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Income Tax Appellate Tribunal, DELHI BENCHES “B” : NEW DELHI
Before: SHRI R.K. PANDA & SHRI NARENDRA KUMAR CHOUDHARY
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES “B” : NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI NARENDRA KUMAR CHOUDHARY, JUDICIAL MEMBER ITA No.2642/Del./2018 Assessment Year 2014-15 Uberoi Sood & Kapoor, The ACIT, 606, 95 Vishal Bhawan, Circle – 63 (1), Nehru Place, New Delhi. vs., PIN – 110 019. New Delhi. PAN AAAFU1674L (Appellant) (Respondent) For Assessee : Shri Sanjay Sood, Advocate For Revenue : Ms. Sangeeta Yadav, Sr. DR Date of Hearing : 21.12.2021 Date of Pronouncement : 24.12.2021 ORDER PER R.K. PANDA, A.M.
This appeal by the Assessee is directed against the order dated 21.02.2018 of the Ld. CIT(A)-20, New Delhi, relating to the A.Y. 2014-15.
Facts of the case, in brief, are that the assessee is a firm and engaged in the business of profession. It filed its return of income on 30.09.2014 declaring an income of 2 ITA.No.2642/Del./2018 Uberoi Sood & Kapoor, New Delhi. Rs.1,21,28,560/-. During the course of assessment proceedings, the A.O. asked the assessee to file reconcile statement in respect of TDS claimed by the assessee in comparison to TDS reflected in the 26AS statement. From the reconciliation statement filed by the assessee, the A.O. noted that assessee has claimed TDS amounting to Rs.1,00,081/- whereas the corresponding income on this TDS has not been offered to tax as it was not received by the assessee in the previous year. In view of the above and in the light of provisions contained in Section 199 of the I.T. Act, 1961, the A.O. disallowed the claim of assessee in respect of TDS amounting to Rs.1,00,081/-.
2.1. In appeal, the Ld. CIT(A) directed the A.O. to give credit of the proportionate TDS of Rs.1,00,081/- in the year under consideration by observing as under :
“4.3.4. In this light, the claim of the appellant that the credit of entire TDS of Rs.1,00,081/- should be given to the appellant deserves to be rejected. In this light, the Assessing Officer is correct in treating the TDS deducted and deposited
3 ITA.No.2642/Del./2018 Uberoi Sood & Kapoor, New Delhi. in the Government account as deemed to be the income received by the appellant in the light of provisions of section 198 of the Act. However, the Assessing Officer is not right in not allowing the credit of corresponding proportionate TDS on the income of Rs.1,00,081/-. During the appellate proceedings the appellant has also submitted that a copy of 154 petition is filed before Assessing Officer for the claim of TDS in the assessment years, where income had been offered to Tax and such application is pending before the Assessing Officer. In this light the Assessing Officer is directed to give credit of the proportionate TDS of Rs.1,00,081/- in the year under consideration as well as to give credit of TDS as per provisions of section 199 to be read with rule 37BA of the Income Tax Act provided the appellant has reflected the income in respect of the TDS claim in the Return of Income and deposited the amount of TDS made in the government account.”
4 ITA.No.2642/Del./2018 Uberoi Sood & Kapoor, New Delhi. 3. Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds :
“1. THAT in the facts and circumstances of the case, the Learned CIT(A) erred in confirming the order of A.O. and in not allowing the assessee’s claim to the extent of TDS of Rs. 1,00,081/-.
2. THAT in view of the facts that assessee had been following receipt basis of accounting, the learned CIT(A) erred in only allowing proportionate credit out of TDS of Rs.1,00,081/- offered as income by the assessee.
The appellant craves leave to add, alter, amend or drop the above ground at the time of hearing.”
Learned Counsel for the Assessee strongly challenged the order of the Ld. CIT(A) in confirming the action of the A.O. holding that the TDS credit be allowed in the financial year when corresponding income is offered to tax. The Learned Counsel for the Assessee referring to page-
5 ITA.No.2642/Del./2018 Uberoi Sood & Kapoor, New Delhi. 10 of the PB and various other pages submitted that the assessee is following cash system of accounting and the corresponding income has been offered to tax in A.Y. 2015- 16 for TDS aggregating to Rs.85,845/-. He submitted that no income has been received from the clients who had deducted TDS and deposited with Central Government to the extent of Rs.14,236/-. Referring to the decision of Coordinate Bench of the Tribunal in the case of Chander Shekhar Aggarwal vs.,. ACIT, Circle-37(1), New Delhi [2016] 67 taxmann.com 62 (Delhi-Trib.) he submitted that the Tribunal in the said decision has held that where assessee following the cash system of accounting, would be entitled to credit of entire amount of TDS being offered as income in the year of deduction. He accordingly submitted that the order of the Ld. CIT(A) be set aside and A.O. be directed to allow the credit for TDS/tax paid.
