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Facts
The assessee, Ranchi Expressways Ltd., filed a nil income return for AY 2014-15 and claimed a refund of Rs. 64,95,260/-, despite offering no matching income for the claimed TDS credit. The Assessing Officer (AO) disallowed the TDS credit and made additions of Rs. 69,49,930/-, stating that TDS credit is contingent on the corresponding income being offered to tax as per Section 199 and Rule 37BA. The CIT(A) sustained the AO's additions.
Held
The Tribunal found that NHAI had deducted TDS on reimbursement of expenses to the assessee, which the assessee contended was without any mark-up and thus not assessable income. The Tribunal held that credit for TDS should be allowed if the transactions are recorded and certificates are furnished by the deductor, even if no corresponding income is assessable in the current year. Therefore, the Tribunal set aside the CIT(A)'s order and directed the AO to delete the additions.
Key Issues
Whether credit for TDS can be allowed under Section 199 read with Rule 37BA when the corresponding income, particularly reimbursement of expenses without mark-up, is not offered to tax in the same assessment year.
Sections Cited
199, 244A, 143(1)
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Income Tax Appellate Tribunal, Hyderabad ‘ A ‘ Bench, Hyderabad
करदाता का प्रतततितित्व/ : None Assessee Represented by राजस्व का प्रतततितित्व/ : Shri Gurpreet Singh, Sr.A.R. Department Represented by सुिवाई समाप्त होिे की ततति/ : 08.10.2025 Date of Conclusion of Hearing घोर्णध की तधरीख/ : 07.11.2025 Date of Pronouncement O R D E R PER MANJUNATHA G., A.M :
This appeal filed by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals) – 9, 2 Ranchi Expressways Limited Hyderabad, dated 25.01.2019 relating to the assessment year 2014-15.
The brief facts of the case are that the assessee company is engaged in the business of civil engineering works particularly building of constructions and parts thereof, filed its return of income for A.Y. 2014-15 on 29.11.2014 declaring total income of Rs. Nil and claimed refund of Rs.64,95,260/-. The case was selected for scrutiny and during the course of assessment proceedings, the A.O. noticed that, the assessee has offered nil income, however, claimed credit for TDS without offering matching income. Therefore, the A.O. after considering the relevant submissions of the assessee denied credit for TDS and made additions of Rs.69,49,930/- towards refund of tax along with interest u/s 244A of the Income Tax Act, 1961 was already issued to the assessee in the order passed u/s 143(1) of the Income Tax Act, 1961 dated 30.12.2016.
Aggrieved with the order of A.O., assessee carried the matter in appeal before the Ld. CIT(A), but could not succeed. The Ld. CIT(A) for the reasons stated in their appellate order dated 3 Ranchi Expressways Limited 25.01.2019 rejected the explanation of the assessee and sustained additions made by the A.O. towards refund of TDS along with interest by holding that, as per the provisions of Section 199 of the Act read with Rule 37BA of the Income Tax Rules, 1962, which is applicable w.e.f. A.Y. 2018-19, unless corresponding income is offered to tax, TDS related to the said income cannot be allowed. Therefore, the Ld. CIT(A) rejected the arguments of the assessee and sustained the additions made by the A.O.
Aggrieved by the order of Ld. CIT(A), the assessee is now in appeal before the Tribunal.
None appeared on behalf of the assessee.
We have heard the learned Sr.AR for the Revenue, Shri Gurpreet Singh, perused the material available on record and had gone through the orders of the authorities below. The A.O. made additions of Rs.69,49,930/- towards refund of tax along with interest claimed and issued notice u/s 143(1) of the Act on the ground that, corresponding income related to TDS claim of Rs.64,95,260/- was not offered to tax. It was the explanation of 4 Ranchi Expressways Limited the assessee before the A.O. that, the assessee is into the business of civil construction had entered into agreement with National Highway Authorities of India (for short “NHAI”) and NHAI has paid a sum of Rs.66,73,81,338/- towards shifting charges as reimbursement of expenses and the shifting charges received from NHAI is without any mark up of income and the assessee has not derived income from the said contract and consequently offered nil income. Since the NHAI has deducted TDS against the reimbursement expenses, the assessee has rightly claimed credit for TDS as per the provisions of Section 199 of the Income Tax Act, 1961. We find that, the provisions of Section 199 of the Act deal with the credit for TDS and as per the said provisions, any deduction made in accordance with the foregoing provisions of this Chapter and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made, or of the owner of the security etc., as the case may be in accordance with the Rules framed by the Board as per the provisions of sub-section (3) of Section 199 of the Act. Rule 37BA of the Income Tax Rules, 1962 provides for credit for taxes deducted and paid to the Central Government account 5 Ranchi Expressways Limited and as per Rule 37BA, credit for tax deducted at source and paid to the Central Government in accordance with the provisions of Chapter XVII shall be given to the person to whom the payment has been made or credit has been given on the basis of information relating to the deduction of tax furnished by the deductor to the income tax authority.
As per Rule 37BA(2) of Income Tax Rules, 1962 where, under the provisions of the Act, the whole or any part of the income on which tax has been deducted is assessable in the hands of the person other than the deductee, credit for whole or any part of the tax deducted at source as the case may be shall be given to the other person and not to the deductee. Further sub-rule (3) of Rule 37BA provides that, the credit for tax deducted at source and paid to the Central Government shall be given for the assessment year for which such income is assessable. From the plain reading of Section 199 read with Rule 37BA(3) of Income Tax Rules, 1962 make it very clear that, credit for tax should be allowed in the year in which income is assessable to tax. In other words, if any income is assessable to tax, then credit for taxes deducted at source on the said income should be allowed to the assessee on 6 Ranchi Expressways Limited the basis of certificates furnished by the deductee. In the present case, going by the facts available on the record, the assessee claims that, NHAI has deducted TDS on reimbursement of expenses and said reimbursement expenses received by the assessee is without any mark up and consequently, there is no income assessable for the assessment year under consideration. However, the transactions relating to TDS deducted on reimbursement of expenses has been considered in the books of accounts and given effect to the relevant expenditure account. Since there is no income assessable for the year under consideration in respect of TDS deducted by the NHAI, in our considered view, the credit for TDS as claimed by the assessee on the basis of certificate issued by the deductor should be allowed. The A.O. without appreciating relevant facts simply made additions towards refund issued to the assessee as per the order passed u/s 143(1) of the Act. The Ld. CIT(A) by misinterpreting the provisions of Section 199 of the Act read with Rule 37BA, has upheld the additions made by the A.O. Thus, we set aside the order of the Ld. CIT(A) and direct the A.O. to delete the additions towards refund issued to the assessee for Rs.69,49,930/-.
7 Ranchi Expressways Limited
In the result, the appeal filed by the assessee is allowed.