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Facts
The assessee, a trust, received dividend income from Infosys Ltd. with TDS deducted. The assessee claimed this dividend as exempt under Section 10(23AAA) and also claimed TDS credit. The CPC processing the return allowed exemption but failed to grant TDS credit, despite it being reflected in Form 26AS.
Held
The Tribunal held that the CIT(A) correctly allowed the appeal by directing the credit of TDS as reflected in Form 26AS, as the revenue did not dispute the income itself. The revenue's appeal against this decision was dismissed.
Key Issues
Whether TDS credit reflected in Form 26AS, on dividend income claimed as exempt, is to be allowed when the CPC failed to grant it during processing.
Sections Cited
10(23AAA), 143(1), 154, 199, 244A, 37BA
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Income Tax Appellate Tribunal, ‘A’ BENCH : BANGALORE
Before: SHRI LAXMI PRASAD SAHU & SHRI SOUNDARARAJAN K.
ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER
This is an appeal filed by the revenue challenging the order of the NFAC, Delhi dated 27/09/2024 in respect of the A.Y. 2021-22 and raised the following grounds: “
1. The Order of the Ld.CIT(A) is opposed to facts and circumstances of the case.
2. Whether on the facts and in the circumstances of the case, the Ld.CIT(A) is correct in law in allowing the appeal of assessee despite the fact that assessee had only claimed exemption of Rs.4,89,42,007/- as against the total receipts of Rs.48,94,20,072/- under section 10(23AAA) of the Income Tax Act, 1961?
Whether on the facts and in the circumstances of the case, the Ld.CIT(A) is correct in law in allowing the appeal of assessee by ignoring the fact that the difference of Total Receipts and exemption claimed under section 10(23AAA) of the Income Tax Act, 1961, has to be brought to tax? 4. The appellant craves leave to add, alter or amend all or any of the grounds of Appeal
before or at the time of the hearing of the appeal.
5. The order of the learned CIT(A) may be set-aside and the order of the ADIT, CPC may be confirmed.”
2. The assessee is a trust established for the welfare of the employees of the company by giving assistance in various forms such as medical, education, housing, holiday homes, recreational facilities etc. The assessee trust received dividends from the company Infosys Ltd. on which the TDS of Rs. 1,26,91,974/- was deducted. While filing the return, the assessee claimed the said dividend received from the company as exemption u/s. 10(23AAA) of the Act. The CPC issued an intimation u/s. 143(1) and allowed the exemption claimed u/s. 10(23AAA). In the said intimation, the CPC had refunded the advance tax and the interest and the CPC had not taken into the credit the TDS amount even though the said TDS was reflected in form 26AS. Thereafter, the assessee filed a rectification request through the portal and an order u/s. 154 was also passed by the CPC but not considered the TDS credit claimed by the assessee. The assessee aggrieved with the said intimation, had filed an appeal before the Ld.CIT(A) and contended that the non-granting of the credit for TDS is not correct since the said TDS was also reflected in form 26AS. The Ld.CIT(A) had considered the case on merits and accepted that the CPC had not taken into credit the TDS amount deducted and paid by the company while paying the dividend which was also reflected in the form 26AS. The Ld.CIT(A) had also observed that the assessee is also entitled for the consequential interest u/s. 244A of the Act.
4. At the time of hearing, the Ld.AR filed a paper book in which the relevant documents which are all required to adjudicate the appeal was filed and argued that the appeal itself is not maintainable since the Ld.CIT(A) had granted the relief in respect of the TDS only but the revenue disputed the income received by the assessee which could not be raised by the revenue for the first time before this Tribunal.
The Ld.DR appearing for the revenue contended that the assessee had claimed exemption of lesser amount as against total receipts and claimed exemption u/s. 10(23AAA) of the Act for the entire amount and therefore contended that the Ld.CIT(A) is not correct in law in confirming the entire exemption while allowing the appeal.
We have heard the arguments of both sides and perused the materials available on record.
First we will consider the grounds of appeal
filed by the assessee before the Ld.CIT(A) which is as follows: “1 Section 143(1) - General Ground 1.1 The learned Assistant Director of Income Tax, CPC, Bangalore has erred in passing the Intimation under section 143(1) in the manner passed. The order being bad in law is liable to be quashed.
2. Section 199 - Ground relating to denial of credit of Tax Deducted Source 2.1 The Assistant Director of Income Tax, CPC, Bangalore has erred in not giving credit for TDS of Rs. 1,26,91,974/- as claimed in the Return of income and reflected in Form no. 26AS for the relevant Assessment Year.
3. Section 244A - Interest on Refund 3.1 The Assistant Director of Income Tax, CPC, Bangalore has erred in not providing additional interest under section 244A on account of additional TDS credit. On facts and Appellant is entitled to additional interest on refund under section 244A. 4 Section 251 - Prayer 4.1 In view of the above and other grounds to be adduced at the time of hearing, the appellant prays that the Intimation passed under section 143(1) be quashed Or alternatively (i) TDS credit of Rs. 1,26,91,974/- as claimed in the Return of income and as available in Form no. 26AS be allowed. (ii) Refund claimed along with applicable interest u/s. 244A be allowed. The appellant prays accordingly.”
