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Facts
The assessee, a non-banking financial corporation, filed its return of income and claimed TDS credit. However, certain TDS credit was not granted as the deductors had not deposited the TDS to the government account. The CIT(A) granted partial credit for some TDS but denied the rest.
Held
The Tribunal held that Section 205 of the Income Tax Act bars the department from recovering tax from the assessee when tax has already been deducted at source, irrespective of whether the deductor has deposited it. The matter was restored to the AO for verification of TDS deduction.
Key Issues
Whether the assessee is entitled to TDS credit when the deductor has not deposited the same to the government, and if Section 205 of the Income Tax Act protects the assessee from recovery.
Sections Cited
143(1), 205, 199, 234A, 234B, 234C
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Income Tax Appellate Tribunal, MUMBAI BENCH “E” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI RAHUL CHAUDHARY
therefore, same were heard together and therefore, same were heard together and disposed off by way of this disposed off by way of this consolidated order for the sake of convenience. consolidated order for the sake of convenience.
The The The grounds grounds grounds raised raised raised by by by the the the assessee assessee assessee in in in ITA ITA ITA No. No. No. 6990/Mum/2024 for assessment year 2021 6990/Mum/2024 for assessment year 2021-22 are reproduced as 22 are reproduced as under:
1. The Hon'ble Commissioner of Income Tax (Appeal) 49, Mumbai The Hon'ble Commissioner of Income Tax (Appeal) 49, Mumbai The Hon'ble Commissioner of Income Tax (Appeal) 49, Mumbai [Hereinafter referred as "CIT(A)"] erred in directing the AO to "not [Hereinafter referred as "CIT(A)"] erred in directing the AO to "not [Hereinafter referred as "CIT(A)"] erred in directing the AO to "not to enforce the recovery of Rs. 1,64,81,206/ to enforce the recovery of Rs. 1,64,81,206/- from the appellant from the appellant and earmark the said TDS liability as "not recoverable" from the and earmark the said TDS liability as "not recoverable" from the and earmark the said TDS liability as "not recoverable" from the appellant" instead of directing the AO to allow the above appellant" instead of directing the AO to allow the above appellant" instead of directing the AO to allow the above TDS credit to the Appellant resulting into income tax refund. credit to the Appellant resulting into income tax refund. credit to the Appellant resulting into income tax refund. The Appellant prays that the AO shall be directed to give credit The Appellant prays that the AO shall be directed to give credit The Appellant prays that the AO shall be directed to give credit for the TDS of Rs. 1,64,81,206/ for the TDS of Rs. 1,64,81,206/- being deducted by the payer / being deducted by the payer / deductor; however, not paid to the credit of Central Government. deductor; however, not paid to the credit of Central Government. deductor; however, not paid to the credit of Central Government. Therefore, grant refund to herefore, grant refund to the Appellant. 3. Briefly stated, facts of the case are that Briefly stated, facts of the case are that the assessee is a non the assessee is a non- banking financial corporation. T banking financial corporation. The assessee filed its return of he assessee filed its return of income electronically on 31.03.2022 declaring total income at income electronically on 31.03.2022 declaring total income income electronically on 31.03.2022 declaring total income Rs.6,15,49,118/-. The . The return of income filed by the assessee was return of income filed by the assessee was processed and intimation u/s 143(1) of the intimation u/s 143(1) of the Income-tax tax Act,1961( in short the Act) was issued on 13.11.2022 was issued on 13.11.2022, wherein certain credit for wherein certain credit for the tax deducted at source the tax deducted at source (TDS) was not granted. Detail of the TDS was not granted. Detail of the TDS not granted is reproduced as ted is reproduced as under:
Sl. No. Particulars Amount (Rs.) 1. TDS credit pertaining to amalgamating company i.e. TDS credit pertaining to amalgamating company i.e. TDS credit pertaining to amalgamating company i.e. 95,02,267 Lodha Ventures Holding Pvt. Ltd and appearing in Lodha Ventures Holding Pvt. Ltd and appearing in Lodha Ventures Holding Pvt. Ltd and appearing in Form 26AS of LVHPL Form 26AS of LVHPL 2. TDS credit appearing in Form 26AS of the TDS credit appearing in Form 26AS of the 61,28,853 Appellant company Appellant company 3. TDS credit pertaining to amalgamating company ie TDS credit pertaining to amalgamating company ie 87,270