The Ld. D.R. on the other hand heavily relied on the order of the Ld. CIT(A).
6 ITA.No.2642/Del./2018 Uberoi Sood & Kapoor, New Delhi.
We have considered the rival arguments made by both the sides, perused the orders of the A.O. and the Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessee in the instant case is a partnership firm of Chartered Accountants which accounts for its income on cash basis. We find during the course of assessment proceedings the A.O. disallowed the claim of TDS credit amounting to Rs.1,00,081/- on the ground that the corresponding income of these TDS has not been offered to tax as it was not received by the assessee in the previous year. We find the Ld. CIT(A) directed the A.O. to give credit of the proportionate TDS of Rs.1,00,081/- in the year under consideration as well as to give credit of TDS as per the provisions of Section 199 to be read with Rule 37BA of the I.T. Act, 1961. It is the submission of the Learned Counsel for the Assessee that credit for the entire TDS of Rs.1,00,081/- should be given in the year itself in view of decision of the Coordinate Bench of the Tribunal in the case of Chander Shekhar Aggarwal vs., ACIT (supra) wherein it was held that where assessee following cash
7 ITA.No.2642/Del./2018 Uberoi Sood & Kapoor, New Delhi. system of accounting would be entitled to credit of entire amount of TDS being offered as income in the year of deduction.
6.1. We find some force in the above arguments advanced by the Learned Counsel for the Assessee. It is an admitted fact that the assessee during the impugned assessment year has adopted cash method of accounting. In the assessment order the A.O. did not allow the TDS credit of Rs.1,00,081/- on the ground that the corresponding income of this TDS has not been offered to tax by the assessee as it was not received during the impugned assessment year. We find an identical issue had come-up before the Coordinate Bench of the Tribunal in the case of Chander Shekhar Aggarwal vs., ACIT (supra) wherein the Tribunal after considering the identical set of facts has held that assessee would be entitled to credit of the entire TDS offered as income in the year of deduction. The relevant observation of the Tribunal from para-8 onwards reads as under :
8 ITA.No.2642/Del./2018 Uberoi Sood & Kapoor, New Delhi. “8. We have carefully considered the original submission and perused the material on record. It is noticed that in the instant case assessee as adopted cash method of accounting. He furnished his return of income claiming credit of TDS of Rs.79,91,290/- which was further revised to Rs.80,16,290/-. The AO restricted the credit of Rs.71,20,267/- in the intimation u/s 143(1) of the Act. The CIT(A) has upheld the restriction inter-alia on the ground that credit of TDS is to be allowed in terms of Rule 37BA(2) of the Rules and as such the credit would be allowable on pro rata basis in the year in which the certificate is issued and also in future where balance of such income is found to be assessable as per the mandate of section 199 of the Act. She has held that any amount which has not been assessed in any year but referred in the TDS certificate cannot be claimed under section 199 of the Act.
Sub-section (1) of section 199 of the Act provides that “any deduction made in accordance with the foregoing provisions of this chapter and 9 ITA.No.2642/Del./2018 Uberoi Sood & Kapoor, New Delhi. paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made. In view thereof, since the tax was deducted at source by the deductor and the amount was deposited by the deductor on behalf of the assessee, the said sum is deemed to be the payment of tax made on behalf of the assessee. Also, section 198 of the Act provides that all sums deducted in accordance with Chapter XVII-B of the Act shall for the purposes of computing the income of an assessee be deemed to be income received. Thus, section 198 of the Act specifically provides that tax deducted at source shall for the purpose of computing income of an assessee will be deemed to be income received by the assessee. Thus, there is no justification not to grant credit of tax deducted and deposited to the account of Central Government by the deductor to the assessee from whose income, such tax has been deducted by the 10 ITA.No.2642/Del./2018 Uberoi Sood & Kapoor, New Delhi. deductor, more particularly when such TDS stands duly declared as income by the assessee. The conclusion of the CIT(A) to grant proportionate credit is also not in accordance with the cash system of accounting followed by the assessee. The CIT(A) in her order has laid much emphasis on Rule 37BA of the Rules. Rule 37BA as inserted w.e.f. 1.4.2009 reads as under:-
“Credit for tax deducted at source for the purposes of section 199:
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 authorized by such authority.
