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Facts
The assessee, a Joint Venture (JV), received contract receipts from NFR and distributed them to its constituent partners (HCCL and CPL). NFR deducted TDS on these receipts. The assessee claimed a refund of this TDS. The Assessing Officer (AO) and CIT(A) denied the credit, holding that since the income was assessable in the hands of constituent partners, they alone were eligible for TDS credit.
Held
The Tribunal held that the assessee correctly accounted for the gross contract receipts as its income and paid constituent partners as expenses, reporting nil profit. The AO erred in invoking Section 238(1) as the income was assessable in the hands of the assessee. Following the decision in IVRCL-KBL (JV) Vs. ACIT, the Tribunal ruled that the assessee rightly claimed credit for the TDS.
Key Issues
Whether the assessee JV is eligible to claim credit for TDS deducted by NFR when the gross receipts were distributed to constituent partners, and whether Section 238(1) and Rule 37BA are applicable to deny the credit.
Sections Cited
194C, 238, 199, 37BA, 199(1), 37BA(1), 37BA(2), 37BA(2)(i), 194N
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Income Tax Appellate Tribunal, HYDERABAD BENCHES “A” , HYDERABAD
Before: SHRI LALIET KUMAR, HON’BLE & SHRI G. MANJUNATHA, HON’BLE
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), National Faceless Appeal Centre (NFAC), Delhi dated 08.08.2024, pertaining to A.Y.2018-19. The assessee has raised the following grounds :
“1. The order of the learned Commissioner of Income Tax (Appeals) is contrary to the facts and also the law applicable to the facts of the case.
2. The learned Commissioner of Income Tax (Appeals) is not justified in upholding the denial of credit for TDS of Rs.5,20,58,733 by the assessing officer.
3. The learned Commissioner of Income Tax (Appeals) ought to have appreciated that the contract amount was received by the appellant in its own right and hence the appellant is eligible to claim credit for TDS of Rs.5,20,58,733 in its hands.”
The brief facts of the case are that the assessee is a non- integrated work sharing Joint Venture (JV) constituted by Hindustan Construction Company Limited (HCCL) and Costal Projects Ltd (CPL). The assessee had entered into agreements with North-East Frontier Railway (NFR), a Central Government Agency, for execution of works relating to construction of railway tunnels. The constituents entered into a Joint Venture Consortium Agreement on 28.04.2010, wherein the allocation of total work to the constituents is 60% to HCCL and 40% to CPL. The JV did not execute any contract work and the gross contract receipts from NFR were distributed between the two constituent partners in the ratio stated above and the constituent partners executed the work. NFR deducted tax at source from the gross contract amounts paid to the assessee under Section 194C and credited to the Central Government account. The assessee in the books of accounts credited gross contract receipts from NFR, as its Revenue from operations and amount distributed to constituent partners as other expenses. The assessee has declared nil profits from the contract works.
The assessee company has filed its return of income for A.Y. 2018-19 on 31.10.2018 declaring total income of Rs.nil and claimed TDS refund of Rs.5,20,58,733/-. The case was selected for scrutiny and during the course of assessment proceedings, the Assessing Officer observed that the assessee company has awarded works contract by NFR, a central Government Agency for execution of works relating to construction of railway tunnel. The assessee company has distributed the said works to constituent partners @ 60% to HCCL and @ 40% to CPL. Since the assessee has not executed any contract works on its own and the entire contract amount has been distributed between the constituent partners, the Assessing Officer noted that the assessee has not offered any income from the said contract in its return of income. The Assessing Officer further observed that the income pertaining to the works contract is not assessed in the hands of the assessee and therefore, the credit for TDS cannot be given in terms of Section 238(1) r.w. Rule 37BA(1) of the I.T Rules 1962. Therefore, called upon the assessee to explain as to why TDS credit cannot be withdrawn. In response, the assessee submitted that the provisions of Section 238(1) of the Act, has no application because the assessee has treated gross contract receipts from NFR as its income and the entire contract amount distributed to constituent partners has been considered as its expenses and reported nil profits from the contract receipts. Further, NFR has deducted TDS on gross contract amount and once TDS has been deducted on payment made to the assessee, then the said TDS is nothing but tax paid on behalf of the assessee, in terms of Section 199 of the Income Tax Act, 1961 and consequently, the assessee is eligible for claiming credit for TDS.