Tomorrow Capital Enterprises Pvt. Ltd Capital Enterprises Pvt. Ltd 3 & 6989/MUM/2024 Lodha Ventures Holding Private Limited but the Lodha Ventures Holding Private Limited but the Lodha Ventures Holding Private Limited but the deductor has not deposited to the TDS to the credit of deductor has not deposited to the TDS to the credit of deductor has not deposited to the TDS to the credit of government 4. TDS credit not allowed to the Appellant as deductor has TDS credit not allowed to the Appellant as deductor has TDS credit not allowed to the Appellant as deductor has 6,48,984 not deposited to the TDS to the credit of government. not deposited to 5. Entries unreconciled Entries unreconciled 1,13,828 Total TDS credit not allowed to the Appellant Total TDS credit not allowed to 1,64,81,202 4. On further appeal, the Ld. CIT(A) granted credit for TDS of On further appeal, the Ld. CIT(A) granted credit for TDS of On further appeal, the Ld. CIT(A) granted credit for TDS of Rs.95,02,267/- at serial No. 1 at serial No. 1 and TDS credit for Rs.61,28,853/ Rs.61,28,853/- at serial No.
2. The credit for the remaining amount was not allowed he credit for the remaining amount was not allowed he credit for the remaining amount was not allowed by the Ld. CIT(A) observing as under: by the Ld. CIT(A) observing as under:
“8.2.3 The appellant has claimed the TDS credit of Rs. 6,48,984/ 8.2.3 The appellant has claimed the TDS credit of Rs. 6,48,984/ 8.2.3 The appellant has claimed the TDS credit of Rs. 6,48,984/- and Rs. 87,270/ and Rs. 87,270/- which is not reflected in the form 26AS because which is not reflected in the form 26AS because the deductors had not paid the same to the credit of the Central deductors had not paid the same to the credit of the Central deductors had not paid the same to the credit of the Central Government. Appellant has further submitted that it has offered Government. Appellant has further submitted that it has offered Government. Appellant has further submitted that it has offered the corresponding income and, in its book & the return of income. the corresponding income and, in its book & the return of income. the corresponding income and, in its book & the return of income. Appellant has relied upon the CBDT Circular dated 01.06.2015 Appellant has relied upon the CBDT Circular dated 01.06.2015 Appellant has relied upon the CBDT Circular dated 01.06.2015 and 11.03.2016 11.03.2016 wherein CBDT has directed the Assessing wherein CBDT has directed the Assessing Officers not to enforced demand created on account of mismatch of Officers not to enforced demand created on account of mismatch of Officers not to enforced demand created on account of mismatch of credit due to non credit due to non-payment of TDS amount to the Government payment of TDS amount to the Government treasury by the Deductor. The Appellant has relied upon number of treasury by the Deductor. The Appellant has relied upon number of treasury by the Deductor. The Appellant has relied upon number of judicial decisi judicial decisions in support of its contentions. The operative part ons in support of its contentions. The operative part of the decision decision of Hon'ble High Court of Bombay in the case of Hon'ble High Court of Bombay in the case of Yashpal Sahni vs. ACIT (293 ITR 539) is reproduced as under Yashpal Sahni vs. ACIT (293 ITR 539) is reproduced as under Yashpal Sahni vs. ACIT (293 ITR 539) is reproduced as under- "24. As stated earlier, in the present case petitioner "24. As stated earlier, in the present case petitioner-assessee has assessee has established that from his salary income, tax has been deducted at d that from his salary income, tax has been deducted at d that from his salary income, tax has been deducted at source by the employer source by the employer-respondent No.6 and, therefore, the respondent No.6 and, therefore, the revenue has to recover the said TDS amount with interest and revenue has to recover the said TDS amount with interest and revenue has to recover the said TDS amount with interest and penalty from the respondent No.6 alone and the revenue cannot penalty from the respondent No.6 alone and the revenue cannot penalty from the respondent No.6 alone and the revenue cannot seek to recover th seek to recover the said amount from the petitioner- e said amount from the petitioner-assessee in view of the specific bar contained under section 205 of the Act. The view of the specific bar contained under section 205 of the Act. The view of the specific bar contained under section 205 of