the subjective satisfaction of A.O., but an objective satisfaction which must be based on Clauses (i), (ii), (iii) and (iv) of sub-rule (2) of Rule 28 AA.

 

Thus, for low TDS Certificate, the AO is competent only to examine the aspect of TDS and had no authority, jurisdiction and competence to look into the aspect of net profit which is within the province of jurisdictional Assessing Officer as was held in the case of GOEL CARGO PRIVATE LIMITED Vs COMMISSIONER OF INCOME TAX, BHOPAL [2024-VIL-28-MP-DT]




About the Author

DESIGNATED PARTNER

Mr. Vivek Jalan is a FCA, Qualified LL.M (Constitutional Law) and LL.B. He is the Chairman of The Fiscal Affairs and Taxation Committee of The Bengal Chamber of Commerce and Industry. He is the Convenor on Indirect Taxes of the CII- Economic Affairs and Taxation Committee (ER); He is also a visiting faculty for Indirec ... Read more

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