The Assessing Officer after considering the submissions of the assessee and also taken note of provisions of Section 238(1) of the Act r.w.r 37BA of I.T Rules, 1962, observed that the provisions of Section 238(1) of the Act, are clearly applicable in the present case because the income of the assessee is included in the total income of constituent partners and therefore, the constituent partners alone shall be entitled to a refund, as per section 238 of I.T Act, 1961. Further, as per Rule 37BA of the IT Rules, 1962, where any income on which TDS has been deducted is assessable in the hands of a person other than the deductee, credit for the whole or part of the TDS, as the case may be, shall be given to such other person and not to the deductee. In the instant case, NFR is the deductor, the JV (assessee) is the deductee, and the constituent partners are the persons in whose hands the income is assessable. Therefore, even as per Rule 37BA of the IT Rules, 1962, the assessee is not entitled for credit for TDS, as the income is assessable in the hands of the constituent partners. Further, as per the provisions to Rule 37BA, the deductee shall file a declaration with the deductor, and the deductor shall report the tax deduction in the name of the other person as per Rule 37BA(2)(i). Since NFR has deducted TDS in the name of the assessee and reported it accordingly, the assessee is not entitled to credit for TDS in terms of Section 199 read with Rule 37BA of the I.T. Rules, 1962. Therefore, rejected the arguments of the assessee and withdrawn credit for TDS of Rs.5,20,58,733/-. The relevant findings of the AO are as under:
“4.4. The assessee was issued a show cause notice on 29.01.2021, requiring it to explain as to why the TDS credit should not be withdrawn. A copy of the draft assessment order was al included in the show cause notice. In response to the show cause notice, the assessee uploaded a response on 15.02.2021. The arguments put forth by the assessee and the reasons why the same are not acceptable are discussed herein under; (a) It is stated that the provisions of section 238(1) are not applicable to the assessee. This argument of the assessee is not acceptable as the said section does not provide any exclusion to any categories of assessees. This section clearly states that where the income of one person is included under any provision of this Act in the total income of any other person, the latter alone shall be entitled to a refund under this Chapter in respect of such income. In the instant case, the income of HCC CP PL (JV) is included in the hands of its constituents and hence, only the constituents are entitled for refund. The assessee has not satisfactorily explained as to how the provisions of this section are not applicable to it. In the circumstances, this argument of the assessee is not accepted. (b) It is also stated by the assessee that as per the provisions of section 199 of the Act, the tax deduction shall be treated as a payment of tax on behalf of the Joint Venture since the deduction is out of the gross contract receipts paid to the Joint Venture and has quoted selective portion of the said section. This argument of the assessee is not acceptable for the reason that sub section (3) of the said section specifies that Rule 37BA of the Income Tax Rules governs the manner of giving credit. Hence, this section has to be read with Rule 37BA and not in isolation.
(c) It is further stated by the assessee that Rule 37BA is not applicable to it. This argument of the assessee is not acceptable as the said rule does not provide any exclusion to any categories of assessees. Rule 37BA clearly states that where under any provisions of the Act, the whole or any part of the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for the whole or any part of the tax deducted at source, as the case may be, Page 6 of 8 AAAAH5541G- HCC CP PL (JV) A.Y. 2018-19 ITBA/AST/S/143(3)/2020-21/1031015722(1) shall be given to the other person and not to the deductee. This rule makes it clear that the assessee JV is not eligible to claim credit of taxes and the same is allowable only in the hands of its constituents. (d) The facts of the judicial pronouncement in the case of IVRCL-KBL (JV) Vs ACIT Circle 7(1), Hyderabad, (2016) 67 Taxmann.com 224 (AP) are different from the case of the assessee and hence, the same cannot be applied to the case of the assessee. In the circumstances, it is seen that none of the arguments put forth by the assessee JV are fit for acceptance. Accordingly, the same are not accepted. 4.5. On going through the provisions related to credit of TDS in the Income Tax Act and Income Tax Rules, it is clear that all provisions contained in section 238 and 199 of the Act and Rule 37BA of the Rules are perfectly in consonance with each other. The action of the assessee is out of place and does not fit in the enactment. By raising invoices, taking all liabilities of work contract and receiving payments of contract proceeds, the assessee JV declares before the N.F. Railway to be the rightful owner of the receipts and consequently the corresponding income. However, before Income Tax Department, the assessee JV puts up a different stand. In view of the provisions contained in section 238 and 199 of the Act and Rule 37BA of the Rules, it is clear beyond any doubt that the assessee JV cannot be granted credit of the TDS amount claimed by it in its ITR. The facts of the case referred by the assessee are different from the case of the assessee and hence the same cannot be applied to the case of the assessee. 4.6. In light of the above discussions, the credit of TDS of Rs. 5,20,58,733/- claimed by the assessee in its ITR and allowed by the department at the time of processing of ITR, is hereby withdrawn.”