the Act. The fact that the petitioner is not entitled to the credit of the tax fact that the petitioner is not entitled to the credit of the tax fact that the petitioner is not entitled to the credit of the tax deducted at source for the non deducted at source for the non-issuance of the TDS certificate by issuance of the TDS certificate by the respondent No.6, cannot be a ground to recover the amount of ndent No.6, cannot be a ground to recover the amount of ndent No.6, cannot be a ground to recover the amount of tax deducted at source from the petitioner. In other words, even if tax deducted at source from the petitioner. In other words, even if tax deducted at source from the petitioner. In other words, even if the credit of the TDS amount is not available to the petitioner the credit of the TDS amount is not available to the petitioner the credit of the TDS amount is not available to the petitioner assessee for want of TDS certificate, the fact that the tax has been assessee for want of TDS certificate, the fact that the tax has been assessee for want of TDS certificate, the fact that the tax has been deducted at source from salary income of the petitioner would be deducted at source from salary income of the petitioner would be deducted at source from salary income of the petitioner would be sufficient to hold that as per section 205 of the Act, the revenue sufficient to hold that as per section 205 of the Act, the revenue sufficient to hold that as per section 205 of the Act, the revenue
Tomorrow Capital Enterprises Pvt. Ltd Capital Enterprises Pvt. Ltd 4 & 6989/MUM/2024 cannot recover the TDS amount with interest from the petitioner cannot recover the TDS amount with interest from the petitioner cannot recover the TDS amount with interest from the petitioner once again.
In the result, the petition succeeds. As th In the result, the petition succeeds. As the respondent No.6 e respondent No.6 had deducted the had deducted the tax at source from the salary income of the tax at source from the salary income of the petitioner the revenue petitioner the revenue could not have recovered the said amount recovered the said amount with interest from the petitioner in view of the bar contained in with interest from the petitioner in view of the bar contained in with interest from the petitioner in view of the bar contained in section 205 of the Act. Accordingly, the revenu section 205 of the Act. Accordingly, the revenue is from direct to e is from direct to refund to the petitioner within 8 weeks from today the amount of refund to the petitioner within 8 weeks from today the amount of refund to the petitioner within 8 weeks from today the amount of Rs. 17,89,587/ Rs. 17,89,587/- with interest @ 6% from the date of recovery till with interest @ 6% from the date of recovery till the date of payment. Though the credit of the tax deducted at the date of payment. Though the credit of the tax deducted at the date of payment. Though the credit of the tax deducted at source is not available to the petitioner, source is not available to the petitioner, since the said liability is since the said liability is not recoverable from the petitioner, the revenue is directed to not recoverable from the petitioner, the revenue is directed to not recoverable from the petitioner, the revenue is directed to earmark the said TDS liability as "not recoverable" from the earmark the said TDS liability as "not recoverable" from the earmark the said TDS liability as "not recoverable" from the petitioner". In all the decisions relied upon by the appellant, Hon'ble Courts In all the decisions relied upon by the appellant, Hon'ble Courts In all the decisions relied upon by the appellant, Hon'ble Courts have cited the Section 2 have cited the Section 205 of the Act which states that where tax 05 of the Act which states that where tax is deductible at source under provisions of this Act, the assessee is deductible at source under provisions of this Act, the assessee is deductible at source under provisions of this Act, the assessee shall not the called upon to pay the tax by himself to the extent to shall not the called upon to pay the tax by himself to the extent to shall not the called upon to pay the tax by himself to the extent to which the tax has been deducted. which the tax has been deducted. 