MILAHA INTEGRATED MARITME AND LOGISTICS ,MUMBAI vs. DCIT (IT) CIRCLE 3(2)(2), MUMBAI

O R D E R

PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:

“ Ground No. 1 On the facts and in the circumstances of the case and in law, the Hon'ble Commissioner of Income Tax (Appeals) - 57 ['CIT(A)'] has erred in denying the credit of Tax Deducted at Source (TDS) amounting to Rs. 46,66,874 in its order dated September 27, 2024 passed under section 250 of the IT Act for AY 2018- 19 ('impugned order) despite the fact that the Appellant has duly offered the corresponding income and is therefore, eligible for claiming TDS as per section 199 of the IT Act The Appellant, therefore, prays that the TDS credit due of Rs. 46,66,874 be granted to it.

Ground No. 2 Without prejudice to the above, on the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) has erred in denying the credit of TDS amounting to Rs 38,95,402 (appearing in Form 26AS of its agent in India) in the impugned order despite the fact that the Appellant has duly offered the corresponding income and is therefore, eligible for claiming TDS as per section 199 of the IT Act The Appellant, therefore, prays that the TDS credit due of Rs. 38,95,402 be granted to it.

Ground No. 3 Without prejudice to the above, on the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) erred in upholding the order of learned Deputy Commissioner of Income Tax, Centralized Processing Centre ('CPC') in not allowing the TDS credit of Rs. 7,71,472 as reflecting in Form 26AS of the Appellant while processing the return of income for the captioned AY under section 143(1) of the IT Act.

The Appellant, therefore, prays that the TDS credit of Rs. 7,71,472 as reflecting in Form 26AS of the Appellant be granted.”

3.1. Return of income was filed by the assessee on 26.10.2018 reporting Nil income. While reporting nil income, assessee took the position that its income is chargeable to tax in Qatar and not in India, considering provisions of Article 8 of the India-Qatar Double Tax Avoidance Treaty. In view of Article 8 of the said treaty, according to the assessee, it derived profits from operation of ships in international traffic and therefore the freight income earned from Indian voyages was taxable only in Qatar and not in India. In the return so filed, assessee claimed TDS credit of Rs.46,66,874/- as refund. According to the assessee, some of the Indian customers had done withholding of tax at source against the PAN of its appointed agent, i.e., PSAPL, which appeared in the Form-26AS of the agent and not of the assessee. TDS done against the PAN of assessee which appeared in its Form-26AS amounted to Rs.7,71,472/-. The balance of Rs.38,95,402/- was against the PAN of PSAPL. Assessee had reported the entire income in the return filed by it which included both the amounts against which the TDS was done, i.e., part of it against the PAN of assessee and part of it against the PAN of PSAPL.

3.2. Return of the assessee was processed by Centralized Processing Centre, Bengaluru (CPC) vide intimation dated 27.09.2019 u/s. 143(1), whereby the nil income reported by the assessee was processed as such. However, credit of TDS claimed by the assessee of Rs.46,66,874/- was denied. Thus, in the return so processed vide said intimation, the total income was determined at nil with income-tax payable/refundable by/to the assessee as nil. Consequent to this Milaha Integrated Maritime and Logistics AY 2018-19 processing of return and denial of TDS credit, an online rectification application was filed u/s.154. Assessee also moved an appeal before ld. CIT(A) against denial of the said TDS credit. In the order passed by the CPC against the rectification application, TDS credit was not granted but at the same time, income reported by the assessee at nil was not disturbed. Another application for rectification was moved before the ld. Jurisdictional Assessing Officer (JAO) to claim the credit for the TDS so done. The said application is stated to be pending as on date.

3.3. Claim of the assessee is that TDS credit ought to be granted to it since the income on which the said TDS is done belongs to the assessee which has been duly reported in its return, however, not chargeable to tax owing to provisions contained in Article 8 in India- Qatar DTAA. In this respect, assessee submitted that it had issued an undertaking/declaration to PSAPL, stating its intention to claim the said TDS credit in its return, pursuant to which PSAPL did not claim the credit of TDS in its return though appearing under the PAN of PSAPL. To substantiate this fact, return of PSAPL was also placed on record for the year under consideration whereby from Schedule ‘15B1- Sch TDS1 Details of Tax Deducted at Source on Income [As per Form 16A issued by Deductor(s)]’, it was demonstrated that PSAPL had not claimed credit of such TDS. Also, an indemnity bond from PSAPL was placed on record stating that TDS credit of Rs.38,95,402/- pertaining to the assessee was not claimed by PSAPL. The said indemnity bond also states that PSAPL does not have any objection for granting credit of TDS to assessee and it shall indemnify against any revenue loss that may be caused for granting credit of such TDS to the assessee.

3.4. Thus, assessee requested for directions to the ld. Assessing Officer for granting of the said TDS credit aggregating to Rs.46,66,874/- appearing against both the PANs, i.e., of the assessee and that of PSAPL, more particularly when nil income reported by the assessee has been processed and determined as well as accepted by the Revenue.

Milaha Integrated Maritime and Logistics AY 2018-19 “37BA (1) Credit for tax deducted at source and paid to the Central Government in accordance with the provisions of Chapter XVII, shall be given to the person to whom payment has been made or credit has been given (hereinafter referred to as deductee) on the basis of information relating to deduction of tax furnished by the deductor to the income-tax authority or the person authorised by such authority.

