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Facts
The assessee, a real estate company, filed a 'nil' income return for AY 2021-22 and claimed TDS credit. The CPC processed the return, determined a lower refund, and denied part of the TDS credit stating the corresponding income was not offered. The CIT(A) confirmed the denial.
Held
The Tribunal held that the assessee is eligible for TDS credit if the corresponding revenue has already been offered to tax in earlier years based on the percentage completion method. The CIT(A) erred by not considering this plea.
Key Issues
Whether the assessee is entitled to claim TDS credit in the current year for income already offered to tax in previous years based on the percentage completion method.
Sections Cited
154, 139(1), 143(1), 145(1), 194IA, 37BA
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI MANU KUMAR GIRI & SHRI S.R. RAGHUNATHA
O R D E R
PER S.R. RAGHUNATHA, ACCOUNTANT MEMBER:
This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi dated 29.11.2024 for the Assessment Year 2021-22.
The assessee has raised the following grounds of appeal:-
1. The order of the Ld. CIT (A) confirming the order u/s 154 of the Act, is contrary to law, facts and opposed to the principles of natural justice and fair procedure.
2. The Ld. CIT (A) erred in confirming the denial of TDS credit claimed as per the return of Income filed by the appellant without appreciating the fact that the same is eligible credit.
3. The Ld. CIT erred in confirming the disallowance of TDS credit made by ld. AO on account of absence of corresponding income in the return of income. The disallowance made by ld. AO and sustained by ld. CIT (A) is arbitrary, baseless and not justified.
The Ld. CIT (A) ought to have appreciated the fact that the method of accounting followed by the appellant is as per the provisions of section 145(1) of the IT Act.
5. The Ld. CIT (A) failed to consider that the income had been offered on accrual basis consistently (on percentage of completion basis, as prescribed by the IT Act) as and when the transaction materialized.
6. The Ld.CIT(A) failed to appreciate the fact that the appellant may treat the income on which tax has been deducted as income for two or more different years and the same cannot be rejected.
7. The appellant craves to amend, alter or delete any of the above grounds of appeal
8. For the above reasons and other reasons that may be adduced at the time of hearing, the TDS credit may kindly be granted and justice be rendered.
Brief facts of the case are that the assessee is a private limited company engaged in the business of real estate services including sub-contracting services and filed its return of income u/s.139(1) of the Income Tax Act, 1961 (hereinafter the ‘Act’) for the assessment year 2021-22 by declaring ‘nil’ income. The return of income was processed u/s.143(1) of the Act by the CPC and determined the refund of Rs.43,48,670/- as against claimed by the assessee of Rs.72,56,220/-. Subsequently, the assessee preferred an application u/s.154 of the Act to rectify the mistake apparent on record for not considering the entire TDS claimed in the return. However, the CPC 26.10.2023 has rejected the application of the assessee and passed an order dated 26.10.2023. Aggrieved, the assessee preferred an appeal before the CIT(A).
3.1 Before the Ld.CIT(A), the assessee filed details of revenue receipts of Rs.9,34,83,132/- consisting of contract work, rental facility, brokerage and commission and maintenance income earned during the impugned assessment year and stated that the CPC has denied TDS credit to the extent of Rs.31,22,027/- stating that the corresponding income has not been offered in the ITR and the rectification application also rejected stating the same reason. Further, the CPC has failed to consider the nature of business and explanation furnished by the assessee for the discrepancy found in gross receipts between the 26AS and the books of accounts. Further, the assessee stated that the income on property transaction has been offered on accrual basis consistently (i.e., percentage completion basis as prescribed by ICAI) as and when the property transaction is materialized. The assessee also explained that the assessable income(revenue) relating to TDS credit claimed in the impugned assessment year has already been offered to tax in the earlier years based on percentage completion basis, whereas the TDS has been deducted by the purchaser of the property u/s.194IA of the Act based on the payments of installments out of sale consideration agreed by the purchasers. However, the Ld.CIT(A) on perusal of the submissions made by the assessee was not convinced and dismissed the appeal of the assessee. Aggrieved by the order of the Ld.CIT(A), the assessee is before us.
4. The Ld.AR for the assessee submitted that the Ld.CIT(A) has erred in confirming the order of the CPC by denying the claim of TDS credit to the tune of Rs.31,22,027/-. Before us, the Ld.AR submitted a paper-book consisting of 131 pages having the details of reconciliation of income between 26AS and ITR across period of projects, partywise break-up of income for the impugned assessment year, Form 26AS across period of projects, audited financials to show the revenue recognition along with Rule 37BA of IT Rules. Further, the Ld.AR submitted the nature of business of the assessee is real estate and hence, the revenue of each project has been recognized on year-on-year basis on percentage basis. However, the buyers of the projects have deducted applicable TDS u/s.194IA of the Act as and when the installments / sale consideration are paid to the assessee. Hence, the income of the corresponding TDS had already been offered as revenue or sale consideration in the earlier assessment years by the assessee. Therefore, the claim of TDS in the current financial year is related to the income which is already been offered to tax. The Ld.AR filed the complete details of TDS received both party-wise and year-wise in page No.2 of paper-book along with the section-wise TDS details in PB page No.3 for the assessment years 2018-19 to 2021-22 and prayed for granting the eligible TDS by setting aside the order of Ld.CIT(A).
Per contra, the Ld.DR stated that the assessee has not furnished the reconciliation of income earned to the TDS claimed and hence, the order of CIT(A) may please be confirmed.
We have heard both the parties, perused materials available on record, the paper book and gone through orders of the authorities below. Admittedly, the assessee is a private limited company and carrying on the business of real estate and following the system of recognizing the revenue based on percentage completion of each project. Accordingly, the assessee has claimed the TDS in the impugned assessment year on the revenues which has already been offered to tax in the earlier assessment years based on the percentage completion method. Before us, the Ld.AR furnished the reconciliation of TDS received, corresponding revenue offered to tax in each of the earlier assessment years along with the 26AS for the TDS claimed in the impugned assessment years have already been offered to tax. On perusal of the records we note that the assessee is eligible to get credit for TDS as per 26AS, in case the corresponding revenue has already been offered to tax during the earlier assessment years. Therefore, we are of the considered view that the Ld.CIT(A) has erred by not considering the plea of the assessee and hence, we set aside the order of the Ld.CIT(A) and remit the issue back to the file of the AO for this limited purpose to verify the reconciliation submitted by the assessee in respect of TDS claimed and the turnover offered to tax and grant credit of TDS in accordance with law.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 8th April, 2025.