8.2.4 Considering the facts of the case and i 8.2.4 Considering the facts of the case and in light of the judicial n light of the judicial pronouncements, Assessing Officer is directed to verify whether pronouncements, Assessing Officer is directed to verify whether pronouncements, Assessing Officer is directed to verify whether the tax has been deducted by the deductor and whether the tax has been deducted by the deductor and whether the tax has been deducted by the deductor and whether corresponding income has been offered by the appellant in its corresponding income has been offered by the appellant in its corresponding income has been offered by the appellant in its books of accounts. If so, then the AO is directed no books of accounts. If so, then the AO is directed not to enforce the t to enforce the recovery of Rs 7,36,254/ recovery of Rs 7,36,254/- from the appellant and earmark the said from the appellant and earmark the said TDS liability as "not recoverable" from the appellant. TDS liability as "not recoverable" from the appellant. 8.2.5 Appellant has not reconciled the remaining TDS entry of Rs. 8.2.5 Appellant has not reconciled the remaining TDS entry of Rs. 8.2.5 Appellant has not reconciled the remaining TDS entry of Rs. 1,13,828/- Therefore, no relief is granted on the sa Therefore, no relief is granted on the same. me.”
Before us, the Ld. counsel for the assessee referred to decision Before us, the Ld. counsel for the assessee referred to decision Before us, the Ld. counsel for the assessee referred to decision of the Co-ordinate Bench of the Tribunal in the case of M/s ordinate Bench of the Tribunal in the case of M/s ordinate Bench of the Tribunal in the case of M/s ECL Finance Ltd. in for assessment year 2013 Ltd. in for assessment year 2013 Ltd. in ITA No. 899/Mum/2018 for assessment year 2013- 14 wherein the Tribunal has followed the Central Board of Direct 14 wherein the Tribunal has followed the Central Board of 14 wherein the Tribunal has followed the Central Board of Taxes (CBDT) office memorandum dated office memorandum dated 11/03/2026. 11/03/2026. The relevant finding of the Tribunal is reproduced as under: finding of the Tribunal is reproduced as under:
Tomorrow Capital Enterprises Pvt. Ltd Capital Enterprises Pvt. Ltd 5 & 6989/MUM/2024 “7.1 Further, reliance has been placed in the case of Executors of 7.1 Further, reliance has been placed in the case of Executors of 7.1 Further, reliance has been placed in the case of Executors of the Estate of S. Shanmuga Mudaliar vs. ACIT (supra). One of the the Estate of S. Shanmuga Mudaliar vs. ACIT (supra). One of the the Estate of S. Shanmuga Mudaliar vs. ACIT (supra). One of the substantial question of law before the Hon'ble High Court was: ntial question of law before the Hon'ble High Court was: ntial question of law before the Hon'ble High Court was: "3. Whether on the facts and circumstances of the case, "3. Whether on the facts and circumstances of the case, "3. Whether on the facts and circumstances of the case, Section 205 of the Income Tax Act would apply and is the Section 205 of the Income Tax Act would apply and is the Section 205 of the Income Tax Act would apply and is the Appellant liable to pay tax to the extent to which tax has Appellant liable to pay tax to the extent to which tax has Appellant liable to pay tax to the extent to which tax has been deducted?" been deducted?" The Hon'ble High Court after placing reliance on the decision High Court after placing reliance on the decision rendered in the case of Yashpal Sahni vs. Rekha Hajarnavis, ACIT rendered in the case of Yashpal Sahni vs. Rekha Hajarnavis, ACIT rendered in the case of Yashpal Sahni vs. Rekha Hajarnavis, ACIT (supra) and in in the case of Ansuya Alva vs. DCIT, reported as 278 Ansuya Alva vs. DCIT, reported as 278 ITR 206 (Kar) held that the provisions of section 205 of the Act bars ITR 206 (Kar) held that the provisions of section 205 of the Act bars ITR 206 (Kar) held that the provisions of section 205 of the Act bars the Department from demanding tax deducted at epartment from demanding tax deducted at source from the source from the assessee who has already suffered deduction. Thus, the Hon'ble assessee who has already suffered deduction. Thus, the Hon'ble assessee who has already suffered deduction. Thus, the Hon'ble High Court answered substantial question in negative and in favour High Court answered substantial question in negative and in favour High Court answered substantial question in negative and in favour of assessee /appellant. In the light of decision referred above and of assessee /appellant. In the light of decision referred above and of assessee /appellant. In the light of decision referred above and the CBDT Circular (supra), we hold that the assessee be allowed he CBDT Circular (supra), we hold that the assessee be allowed he CBDT Circular (supra), we hold that the assessee be allowed benefit of TDS already deducted irrespective of the fact