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Income Tax Appellate Tribunal, BANGALORE BENCHES “A”, BANGALORE
Before: Shri Chandra Poojari, AM & Shri George George K, JM
O R D E R Per George George K, JM : These appeals at the instance of the assessee are directed against two orders of CIT(A), both dated 29.12.2021. The relevant assessment years are 2015-2016 and 2016- 2017.
Common issues are raised in these appeals, hence, they were heard together and are being disposed of by this consolidated order. The grounds raised are identical, except for variance in figures. The grounds relating to assessment year 2015-2016 are reproduced:-
“1. That the order of the assessing officer in so far as it is against the appellant is against the law, facts, circumstances, natural justice, without jurisdiction, bad in law and all other known principles of law. 2. That the learned CIT Appeals NFAC has erred in law and on facts in confirming the action of the Assessing Officer by not giving credit for TDS amounting to Rs.4,35,31,200.
2 & 119/Bang/2022. M/s.K.N.Dastur & Co. Pvt.Ltd.
3. The credit for taxes paid / TDS has been denied on unsustainable and untenable reasons though the assessee had met with all the conditions as required under law.
4. The learned Assessing Officer erred in not giving adequate and sufficient opportunity as required under law thus violating the principles of natural justice.
For the above and other grounds and reasons which may be submitted during the course of hearing of this appeal, the assessee requests that the appeal be allowed as prayed and justice be rendered.”
The brief facts of the case are as follows: The assessee is a company, engaged in the business of providing integrated design and engineering consultancy services from concept of commissioning, for a wide range of projects in metallurgical, mining, chemical, cement, power, environment, infrastructure and other allied industries. As per section 194J of the I.T.Act, tax is deductible at source (TDS) at the rate of 10% on the professional fees paid by the clients / customers. It was submitted that the assessee- company follows mercantile / accrual system. It was stated that as the implementation / execution of the project spreads over more than one year and based on services rendered, the income / receipts is transferred to profit and loss account out of the advances received from the clients and the balance advances is carried forward to subsequent years and shown as advances received from clients. It was submitted that at times no advances are received from the clients but services have been rendered and invoices raised and income offered to tax on accrual basis, however, the payments are received at a later date or in a different financial year and tax at source is also deducted at the time of making payment by the
It was submitted that in the assessment proceedings for the assessment years 2012-2013, 2013-2014 and 2014-2015 (copies of assessment orders are placed on record), the AO invoked section 199 of the I.T.Act and allowed credit for TDS to the extent of income offered on turnover basis. By an order dated 30.05.2019 u/s 154 of the I.T.Act, the AO has determined TDS credit to the extent of Rs.10,99,08,103 is available for carry forward to future years. The assessee on the basis of order dated 30.05.2019, u/s 154 of the I.T.Act, sought credit for TDS of Rs.10,99,08,103 for assessment year 2015-2016 and for assessment year 2016-2017 in application u/s 154 of the I.T.Act. However, the application was rejected for the reason that the said sum is not reflected in 26AS nor claimed in the return of income. The relevant finding of the AO in rejecting the rectification application reads as follows:-
“(i) Income Tax return provides for claim of unclaimed TDS of earlier year. The assessee has to provide party-wise details of deductor, specifying amount of TDS claim, in schedule TDS of the income tax return. From schedule TDS of ITR filed by the assessee, it is seen that assessee has not made any claim under “unclaimed TDS brought forward” from earlier years. (ii) Party-wise details of deductor, TDS claim and corresponding income details have not been provided by the assessee in its rectification application. (iii) Processing u/s 143(1) was done based on details furnished by the assessee in the return of income and TDS credit claimed by the assessee was considered while processing of return.”