Being aggrieved by the assessment order, the assessee preferred appeal before the LD.CIT(A). Before the Ld. CIT(A), the assessee reiterated its submissions made before the Assessing Officer and argued that the provisions of Section 238(1) of the Act, are not applicable to the assessee because the assessee has reported the amount received from NFR, as income from operations and debited the amount paid to the constitutent as other expenses. Therefore, the income relatable to the said contract is treated as the income of the assessee, and accordingly, the amount credited for TDS should be allowed to the assessee, in terms of Section 199(1) read with Rule 37BA of the I.T. Rules, 1962.
The Ld. CIT(A), after considering the relevant submissions of the assessee and also taken note of the provisions of Section 238(1) read with Rule 37BA of the I.T. Rules, 1962, rejected the arguments of the assessee and upheld the reasons given by the Assessing Officer to withdraw the credit for TDS by holding that once the JV has distributed gross contract receipts to its constituent partners, then the income relatable to the said contract is assessable in the hands of the constituent partners and not in the hands of the assessee. Therefore, as per the provisions of Section 238(1) of the Act, once the income of one person is included in the total income of any other person, the latter alone should be entitled to a refund under this Chapter in respect of such income. Further, Rule 37BA(2) of the I.T. Rules, 1962, also clearly states that where under any provision of the Act, the whole or any part of the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for the 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. Since the assessee has distributed the contract receipts between its constituent partners and the constituent partners have executed the work, the income relatable to the said contract is assessable in the hands of the constituent partners, and consequently, the constituent partners alone can claim credit for TDS, but not the assessee and therefore, rejected the submissions of the assessee and upheld the reasons given by the Assessing Officer to withdraw the credit for TDS.
Aggrieved by the order of LD.CIT(A), the assessee is in appeal before the Tribunal.
The Ld. AR for the assessee, Shri G.V.N. Hari, Advocate, submitted that the Ld. CIT(A) erred in upholding the denial of credit for TDS by the Assessing Officer without appreciating the fact that the provisions of Section 238(1) of the Act read with Rule 37BA(2)(i) of the I.T. Rules, 1962, do not apply to the assessee. The learned counsel for the assessee, referring to Section 238(1) of the I.T. Act, 1961, submitted that as per the said provision, when the income of one person is included in the total income of another person under the provisions of the Act, the latter alone shall be entitled to a refund under this Chapter in respect of such income. Since the contract receipts from NFR are assessable in the hands of the assessee, the provisions of Section 238(1) are not applicable. The learned counsel for the assessee further, referring to Section 199(1) of the Act and Rule 37BA of the I.T. Rules, 1962, submitted that as per Section 199 of the Act, the tax deduction shall be treated as payment of tax on behalf of the deductee. Similarly, Rule 37BA(3) of the I.T. Rules, 1962, governs the manner of granting credit, and as per the said rule, credit for tax deducted at source and paid to the Central Government shall be given to the person to whom the payment has been made or in whose name credit has been given. In the present case, NFR has made the payment to the assessee, and TDS has been deducted and credit has been given to the assessee. Therefore, the assessee alone is eligible to claim credit for TDS. Therefore, the Assessing Officer and the Ld. CIT(A) erred in relying on Section 238 of the Act. Section 238 applies only in cases, where the whole or any part of the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee. Therefore, learned counsel for the assessee submitted that the LD.CIT(A) has erred in upholding the action of the Assessing Officer in denying the credit for TDS. In this regard, he relied upon the decision of Hon'ble High Court of Andhra Pradesh in the case of IVRCL-KBL (JV) Vs. ACIT reported in (2016) 289 CTR 0111 AP.