8. We have gone through the grounds raised by the assessee in which the assessee had disputed the TDS credit which was not allowed by the CPC even though the said TDS amount was reflected in form 26AS. There is no dispute with regard to the income received by the assessee from the company and therefore the Ld.CIT(A) had considered the grounds raised by the assessee and allowed the claim made by the assessee. The relevant finding of the Ld.CIT(A) is as follows: “4.2 Ground No.2: This ground pertains to not granting of credit of TDS of Rs. 1,26,91,974/- in the order u/s 143(1). As per the submission, the appellant had received the dividend of Rs.37.19,29,337/- from Infosys Ltd. on which the TDS of Rs. 1.26.91.974/- was made. The appellant had claimed the credit for TDS of Rs. 1,26,91,974/- in the return of income. The AO. CPC denied the credit of TDS of Rs. 1,26,91.974/- for the reason that “Form 26AS does not contain/contains partial amount of TDS with respect to the TAN mentioned in schedule TDS 1/ TDS 2 / TCS.” In the subsequent order passed u/s. 154, dated 19.12.2022, the claim of the appellant for allowance of subject TDS credit was rejected too. It is seen from the system, that the TDS of Rs. 1,26,91,974/- is reflected in Form 26AS. Further, the appellant has also contended that it has considered the dividend received from the Infosys Ltd. in the income expenditure statement in the return of income. It is further seen from the return of income that total receipts of Rs. 48,94,20,072/- is shown in the Schedule 1E-1 of income and expenditure statement. The entire receipt has been claimed by the appellant as exempt u/s. 10(23AAA) of the Act, in view of the registration granted by the CIT(E). Bangalore on 20.08.2020.
It may be mentioned that the provisions of section 199 rwr 37BA provides for the manner of giving TDS credit. In the case of Anup Rajendra Tapadia Vs DCIT (ITAT Pune)Appeal Number : dated 06/01/2023 it is held that the combined reading of Section 199(3) r.w. Rule 37BA(3) makes the position of law clear that, credit for TDS is available in the year in which the income is reported. It may further be mentioned that the dividend has been made taxable in the hands of the recipient with effect from 01.04.2020. This issue of claim of the appellant that the dividend received from Infosys Ltd. which is appearing in Form 26AS and is considered as receipts in the return for AY 2021-22, requires factual verification. Therefore, the AO is directed to factually verify and allow the claim of TDS credit, in case the dividend received from Infosys Ltd. has been considered by the appellant in the income & the expenditure statement of the return, subject to the provisions of section 199 r.w.r. 37BA. This ground of appeal is allowed for statistical purpose. 4.2 Ground No. 3 : In this ground the appellant has claimed that it is eligible for interest u/s. 244A on the refund arising out of TDS credit of Rs. 1,26,91,974/-. It may be mentioned that the issue of interest is consequent to the refund determined and date of issue. The AO is, therefore, directed to compute the interest u/s 244A, in accordance with provisions of section 244A(1B), after giving effect to this order. Therefore, this ground of appeal is allowed.”
9. As seen from the finding given by the Ld.CIT(A), we came to know that the Ld.CIT(A) had considered the issue of TDS which was raised by the assessee and which was deducted by the company and which was also reflected in the form 26AS, as an eligible credit for the assessee and therefore held that the CPC had erred in not granting the said credit while processing the return and sending the intimation u/s. 143(1) of the Act. The Ld.CIT(A) had also considered the other grounds raised by the assessee which is about consequential interest payable to the assessee. Therefore the issue before the Ld.CIT(A) was that whether the TDS credit should be taken into consideration or not and if so, any interest is liable to be paid on the delayed refund of the same and nothing more than that was disputed and decided by the Ld.CIT(A). The Ld.CIT(A) had also correctly applied his mind TDS deducted by the company is to be necessarily taken into credit while processing the return.
10. In such circumstances, the grounds now raised by the revenue is about the income declared by the assessee in their return of income which was not in dispute before the Ld.CIT(A). It is a fact that admittedly, the company had deducted TDS of Rs. 1,26,91,974/- while paying the dividend to the assessee which was duly remitted to the department, which was also reflected in the form 26AS, then the order of the CPC by not considering the said TDS by stating one reason or other, is not correct and therefore the Ld.CIT(A) had correctly allowed the appeal filed by the assessee.
11. The revenue had not pointed out any error in the order of the Ld.CIT(A) but raised a different issue which in our opinion is not maintainable. We therefore dismiss the appeal filed by the revenue.
In the result, the appeal filed by the revenue is dismissed.
Order pronounced in the open court on 11th February, 2025.