5. Being aggrieved, the assessee filed appeals before the first appellate authority. The CIT(A) rejected the appeals for assessment years 2015-2016 and 2016-2017. The relevant finding of the CIT(A) for assessment year 2015-2016, reads as follow:-
“4.2 Ground No. 2& 3: The appellant has pleaded that the Learned Assessing Officer erred in not giving credit for claim of taxes paid /TDS amounting to Rs.4,35,31,200/- and the credit for claim of taxes paid /TDS has been denied on unsustainable reasons though the assessee had met with all the conditions as required under law. The appellant is a pvt. Company engaged in the business of engineering and software service. Perusal of income tax return for A Y 2015-16 'reveals that the appellant had claimed TDS at Rs.14.64,99.748/- whereas credit of TDS of Rs.14.59.68.548/- has been granted in the intimation order dated 31.03.2017 resulting short credit of Rs.5,31,200/-. The appellant contested the non-credit/short credit of TDS that most of the short credit of TDS pertain to AY 2014-·15, which has been utilized in AY 2015-16 and the CPC did not allow the same due to non-availability in 26AS statement for AY 2015-16. On perusal of ITR, I have observed from schedule TCS-2 of IT R that the appellant has claimed TCS on sale of immovable properties amounting to Rs.5,31,200/- in the return in schedule TDS-2 instead of schedule TCS, which resulted mis-match. I have also observed that the appellant has also mentioned the fact in the schedule as unclaimed TCS brought forward for FY 2014-15. Hence, AO is directed to allow the credit of TCS amounting to Rs.5,31,200/- after examining the declaration of income on a/c of sale of immovable property in the present FY 2014-15. Thus, this ground of appeal is allowed for statistical purpose. So far as the remaining credit of Rs. 4.30 crores is concerned, the appellant has submitted that it has offered the corresponding income in the return of income for A Y 2015-16 by mentioning that total receipt is Rs.15,064.11 lacs as per 26AS whereas total revenue shown at Rs. 20,236.68 lacs in the profit & loss account. The submission of the appellant has been examined and finds that the appellant did not claimed any unclaimed TDS credit for earlier years in schedule TDS-1 and the AO has correctly given his finding in the same line. Further, it is seen from schedule-1 of 5 & 119/Bang/2022. M/s.K.N.Dastur & Co. Pvt.Ltd. ITR that the appellant is following mercantile system of accounting and all TDS appearing In 26AS has been claimed in ITR and the same has been allowed in intimation order except TDS of Rs.5,31,200/-. Hence, there is- no mistake in the intimation order about non-credit of TDS of Rs. 4.30 crores for earlier years as it has not been claimed in the ITR of the appellant and appellant is following mercantile system of accounting. Thus, the ground about short credit of TDS of Rs.4.30 crores is dismissed."
6. Aggrieved by the orders of the CIT(A) for assessment years 2015-2016 and 2016-2017, the assessee has filed these appeals before the Tribunal. The learned AR has filed a brief written submission and also a paper book enclosing therein the case laws relied on, the assessment orders concluded for assessment years 2012-2013 to 2014-2015, statement showing income disclosed for assessment years 2012-2013 to 2019-2020, etc. The brief written submission submitted by the learned AR reads as follow:-
“Undisputedly, as can be seen from Annexure C (page No.18) enclosed herein, income commensurate to the TDS of Rs.10,99,08,103 has been offered to tax between assessment years 2015-2016 to 2019-2020. In all these assessment years the tax deducted being larger than the tax liability as per the returns, refunds have been granted for the residual excess taxes paid ignoring the credit to TDS for Rs.10,99,08,103. Since income is fully taxed for assessment years 2015-2016 to 2019-2020, the entire sum of TDS of Rs.10,99,08,103 may be directed for refund for assessment year 2015-2016 itself.”
In support of the above submission, the learned AR relied on the following judicial pronouncements:-
(i) Parikar Business and Knowledge Service Pvt. Ltd. v. DCIT Circle 5(1)(2), Bangalore in Bang/2018 (order dated 05.04.2019) (ii) Manyata Promoters Private Ltd. v. DCIT, Central Circle 1(3) and others in WP No.4829/2022 (I-T) dated 24.03.2022 (Karnataka High Court) (iii) Noor Mohammed v. Jethanand & Anr (2013 5 SCC 202) (SC)
The learned Departmental Representative supported the orders of the Income Tax Authorities.
We have heard rival submissions and perused the material on record. The undisputed fact is that vide order u/s 154 of the I.T.Act (order dated 30.05.2019) TDS credit (u/s 194J of the I.T.Act) amounting to Rs.10,99,08,103 was available for carry forward for future years. The assessee has enclosed Annexure-C in the paper book, wherein the details of income, the income offered to tax for the earlier years, the credit allowed for the respective assessment years, carry forward of TDS, etc. for the assessment year 2012-2013 to 2019-2020 are detailed. The learned AR by placing reliance on the order of the Bangalore Bench of the Tribunal in the case of Parikar Business and Knowledge Services Pvt. Ltd. v. DCIT (supra) and the judgment of the Hon’ble Karnataka High Court in the case of Manyata Promoters Private Limited v. DCIT (supra), submitted that directions may be given to the A.O. for giving TDS credit of Rs.10,99,08,103 in the assessment year 2015-2016, itself. The Annexure-C, wherein the details of the income offered, the credit allowed in the respective assessment years, the carry forward of TDS, etc. for assessment years 2012-2013 to 2019-2020 are reproduced below:-
Asst.Year Income from Advance / Income TDS as per Credit Credit to Carry Operations receipts as offered to tax 26AS allowed in be given forward of as per P&L per 26AS out of earlier Asst. TDS years A B A-B=C D E F D-E-F=G 2012-13 2223609507 3686800326 - 366070000 223300000 0 142770000 1463190819
7 & 119/Bang/2022. M/s.K.N.Dastur & Co. Pvt.Ltd. 2013-14 1729321352 1300459593 428861759 129203889 172203889 0 99770000 2014-15 1711753558 176482383 -52928825 181244237 171106134 0 109908103 2015-16 1807091336 1371697475 435393861 137809044 137809044 43539386 66368717 2016-17 1527356137 1310718346 216637791 130626538 130626538 21663779 44704938 2017-18 1051254871 772501984 278752887 77050842 77050842 27875289 16829649 2018-19 1098283717 998215644 100068073 99218348 99218348 10006807 6822842 2019-20 1181644939 925875112 68228420 92158455 88783514 6822842 0 9.1 The Hon’ble Karnataka High Court in the case of Manyata Promoters Private Limited v. DCIT (supra), had held as follows:-
“Sri. E.I. Sanmathi, learned counsel for the respondents, is enable to controvert essential submissions on befall of the petitioner viz, that the petitioner's request for rectification is rejected not because there is denial of the petitioners entitlement to the TDS credit returns but because of a functional disability in the automated process. This Court is persuaded to opine that with the authorities not disputing the petitioner's entitlement to TDS credit, the petitioner is entitled for refund by 30.04.2022.