(2) (i) Where under any provisions of the Act, the whole or any part of the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for the whole or any part of the tax deducted at source, as the case may be, shall be given to the other person and not to the deductee.

Provided that the deductee files a declaration with the deductor and the deductor reports the tax deduction in the name of the other person in the information relating to deduction of tax referred to in sub-rule (1).]

(ii) The declaration filed by the deductee under clause (i) shall contain the name, address, permanent account number of the person to whom credit is to be given, payment or credit in relation to which credit is to be given and reasons for giving credit to such person

(iii) The deductor shall issue the certificate for deduction of tax at source in the name of the person in whose name credit is shown in the information relating to deduction of tax referred to in sub-rule (1) and shall keep the declaration in his safe custody.

3) (i) 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.

(ii) Where tax has been deducted at source and paid to the Central Government and the income is assessable over a number of years, credit for tax deducted at source shall be allowed across those years in the same proportion in which the income is assessable to tax.

Milaha Integrated Maritime and Logistics AY 2018-19 17. What needs to be seen is harmonious construction of Section 199(1) read with the conditions provided in rule 37BA and intention of the legislature was not to deny the credit if the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, whereas the intention is to grant credit for the tax deducted at source on behalf of the person from whose income the deduction has been made. Now if the deductee has produced evidence or certificate that it has not claimed TDS as income belongs to the other person and in his return has not taken such credit, which fact has also been acknowledged by the department and there is no dispute by the department that the original deductee is never going to take the credit of TDS, then if deductor for some reason fails to report the tax deduction in the name of the other person; or does not issue the certificate for deduction of tax at source in the name of the person in whose name credit is shown in the information relating to deduction of tax, then, is other person who is showing the income in respect of which TDS has been deducted and the original deductee files a declaration with the deductor and also in the return of income, can credit of TDS be denied to the other person showing the income. Under such circumstances a liberal interpretation has to be given. The form prescribed under the rules cannot have an effect of interpretation of operations of the parent statute……… …….19. There is another angle which needs to be seen is that the procedure prescribed by the Rule 37BA in certain circumstances becomes extremely cumbersome, because of each declaration by the mutual fund or the company, one has to lodge a particular form. It is impossible in the case of holding of several investments. Here it is a case, the present assessee which is in appeal before us has offered income on which TDS has been deducted and it is not able to receive the credit despite the PAN on which TDS has been deducted has not shown in the return of income and is clearly stated that no credit for TDS is being taken as the income belongs to the assessee and credit should be given there. Thus, in these circumstances, the strict conditions provided in Rule 37BA especially the forms prescribed under the Rules has to be read in the spirit of provision of Section 199(1) which in our opinion should prevail upon the forms and the conditions provided in the Rules. This proposition has been settled in various judgments, for sake of reference few of them are being referred to, viz.,:- • CIT vs. Tulsyan NEC Ltd. (2011) (330 ITR 226) (SC)

13. Lastly, it is immaterial that the relevant form prescribed under Income- tax Rules, at the relevant time (i.e., before 1-4-2007), provided for set off of MAT credit balance against the amount of tax plus interest i.e., after the computation of interest under section 234B. This was directly contrary to a plain reading of section 115JAA(4). Further, a form prescribed under the rules can never have any effect on the interpretation or operation of the parent statute.

• CIT vs. Hindustan Construction Co. Ltd. (1995) (211 ITR 535) (Bom)

In any event, the language of the statute cannot be overridden by a form prescribed under the Rules framed under the Act.

26. A form provided by a rule-making authority which is a delegate of the Legislature cannot override a statutory provision. Forms are subservient to legislation. Forms are intended to facilitate the implementation of legislation. Forms cannot supplant legislation.

• CIT vs. Nagpur Hotel Owners Association (1994) (209 ITR 441) (Bom)

"The Supreme Court decisions referred to above are clear. They specifically speak of the rules and not the form. In principle also no distinction between the form and the rule can be drawn to judge the extent of delegation under section ii(2)(a) where the language does not permit delegation of power to prescribe limitation to give notice.

The conclusion is thus inevitable that the Income-tax Rules could not fix a time- limit for submitting the application in Form No. 10 under rule 17 and, therefore, the Tribunal was correct in its conclusion." • Sales Tax Officer vs. KI Abraham (1967 AIR SC1823)

"The decision of the question at issue therefore depends on the construction of the phrase "in the prescribed manner" in s. 8(4) read with s. 13 of the Act. In our opinion, the phrase "in the prescribed manner" occurring in s. 8(4) of the Act only confers power on the rule-making authority to prescribe a rule stating what particulars are to be mentioned in the prescribed form, the nature and value of the goods sold, the parties to whom they are sold, and to which authority the form is to be furnished. But the phrase "in the prescribed manner" in s. 8(4) does not take in the time-element. In other words, the section does not authorities the rule-making authority to prescribe a time-limit within which the declaration is to be filed by the registered dear...In Stroud's Judicial Dictionary it is said that the words "manner and form" refer only "to the mode in which the thing is to be done, and do not introduce anything from the Act referred to as to the thing which is to be done or the time for doing it."