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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI KULDIP SINGH & SHRI GAGAN GOYAL
PER GAGAN GOYAL, A.M:
This appeal by assessee is directed against the order of National Faceless Appeal Centre (for short “NFAC”) dated 05.09.2022 u/s. 250 of the Income Tax Act, 1961 (in short ‘the Act’) for A.Y. 2018-19. The assessee has raised the following grounds (revised) of appeal:-
2 ITA No. 367/Mum/2023 Ignitive Digitech Private Limited 1. On the facts and in the circumstances of the case and in law the order passed by the Honourable Commissioner of Income Tax (Appeals) (hereafter referred to as Honourable CIT (Appeals)) is invalid and bad in law.
During the course of appellate proceedings with Honourable CIT (Appeals), the appellant had submitted all the details in support of its claim. The appellant had clearly stated in the submission that they are ready to explain the facts through virtual hearing if required. Unfortunately, the same has not been considered by Honourable CIT (Appeals) at the time of passing the Order. The appellant has filed grievance on Income Tax Portal and requested for rectification of the Order passed Honourable CIT (Appeals) but till date the same grievance is unsolved.
The appellant had claimed TDS credit as per the provision of section 199 of the Income Tax Act, 1961 (hereafter known as "Act") read with Rule 37BA(3)(i) of the Income Tax Rule 1962 (hereafter known as "Rules") and the relevant provisions of the rules are reproduce herewith for your reference.
Rule-37BA, Income-tax Rules [Credit for tax deducted at source for the purposes of section 199. 37BA. (1)****************** (2) (i) ******************** (ii)************************* (iii)************************* (3) (1) Credit for tax deducted at source and paid to the Central Government, shall be given for the assessment year for which such income is assessable.
Despite the provision of the Rule is very clear and the assessee had explained the same in its submission, Honourable CIT (Appeals), has failed to consider and understand the same and confirmed the Intimation received from CPC and disallowed the TDS credit.
3 ITA No. 367/Mum/2023 Ignitive Digitech Private Limited 4. On the facts and in the circumstances of the case and in law, the charging of interest u/s. 234B and 234C of the I.T. Act, 1961 are invalid and bad in law..
PRAYER:-
In the light of the above grounds, your appellant prays that the TDS credit relevant to A. Y 2018-19 be allowed which we have claimed as per the provision of Act and Rules.
The appellant craves leave to add, to alter or amend any of the above grounds of appeal as may be advised, at any time on or before the hearing of this appeal.
This appeal of the assessee is time barred by 96 days. To clarify and to explain its delay, assessee filed an affidavit alongwith his letter dated 04.02.2023. We have gone through the affidavit filed by the assessee and it is found that delay has arisen because of certain efforts assessee advanced before the jurisdictional AO and the TDS officer of the deductor so that issue can be resolved at that stage itself, but in the mean time the Ld. CIT (A) passed the order and assessee approached the grievance cell of the department and is still waiting for the response. In this whole process of filing of appeal before us get time barred. Explanation of the assessee found to be reasonable and deserves condonation of delay. In these circumstances, this delay of filing an appeal is condoned and matter is to be heard and adjudicated on merits.
The brief facts of the case are that assessee company filed its return of income on 28.09.2018 declaring total income of Rs. 1,74,333/-. The assessee had declared turnover of Rs. 16, 21,500/- on which TDS u/s. 194J of the Act was deducted by the client of the assessee M/s. Kotak Mahindra Asset
4 ITA No. 367/Mum/2023 Ignitive Digitech Private Limited Management Co. Ltd. (KMAMC). Assessee has a liability of Rs. 44,890/- against returned income and has a credit of TDS deducted by KMAMC amounting to Rs. 1, 62,150/-. The return of the assessee was processed u/s. 143(1) by the CPC, Bangalore vide order dated 15.05.2019, but TDS credit was not granted to the assessee, as assessee is following mercantile system of accounting and declared the income during the assessment year 2018-19, whereas the deductor deducted and deposited the amount of TDS on payment basis i.e. in AY 2019-20, accordingly TDS credit in Form No. 26AS also reflected in assessment year 2019-20. Against this order of CPC passed u/s. 143(1), assessee preferred an appeal before the Ld. CIT (A). In his order passed u/s. 250, Ld. CIT (A) also did not consider the claim of assessee and dismissed the appeal filed by the assessee.