that the benefit of TDS already deducted irrespective of the fact that the benefit of TDS already deducted irrespective of the fact that the same has been deposited by the same has been deposited by the deductee to the Government deductee to the Government exchequer or not. This issue is restored back to the file of exchequer or not. This issue is restored back to the file of exchequer or not. This issue is restored back to the file of Assessing Officer only for the limited purpose of verification of the TDS Officer only for the limited purpose of verification of the TDS Officer only for the limited purpose of verification of the TDS amounts that have been deducted but not reflected in 26AS amounts that have been deducted but not reflected in 26AS amounts that have been deducted but not reflected in 26AS statement of the assessee.”
We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused the relevant materials on record the relevant materials on record. The TDS credit of Rs.87,270/ The TDS credit of Rs.87,270/- and Rs.6,48,984/- has only been disputed before us. has only been disputed before us. In the instant has only been disputed before us. case, the Ld. counsel has referred to the Paper Book page 25 and case, the Ld. counsel has referred to the Paper Book page 25 and case, the Ld. counsel has referred to the Paper Book page 25 and submitted that interest has been received from interest has been received from four parties four parties and tax was deducted at source deducted at source by those parties but same but same has not been deposited into Government Government account by those parties. The Ld. those parties. The Ld. counsel submitted that the loan transactions with those parties counsel submitted that the loan transactions with those parties counsel submitted that the loan transactions with those parties already stands closed. We find that the already stands closed. We find that the Tribunal in the case ECL in the case ECL Finance Ltd. (supra) Finance Ltd. (supra) has considered the decision the decision in the case of Yashpal v. ACIT Yashpal v. ACIT (supra) (supra) and and relied on on the the CBDT CBDT office memorandum(supra) memorandum(supra). The ld CIT(A) has also directed the AO for not . The ld CIT(A) has also directed the AO for not Tomorrow Capital Enterprises Pvt. Ltd Capital Enterprises Pvt. Ltd 6 & 6989/MUM/2024 doing any recovery in respect of the TDS amount. But for doing any recovery in respect of the TDS amount. B doing any recovery in respect of the TDS amount. B application of the ratio application of the ratio of the above decisions, s, verification is necessary whether tax was deducted by the party making payment whether tax was deducted by the party making payment whether tax was deducted by the party making payment to the assessee. The Ld. counsel could not file any evidence in assessee. The Ld. counsel could not file any evidence in assessee. The Ld. counsel could not file any evidence in support thereof and requested to restore the matter to AO. support thereof and requested to restore the matter to AO. support thereof and requested to restore the matter to AO. Therefore, in the instant case it Therefore, in the instant case it needs verification by the Assessing tion by the Assessing Officer whether the said four parties had hether the said four parties had deducted tax at source or deducted tax at source or not. Accordingly, we feel it appropriate to restore the matter back to not. Accordingly, we feel it appropriate to restore the matter back to not. Accordingly, we feel it appropriate to restore the matter back to the Assessing Officer for verification of the Assessing Officer for verification of deduction of tax at source tax at source by those parties from thei those parties from their records including financial statements and r records including financial statements and whether the tax deducted at source has been shown as liability by whether the tax deducted at source has been shown as liability whether the tax deducted at source has been shown as liability them. The Assessing Officer after verification of the fact that the tax . The Assessing Officer after verification of the fact that the tax . The Assessing Officer after verification of the fact that the tax was deducted at source by those parties deducted at source by those parties, shall grant , shall grant credit in accordance with law. The sole ground of the appeal of the assessee accordance with law. The sole ground of the appeal of the assessee accordance with law. The sole ground of the appeal of the assessee is allowed for statistical purposes. is allowed for statistical purposes.