11 ITA.No.2642/Del./2018 Uberoi Sood & Kapoor, New Delhi. (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.
12 ITA.No.2642/Del./2018 Uberoi Sood & Kapoor, New Delhi. (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.
(4) Credit for tax deducted at source and paid to the account of the Central Government shall be granted on the basis of-
13 ITA.No.2642/Del./2018 Uberoi Sood & Kapoor, New Delhi. (i) the information relating to deduction of tax furnished by the deductor to the income-tax authority or the person authorized by such authority; and (ii) the information in the return of income in respect of the claim for the credit, Subject to verification in accordance with the risk management strategy formulated by the Board from time to time.]”
A reading of the aforesaid will make it apparent that Rule 37BA(1) of the Act provides rules relating to have credit for the purpose of section 199 of the Act as is provided in section 199(3) of the Act. Rule 37BA(3)(i) of the Act provides that credit for tax deducted at source and credited to the account of Central Government shall be given for the assessment year for which, such income is assessable. Thus, if the said rule is read, it is clear that the assessee is entitled to get
14 ITA.No.2642/Del./2018 Uberoi Sood & Kapoor, New Delhi. credit of the tax deducted at source once such income is included in his income. The admitted facts of the case of the appellant is that the tax deducted at source has been offered as income by the appellant in his return of income and therefore, having regard to even the rules, the assessee is entitled to credit of the tax deducted at source. The assessee before the CIT(A) had provided an illustration whereby it was submitted that assuming an assessee follows cash system of accounting and raises an invoice of Rs. 100/- for the services rendered in financial year 2010-11 on his client and the said client deposits TDS of Rs. 10/- to the credit of the account of the assessee and issued a certificate of TDS to the assessee and thus, it was submitted that an amount of Rs. 10/- was since deducted in respect of the assessee, the said sum is income of the assessee which is assessable to tax. It was submitted that once an income is assessable to tax, the assessee is 15 ITA.No.2642/Del./2018 Uberoi Sood & Kapoor, New Delhi. eligible for credit despite the fact that remaining amount would be taxable in the succeeding years. We are in an agreement with the above submission that the TDS deducted by the deductor on behalf of the assessee and offered as income is to be allowed as credit in the year of deduction of tax deducted at source. Rule 37BA of the Act provides that credit for TDS should be allowed in the year in which income is assessable. Further clause (ii) of Rule 37BA(3) of the Act provides that where tax has been deducted at source 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. In our considered opinion, this rule is only applicable where entire compensation is received in advance but the same is not assessable to tax in that year but is assessable in a number of years. However, such rule has no applicability,
16 ITA.No.2642/Del./2018 Uberoi Sood & Kapoor, New Delhi. where assessee follows cash system of accounting. This can be supported from the illustration that suppose as assessee who is following cash system of accounting raises an invoice of Rs.100/- in respect of which deductor deducts TDS of Rs.10/- and deposits to the account of the Central Government. Accordingly, the assessee would offer an income of Rs.10/- and claim TDS of Rs.10/-. However in the opinion of the revenue, the assessee would not be entitled to credit of the entire TDS of Rs.10/- but would be entitled to proportionate credit only. Now let us assume that Rs. 90/- is never paid to the assessee by the deductor. In such circumstances, Rs. 9/- which was deducted as TDS by the deductor would never be available for credit to the assessee though the said sums stand duly deposited to the account of the Central Government. Rule. 37BA(3) of the Act cannot be interpreted so as to say that TDS deducted at source and deposited to the 17 ITA.No.2642/Del./2018 Uberoi Sood & Kapoor, New Delhi. account of the Central Government is though income of the assessee but is not eligible for credit of tax in the year when such TDS was offered as income. This view is otherwise also not in accordance with the provisions contained in section 198 and 199 of the Act. The proposition as laid out by the CIT(A) and learned DR before us therefore cannot be countenanced. In arriving at the above conclusion, we also derive support from the decision of Visakhapatnam Bench in the case of Peddu Srinivasa Rao (supra) has held as under :