Assessee being further aggrieved with this order of Ld. CIT (A) preferred this appeal before us. We have gone through the ITR filed by the assessee, order u/s. 143(1), order of Ld. CIT (A) and paper book filed by the assessee alongwith case laws relied upon. We observed that assessee duly shown the amount of turnover in its GST return in Form No. GSTR-3B vide page no. 20 of the paper book, assessee submitted the sales ledger in its books where this amount of turnover has been reflected. Further, assessee submitted the copy of tax invoices issued to the client and form no. 26AS. In addition to this, we have gone through the mails exchanged between the assessee and KMAMC vide page no. 64 to 71 of the paper book.
It is pertinent to mention that the assessee and its client are corporate entities, require to follow books of account on mercantile basis as per the
5 ITA No. 367/Mum/2023 Ignitive Digitech Private Limited requirement of section 145 of the Act. In this case, assessee rightly followed the mercantile system of accounting, but the client of the assessee followed cash system of accounting which is otherwise also not correct and this whole issue has arisen because of this fact only. It is observed that during the assessment year 2019-20, assessee has claimed a loss of Rs. 3,15,270/- against the turnover of Rs. 27,97,536/-. Against this turnover, there is a TDS by the client amounting to Rs. 2, 77,354/- duly claimed by the assessee and refund was also issued, but the amount of TDS credit of Rs. 1, 62,150/- was neither considered in the assessment year under consideration (as the same is not reflecting in Form No. 26AS) nor granted the same in succeeding year i.e. AY 2019-20 as the income pertains to earlier year. Now it’s a double jeopardy for the assessee as the year in which income was declared there was no reflection of TDS amount in Form No. 26AS and vice versa in succeeding year. As the assessee has already claimed the amount of TDS amounting to Rs. 1, 62,150/- in AY 2018-19 and the same was not claimed in succeeding year. In this situation, we rely on the order of Coordinate Bench in the case of Sanjeev Rajendra Pandit vs. ADIT in ITA No. 3004 & 3005/Mum/2022 dated 24.01.2023 and M/s Mahesh Software Systems vs. ACIT in ITA No. 1288/Pun/2017 dated 20.09.2019 with similar facts as in this case.
Respectfully following the decisions of Coordinate Benches and considering the facts mentioned (supra), we direct the jurisdictional AO to grant the refund of Rs. 1, 62,150/- to the assessee in AY 2018-19 as the income declared by assessee pertains to this assessment year.
6 ITA No. 367/Mum/2023 Ignitive Digitech Private Limited 7. The AO has relied on sub-rule (1) of section 37BA for denying the benefit of TDS during the year under consideration. This part of the Rule provides that the credit for TDS shall be given to the person to whom payment has been made or credit has been given on the basis of information relating to TDS furnished by the deductor. What is material for sub-rule (1) is the beneficiary of credit for the TDS, being the person to whom payment has been made, which in the instant case is the assessee. The ld. CIT (A) has, in addition, relied on sub-rule (4) of Rule 37BA, which again provides that the credit for TDS shall be granted on the basis of information relating to deduction of tax at source furnished by the deductor. How, this rule prejudices the claim of the assessee is anybody's guess. Obviously, the information about the TDS by KMAMC is not denied. Both the sub-rules simply provide for granting of the benefit of TDS. The point of time at which the benefit of TDS is to be given, is governed by sub-rule (3) of Rule 37BA, which unequivocally provides through clause (i) that the 'credit for tax deducted at source and paid to the Central Government, shall be given for the assessment year for which such income is assessable'. It is, ergo, abundantly clear from the mandate of Rule 37BA (3) (i) that the benefit of TDS is to be given for the assessment year for which the corresponding income is assessable. Since the income, on which tax of Rs. 1,62,150/- was deducted at source, is patently assessable in the year under consideration, we hold that the benefit of the TDS should also be allowed in the same year, namely, the year under consideration. We, therefore, overturn the impugned order and direct accordingly.
7 ITA No. 367/Mum/2023 Ignitive Digitech Private Limited 7. In the result appeal of the assessee is allowed.
Order pronounced in the open court on 10th day of July, 2023. Sd/- Sd/- (KULDIP SINGH) (GAGAN GOYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, दिन ांक/Dated: 10/07/2023 Sr. PS (Dhananjay)
Copy of the Order forwarded to: अपील र्थी/The Appellant , 1. प्रदिव िी/ The Respondent. 2. आयकर आयुक्त(अ)/The CIT(A)- 3. आयकर आयुक्त CIT 4. दवभ गीय प्रदिदनदि, आय.अपी.अदि., मुबांई/DR, ITAT, Mumbai 5. ग र्ड फ इल/Guard file. 6.
BY ORDER, //True Copy// (Asstt. Registrar) ITAT, Mumbai