U GAMES PRIVATE LIMITED ,MUMBAI vs. ITO, WARD 13(1)(1), MUMBAI

The grounds of appeal are as under: On facts and circumstances of the case and in law, the Ld. ADDL/JCIT(A) has erred: 1. Ground No. 1: Erred in concluding that Appellant is not eligible to avail the credit of TDS over and above reported in Form 26AS On facts and circumstances of the case and in law. 1.1. The Ld. ADDL/JCIT(A) has erred in concluding that the Appellant is not eligible to avail the credit of TDS over and above reported in Form 26AS without considering the fact that: 1.1.1. credit of TDS could not be denied merely as the same did not reflect in the Form 26AS of the Appellant. 1.1.2. the Appellant has offered the income earned from Google Asia Pacific Pte. Limited (‘Google’) in its tax return and accordingly, it should be eligible for corresponding credit of TDS amounting to INR 8,06,425/-. 1.1.3. the Appellant, by acting in good faith, had requested the deductor by way of verbal communications to revise the TDS return so as to rectify the TDS credit appearing in the name of Play Games24x7 Private Limited (‘Play Games’) (Holding Company of the Appellant) on account the internal restructuring of the group company during the year under consideration. 1.1.4. the Holding Company, being Play Games, under whose Form 26AS the credit is reflected, has not claimed the said TDS credit in its own return of income and adequate proof of the same is submitted before ADDL/JCIT(A) during course of appellate proceedings.

1.5. the income offered and the corresponding TDS credit have never been in dispute and that the issue at hand solely concerns which entity is entitled to the credit of TDS. 1.1.6. the credit of TDS amounting to INR 806,425/- in relation to income earned from Google should have been granted as per the provisions of Section 199 of the Act which talks of granting credit for TDS to the person who is lawfully taxable in respect of such income. 1.1.7. the revenue cannot retain tax deducted at source without credit being made available to any entity, which is against the spirit and intention of the law and principle of substantive justice. 1.1.8. non-compliance with Rule 37BA, due to circumstances beyond the control of the Appellant, constitutes a procedural issue that should not override the substantive provisions of the Act and that, rules and forms cannot be interpreted in a manner that renders the core provisions of the Act subordinate to such procedural requirements. 1.1.9. the primary objective of Section 199 read with Rule 37BA is to align TDS credit with the person who is the beneficial owner of the income, which is Appellant in this case. 1.1.10. that the procedure is handmaid of justice and cannot be used to hamper the cause of justice and rules should not frustrate the main provisions of the Act. 2. Ground No. 2: Erred in granting short interest under Section 244A of the Act 2.1 On facts and circumstances of the case and in law, the Appellant requests the authorities to be directed to recompute and grant additional interest under section 244A of the Act, after considering the aforesaid short TDS credit due to the Appellant.

Ground No. 3: Erred in not taking into consideration the fact that transferor company i.e.. Play Games has not claimed the TDS credit amounting to INR 806,425/-in its return of income On facts and circumstances of the case and in law, 3.1 The Ld. ADDL/JCIT(A) has erred in concluding that no explanation has been provided by the Appellant as to why the said income and TDS thereon has not been claimed by the transferor company (l.e., Play Games) without acknowledging that the Appellant had submitted all relevant details and facts pertaining to the matter. 3.2 Without prejudice to the above, if the credit of TDS is denied to the Appellant, Play Games (transferor of credit) should be appropriately granted the credit of TDS with a corresponding upward adjustment of income and the said income shall have to eliminated from the books of the Appellant. 3. Facts in brief are that the assessee is a wholly owned subsidiary of M/s Playwin24x7 P.Ltd, the holding company being engaged in the business of online games. In September, 2021,the assessee took over the said company for a consideration of Rs 171.20 cr. as per terms of agreement dated 01.04.2021.During the year, the assessee derived income of Rs 8,06,42,504/-from M/s Google Asia Pacific P.Ltd on which Tax Deduction of source(‘TDS’) of Rs 8,06,425/-u/s 194-O of the Act was made. The income and the TDS amount are reflected in Form no.26AS of the transferor company. The assessee claimed the TDS credit in its own hands which was denied by the AO. The assessee contented

On careful consideration of the above facts, we do not find any infirmity in the conclusion drawn by the ld.CIT(A).The credit for tax has to be accorded strictly in conformity with section 199 of the Act read with Rule 37BA of the Income Tax Rules, 1962. The wordings of the rule 37BA(2) make it clear that credit for tax deducted on income assessable in hands of a person other than the deductee shall be given to the other person and not the deductee, provided the deductee files declaration with the deductor and he reports the tax deduction in name of the other person as per provisions of Chapter XVII of the Act. In the given case, the TDS return filed by the deductor shows the tax deduction in the name of the Playwin and it is duly reflecting in their 26AS statement .The assessee is claiming credit in its hands and as per rule 37BA it should have ensured that it filed a declaration with the deductor giving proper name, address and PAN etc of the persons in whose hands income was to be assessable. On receipt of such declaration, the deductor shall issue certificate for the deduction of tax at source in the name of such other person. The crux of section 199 read with Rule 37BA(2) is that if the income, on which tax has been deducted at source, is chargeable to tax in the hands of the recipient, then credit for such tax will be allowed to such recipient. If, however, the income is fully or partly chargeable to tax in the hands of P a g e | 7 A.Y. 2022-23 U Games Private Limited some other person because of the operation of any provision, the proportionate credit for tax deducted at source should be allowed to such other person who is chargeable to tax in respect of such income, notwithstanding the fact that he is not the recipient of income. It is with a view to regularise the allowing of credit for tax deducted at source to the person other than recipient of income, that the proviso to Rule 37BA(2) has been enshrined necessitating the furnishing of particulars of such other person by the recipient for enabling the deductor to issue TDS certificate in the name of the other person. The entire purpose of this exercise of allowing credit to the other person is to ensure that the benefit of tax deducted at source is availed once and that too, by the right person, who is chargeable to tax in respect of such income. It is just to streamline the procedure for giving effect to this intent and rule out the possibility of taking any inappropriate credit for the amount of tax deducted at source, firstly, by the recipient who is not chargeable to tax and secondly, by the person who is rightly chargeable to tax in respect of such income, that the procedural provision has been put in place in Rule 37BA(2). 6.1 However, it is settled law that non-compliance of a procedural provision, which is otherwise directory in nature, cannot disturb the writ

Accordingly, we restore the matter back to the file of the AO with the direction to him to assist the assessee in revising the relevant TDS returns and reversing the credit of the said TDS in the Form No. 26AS.For this purpose, the AO should write to the deductor to rectify the TDS Return and ensure that the TDS credit is appropriately reflected in the Form 26AS of the assessee who may also be accorded reasonable time to get the necessary amendment done. With the above direction, the grounds of the appeal of the assessee is allowed for statistical purposes. 8. In the result, the appeal is allowed for statistical purposes. Order pronounced in the open court on 11/09/2025. NARENDER KUMAR CHOUDHRY PRABHASH SHANKAR (न्याययक सदस्य /JUDICIAL MEMBER) (लेखाकार सदस्य/ACCOUNTANT MEMBER)

अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file.