“8. We have carefully perused the provisions of section 199 of the Act and according to the pre- amended provisions of section 199, the credit of deduction made in accordance with the relevant provisions of this chapter and paid to the Central Government, shall be given for the amount so deducted on the production of the certificate furnished u/s 203 for the assessment made under this Act for the assessment year for which such 18 ITA.No.2642/Del./2018 Uberoi Sood & Kapoor, New Delhi. income is assessable. But in the amended provisions the words "for the assessment year for which such income is assessable" has been omitted. Meaning thereby, that the legislature was quite conscious about the facts and hardships faced by some assessees, while making the amendments in section 199 and in amended provisions nothing has been stated about the year in which the credit of TDS is to be claimed. As per amended provisions of section 199, in sub-section 1, it has been stated that any deductions made in accordance with the foregoing provisions of this chapter and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made. Therefore, as per the amended provisions, once the TDS was deducted, a credit of the same to be given to the assessees, irrespective of the year to which it relates. The pre-amended and the amended provisions of section 199 are extracted
19 ITA.No.2642/Del./2018 Uberoi Sood & Kapoor, New Delhi. hereunder: "Section 199: Credit for tax deducted - (1) Any deduction made in accordance with the foregoing provisions of this Chapter and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made, or of the owner of the security, or depositor or owner of property or of unitholder or of the shareholder, as the case may be, and credit shall be given to him for the amount so deducted on the production of the certificate furnished under section 203 in the assessment made under this Act for the assessment year for which such income is assessable: (3)
The Board may, for the purposes of giving credit in respect of tax deducted or tax paid in terms of the provisions of this Chapter, make such rules as may be necessary, including the rules for the purposes of giving credit to a person other than those referred to in sub-section (1) and subsection (2) and also the assessment year for which such 20 ITA.No.2642/Del./2018 Uberoi Sood & Kapoor, New Delhi. credit may be given. Section 199. (1) Any deduction made in accordance with the foregoing provisions of this Chapter and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made, or of the owner of the security, or of the depositor or of the owner of property or of the unit-holder, or of the shareholder, as the case may be. (2) Any sum referred to in sub-section (1A) of section 192 and paid to the Central Government shall be treated as the tax paid on behalf of the person in respect of whose income such payment of tax has been made."
In fact the above view has also been followed by Ahmedabad Bench in the case of Sadhbav Engineering Ltd. (supra) wherein it was held as under:
21 ITA.No.2642/Del./2018 Uberoi Sood & Kapoor, New Delhi. “26. We find that the Visakhapatnam Bench in the case of Peddu Srinivasa Rao (supra) has held as under : …….
The ld. DR could not cite any contrary decision or any other good reason for which the aforesaid decision of the Co-ordinate Bench of the Tribunal should not be followed by us. Respectfully following the aforesaid order of the Tribunal, we set aside the orders of the lower authorities and direct the AO to allow credit for the TDS to the assessee. Thus, the ground of appeal of the assessee is allowed.”
12. For the reasons stated above, the claim of the assessee is allowed in as much as it is held that the assessee would be entitled to credit of the entire TDS offered as income by the assessee in his return of income. The grounds raised are therefore, allowed.
22 ITA.No.2642/Del./2018 Uberoi Sood & Kapoor, New Delhi.
Ground Nos.2, 3 and 5 of the Grounds of Appeal essentially are regarding restriction of credit of TDS. The learned counsel for the assessee submitted that the authorities below has restricted credit of TDS despite the fact that TDS certificates were furnished by the assessee and such credit was also reflected in 26AS statement prepared by the revenue except to the sum of Rs.4,10,870/- for which, confirmations have been furnished by the assessee. Having regard to the above submission, we feel it appropriate that the issue be restored to the file of the Assessing Officer with a direction that the credit be allowed to the assessee of the entire TDS in respect of which, TDS certificate has been furnished by the assessee in accordance with section 198 read with section 199 of the Act. Thus the grounds are therefore, allowed for statistical purposes.”
6.2. Respectfully following the decision of Coordinate Bench of the Tribunal we hold that the Ld. CIT(A) is not 23 ITA.No.2642/Del./2018 Uberoi Sood & Kapoor, New Delhi. justified in denying the credit of TDS amounting to Rs.1,00,081/-. Accordingly, order of the Ld. CIT(A) is set aside and the A.O. is directed to allow the credit of TDS amounting to Rs.1,00,081/-. Grounds raised by the assessee are allowed.
In the result, appeal of the Assessee is allowed.
Order pronounced in the open court on 24.12.2021.