Therefore, the petition is allowed declaring that the petitioner is entitled for TDS credit amount to Rs. 30,71,87,125/- in the assessment year 2019-20 and directing the respondents to take necessary action to ensure that benefit of such refund is available to the petitioner for the assessment year 2019-20 within a period of eight {8} weeks from the date of receipt of a certified copy of this order."
9.2 The Bangalore Bench of the Tribunal in the case of Parikar Business and Knowledge Services Pvt. Ltd. v. DCIT (supra) had held that when credit is available to the assessee in a particular year, credit for such TDS needs to be given irrespective of the fact that such income is offered to tax in a different year. The relevant finding of the Bangalore Bench of the Tribunal, reads as follow:-
"8. We have heard both the parties, perused the materials available on record and gone through the orders of the 8 & 119/Bang/2022. M/s.K.N.Dastur & Co. Pvt.Ltd. authorities below. The AO denied credit for TDS on the ground that income pertaining to such TDS has not been offered to tax for the year under consideration. According to AO, provision of sec.199 makes it very clear that credit for TDS shall be given in the year in which such income is offered to tax. Except this, the AO never disputed the fact that income pertaining to such TDS has been offered to tax. In fact, the AO in the asst. order categorically admitted that assessee has offered a sum of Rs.17,73,340/- for the asst. year 2012-13 and a sum of Rs.89,890/- for the asst. year 2014-15. Once particular income is offered to tax, then credit for TDS in relation to such income needs to be given to the assessee, because the amended provisions of see. 199 has omitted the words for the asst. year for which such income is assessable by the Finance Act 2008, meaning thereby that the legislature was quite conscious about the facts and hardships faced by the assessed therefore in the amended provisions nothing has been stated about the year in which credit of TDS is to be claimed. Assuming that the deductor follows cash basis of accounting and deductee follows accrual basis of accounting. In such situation, the deductor follows accrual basis of accounting. In such situation, the deducted deduct TDS only in the year of payment, but the deductee can recognize the income in the year for which services were provided. Now considering rules framed by the Board and the practice adopted by the lower authorities, assessee has to claim credit only in the year in which it is assessed to tax. Presuming the deductor made payment after expiry of 5 years, where all the provisions of Act for the purpose of filing revised return are expired, then in such cases, the assessee would have no choice to but loose the credit which he is rightfully eligible to claim resulting into a loss to that extent. This may not be intention of the legislature. Therefore, we are of the considered view that once the AO has come to conclusion that income pertaining to particular TDS credit has been offered to tax either in the preceding year or succeeding year, but when credit is available to the assessee in a particular year, credit for such TDS needs to be given irrespective of the fact that such income is offered to tax in a different year (Emphasis supplied). The Id CIT{A} without appreciating these facts simply upheld the action of the AO in denial of TDS Credit. Hence, we reverse the findings of Id CIT{A} and direct the AD to allow credit for TDS as claimed by the assessee for the year under consideration.” 9.3 The details submitted in Annexure-C, which is reproduced above needs verification by the A.O. The A.O. shall examine whether the entire income commensurate to 9 & 119/Bang/2022. M/s.K.N.Dastur & Co. Pvt.Ltd. the TDS of Rs.10,99,08,103 has been offered to tax between assessment years 2015-2016 and 2019-2020 and take a decision for granting TDS credit in accordance with law. Needless to state, the A.O. shall afford a reasonable opportunity of being heard to the assessee. It is ordered accordingly.
In the result, the appeals filed by the assessee are allowed for statistical purposes.
Order pronounced on this 26th day of May, 2022.