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Facts
The assessee, engaged in IT services, filed its return for AY 2014-15. A notice under Section 154 was issued alleging discrepancies in income offered and TDS credit claimed, specifically regarding deferred revenue.
Held
The Tribunal held that TDS credit should be allowed proportionally to the income assessable in the current year. Any TDS credit related to deferred revenue should be allowed in the year the income is offered.
Key Issues
Whether the assessee is entitled to full TDS credit when a portion of the income is deferred revenue, or if it should be allowed proportionally to the income offered in the current year.
Sections Cited
154, 143(3), 199, 37BA
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH: BANGALORE
Before: SHRI PRASHANT MAHARISHI & SHRI KESHAV DUBEY
Per Prashant Maharishi, Vice President
This appeal is filed by CAST Software India Pvt. Ltd. (the assessee/appellant) for the assessment year 2014-15 against the appellate order passed by the National Faceless Appeal Centre, Delhi (NFAC) [ld. CIT(A)] dated 10.11.2024 wherein the appeal filed by the assessee against the rectification order u/s. 154 r.w.s. 143(3) of the Income Tax Act, 1961 [the Act] dated 30.3.2021 passed by the ACIT, Circle 2(1)(1), Bangalore [ld. AO] was dismissed.
The assessee is aggrieved and is in appeal before us.
The brief facts of the case show that assessee is a company engaged in providing Information Technology services including design, development, promotion and marketing in software products. The assessee filed return of income on 29.10.2014 which was revised on 6.11.2014 at a total taxable income of Rs.15,31,98,203. The return of income filed by the assessee had a refund claim of Rs.90,61,030. The assessee claimed the TDS as stated in the statement 26AS. The return of income was picked up for scrutiny which resulted into assessment u/s. 143(3) of the Act at the returned income. Against the TDS claim of the assessee of Rs.5,28,24,148 it was granted actual claim of Rs.5,30,41,832.
However, subsequently notice u/s. 154 of the Act was issued on 23.3.2021 stating that assessee has offered income of Rs.42.63 crores and claimed TDS credit of Rs.5.28 crores. Further a sum of Rs.11,44,39,628 has been stated to be deferred revenue. Therefore on the basis of matching principle, the total receipt shown in Form 26AS is Rs.52.82 crores and corresponding TDS credit is Rs.5.28 crores. Therefore TDS credit of Rs.1,14,43,963 should have been carried forward and same should not have been allowed as credit in this year.
The assessee submitted vide letter dated 30.3.2021 that product billed for the customer is Rs.49,37 crores and out of the above Rs.9.23 crores is upfront billing for subsequent years and recorded as deferred revenue in the books of account and claim of the assessee of TDS is correct. It was also stated that there is no difference if the credit is granted in this assessment year as there is no loss of revenue.
The ld. AO rejected the claim of assessee and passed order u/s. 154 of the Act and restricted the TDS credit at Rs.4,13,80,185 by order dated 30.3.2021 where in he restricted the Tax deduction credit proportionately.
The assessee preferred appeal before the ld. CIT(A). The ld. CIT(A) after extracting the submission of the assessee held that as per Form 26AS, assessee has shown total receipt of Rs.52,82,41,464 on which TDS of Rs.5,28,24,146 has been made. The assessee has claimed the entire amount of revenue as per Form No 26 AS of Rs.52,82,41,464 has not been shown as income , but only Rs.42,63,37,312 is disclosed as income , therefore the ld. AO is correct in restricting the credit of TDS to Rs.4,13,80,185.
The ld. AR submitted that assessee should have been granted the complete tax credit. The ld. DR vehemently supported the order of the ld. lower authorities.
The Ld. DR supported the order of the ld. Lower authorities.
We have carefully considered the rival contentions and perused the orders of the ld. lower authorities. Credit for TDS is provided in terms of section 199 of the act. Rule 37BA is framed for credit for tax deducted at source. According to sub-rule (3) credit for TDS and paid to the Central Govt. shall be given for the assessment year for which such income is assessable. Further, where tax has been deduced at source and paid to the Central Govt. and income is assessable over a number of years, credit for TDS shall be allowed across those years in the same proportion in which the income is assessable to tax. Therefore the correct principle is that proportionate amount of credit for TDS shall be allowed to the assessee against the income assessable for that year only. Thus, if the full income is assessable for the current year, the assessee deserves full credit of TDS. If part of the income offered is chargeable to tax in subsequent years, the proportionate credit shall be allowed to the assessee in the subsequent year. It is not in dispute that according Form 26AS the total receipt shown by the assessee is of Rs.52.82 crores, whereas the income of Rs.42.63 crores has been shown in the financial statements. It is also the claim of the assessee that a sum of Rs.9.32 crores is deferred revenue which is not recorded as income for this year but in another year. Therefore , for this year, assessee is entitled to TDS credit of proportionate sum to the billing of Rs.42.63 crores only. However, the balance TDS credit should be granted to the assessee in the year in which the balance income is offered. Accordingly the ld. AO is directed to give credit to the balance TDS to the assessee in the year in which the balance income is offered.
Accordingly the appeal of the assessee is partly allowed.
Pronounced in the open court on this 22nd day of July, 2025.