The learned Senior A.R., Shri Srinath Sadanala, on the other hand, supporting the order of the Ld. CIT(A), submitted that as per Section 238(1) of the Act, if the income of one person is included in the total income of another person, the latter alone shall be eligible to claim a refund in respect of such income. Further, as per Rule 37BA(2) of the I.T. Rules, 1962, where any income on which TDS has been deducted is assessable in the hands of a person other than the deductee, credit for TDS shall be given to such other person, provided the deductee furnishes a declaration to the deductor giving the details of the person to whom the credit should be given. In the present case, the entire contract receipts from NFR have been distributed between the constituent partners in a pre-determined ratio and therefore, the income relatable to the said contract is assessable in the hands of the constituent partners, but not in the hands of the assessee. Since the income on which TDS has been deducted is not assessable in the hands of the assessee, the Assessing Officer has rightly denied the credit for TDS and therefore, the order of the Assessing Officer and LD.CIT(A) should be upheld.
We have heard both the parties, perused the material on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that the assessee is a JV / Consortium with two constituent partners i.e., HCCL and CPL. The assessee company was awarded a contract by NFR, which deducted TDS on the gross contract receipts as per Section 194C of the Act, and reported it in the name of the assessee company, as required under the law. The assessee company has distributed the gross contract receipts in the ratio agreed upon between the constituent partners, who subsequently executed the contract works. There is no dispute with these facts. Further, the assessee company has accounted for the gross contract receipts received from NFR, as its income from operations and has treated the payment made to the constituent partners, as its expenses, in the ratio as agreed upon between the partners. Thus, the assessee company reported zero profit from the contracts in its books of accounts, filed its return of income accordingly, and also claimed a refund of TDS deducted by NFR, which was remitted in the name of the assessee. The Assessing Officer has withdrawn the refund claimed by the assessee on the ground that income relatable to the contract receipts from NFR was not offered by the assessee in its hands, whereas the income relevant to the said contract has been reported by the constituent partners in their income tax returns and therefore, as per Section 238(1) r.w. Rule 37BA of I.T. Rules, 1962, the constituent partners are eligible for claiming credit for TDS, but not the assessee.
In this factual background, we need to examine whether the reasons given by the Assessing Officer and upheld by the LD.CIT(A) for denying credit for taxes to the assessee are in accordance with the provisions of Section 238(1) r.w. Rule 37BA of I.T. Rules, 1962 or not ?. For better understanding the issue, it is relevant to discuss the provisions of Section 238 of the Act which read as under :
Person entitled to claim refund in certain special cases,
(1) Where the income of one person is included under any provision of this Act in the total income of any other person, the latter alone shall be entitled to a refund under this Chapter in respect of such income. (IA) Where the value of fringe benefits provided or deemed to have been provided by one employer is included under any provisions of Chapter XII-H in the value of fringe benefits provided or deemed to have been provided by any in respect of such fringe benefits.] (2) Where through death, incapacity, insolvency, liquidation or other cause, a son is unable to claim or receive any refund due to him, his legal representative or the trustee or guardian or receiver, as the case may be, shall be entitled to claim or receive such refund for the benefit of such person or his estate.