The ground raised in assessment year 2022 The ground raised in assessment year 2022-23 is reproduced 23 is reproduced as under:
The AO erred in allowing the TDS credit of Rs. 96,95,296/ 1. The AO erred in allowing the TDS credit of Rs. 96,95,296/ 1. The AO erred in allowing the TDS credit of Rs. 96,95,296/- as against the TDS credit of Rs 2,78,90,798/ against the TDS credit of Rs 2,78,90,798/- claimed by the claimed by the Appellant in the return of income resulting into short TDS credit of Appellant in the return of income resulting into short TDS credit of Appellant in the return of income resulting into short TDS credit of Rs. 1,81,95,502/ Rs. 1,81,95,502/-. The Appellant submits that the AO's action of not allowing the The Appellant submits that the AO's action of not allowing the The Appellant submits that the AO's action of not allowing the TDS credit is in gross violation of section 199 TDS credit is in gross violation of section 199 r.w.s 205 of the r.w.s 205 of the Income Tax Act, 1961 (Act). The Appellant has rightly claimed the Income Tax Act, 1961 (Act). The Appellant has rightly claimed the Income Tax Act, 1961 (Act). The Appellant has rightly claimed the TDS credit of Rs. 2,78,90,798/ TDS credit of Rs. 2,78,90,798/- in the return of income as the in the return of income as the corresponding income has been offered for taxation during the corresponding income has been offered for taxation during the corresponding income has been offered for taxation during the year under consideration; hence, it shall be al year under consideration; hence, it shall be allowed the TDS lowed the TDS credit of Rs. 2,78,90,798/ credit of Rs. 2,78,90,798/- as claimed in return of income as claimed in return of income
Tomorrow Capital Enterprises Pvt. Ltd Capital Enterprises Pvt. Ltd 7 & 6989/MUM/2024 ITA No. 6990
2. The AO erred in charging interest u/s 234A, 234B and 2. The AO erred in charging interest u/s 234A, 234B and 2. The AO erred in charging interest u/s 234A, 234B and 234C of the Act. 7.1 In view of identical issue in dispute involved In view of identical issue in dispute involved In view of identical issue in dispute involved, this appeal is also restored back to the file of the Assessing Officer for deciding in also restored back to the file of the Assessing Officer also restored back to the file of the Assessing Officer the light of our directions given in assessment year 2021-22. The the light of our directions given in assessment year 2021 the light of our directions given in assessment year 2021 grounds of appeal are accordingly allowed for statistical purposes. grounds of appeal are accordingly allowed for statistical purposes. grounds of appeal are accordingly allowed for statistical purposes.
In the result, both the appeal In the result, both the appeals of the assessee are allowed for of the assessee are allowed for statistical purposes.
Order pronounc Order pronounced in the open Court on 25/02/2025. /02/2025.