The provisions of Section 238(1) of the Act deal with the person entitled to claim a refund in certain special cases. As per the said section, where the income of one person is included under any provision of this Act, in the total income of another person, the latter alone shall be entitled to a refund under this Chapter in respect of such income. A plain reading of Section 238(1) of the Act, makes it very clear that if the income of one person is included in the total income of any other person, then the other person shall be entitled to a refund, but not the person in whose name TDS has been credited. The Assessing Officer was of the opinion that the income of the assessee was included in the income of the constituent partners and, therefore, invoked provisions of Section 238(1) of the Act. In our considered view, the Assessing Officer has grossly misunderstood the provisions of Section 238 of the Act, in as much as, going by the facts of the present case, the income relatable to gross contract receipts from NFR was disclosed by the assessee in its books, and filed ITR for the impugned assessment year, which is evident from the ITR and financial statements, where the assessee has credited the gross contract receipts as income and debited the payments made to constituent partners as expenses, and thereby disclosed nil profit from the contract works. Therefore, from the evidence filed by the assessee, there is no dispute that the profit or loss from the contracts, on which TDS has been deducted under Section 194C of the Act and remitted in the name of the assessee, has been considered in the hands of the assessee alone and not in the hands of the constituent partners, as alleged by the Assessing Officer. The Assessing Officer, merely because the assessee has transferred the gross contract receipts on back to back basis to constituent partners, has assumed that the profit from such contracts, is also transferred to the constituent partners. However, the fact remains that the said profit or loss should be understood in the context of the nature of the business carried out by the particular assessee. In the present case, the assessee has followed a method, whereby the gross contract receipts have been considered, as its income and the back-to-back payments made to constituent partners as its expenses and therefore, from the above project, the assessee has reported a nil profit. However, it does not mean that the assessee has not reported any profit or loss from the project. Therefore, we are of the considered view that, going by the provisions of Section 238(1) of the Act, and facts of the present case, the Assessing Officer is completely erred in invoking Section 238(1) of the Act, to deny the credit for TDS to the assessee.
Coming back to Rule 37BA of the IT Rules, 1962. For better understanding of Rule 37BA, it is relevant to reproduce the Rule, which reads as under :
37BA. (1) 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 payment has been made or credit has been given (hereinafter referred to as deductee) on the basis of information relating to deduction of tax furnished by the deductor to the income-tax authority or the person authorised by such authority. (2) (i) Where under any provisions of the Act, the whole or any part of the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for the 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 : Provided that the deductee files a declaration with the deductor and the deductor reports the tax deduction in the name of the other person in the information relating to deduction of tax referred to in sub-rule (1).] (ii) The declaration filed by the deductee under clause (i) shall contain the name, address, permanent account number of the person to whom credit is to be given, payment or credit in relation to which credit is to be given and reasons for giving credit to such person.
(ii) The deductor shall issue the certificate for deduction of tax at source in the name of the person in whose name credit is shown in the information relating to deduction of tax referred to in sub-rule (1) and shall keep the declaration in his safe custody. (3) (i) 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. (ii) Where tax has been deducted at source and paid to the Central Government and the income is assessable over a number of years, credit for tax deducted at source shall be allowed across those years in the same proportion in which the income is assessable to tax. [(3A) Notwithstanding anything contained in sub-rule (1), sub-rule (2) or sub-rule (3), for the purposes of section 194N, credit for tax deducted at source shall be given to the person from whose account tax is deducted and paid to the Central Government account for the assessment year relevant to the previous year in which such tax deduction is made.]
(4) Credit for tax deducted at source and paid to the account of the Central Government shall be granted on the basis of- (i) the information relating to deduction of tax furnished by the deductor to the income-tax authority or the person authorised by such authority and (ii) the information in the return of income in respect of the claim for the credit, subject to verification in accordance with the risk management strategy formulated by the Board from time to time.]
A bare perusal of Rule 37BA, makes it very clear that tax deducted at source and paid to the Central Government account in accordance with the provisions of Chapter XVII shall be given to whom the payment has been made or credit has been given on the basis of information relating to deduction of tax furnished by the deductor to the income tax authorities or the person authorized by such authority. The Assessing Officer was of the opinion that, in the case of the assessee, sub-rule (2) of 37BA is applicable, because where the whole or any part of the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for the 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. The Assessing Officer was further of the opinion that although provisions provided under sub-rule (2) make it possible for the other person to claim TDS, but the assessee has not furnished relevant particulars to the deductor to enable the deductor to furnish the particulars in the name of the other person. Therefore, even though Rule 37BA(1) of the I.T. Rules, 1962, is applicable, due to non-compliance with Rule 37BA(2) and its proviso, the other person also cannot claim credit for TDS. The sole basis for the Assessing Officer to come to the above conclusion is that the income relatable to gross contract receipts from NFR is not offered by the assessee in its income tax return, but the said income has been offered by the constituent partners. In our considered view, the Assessing Officer has grossly erred in coming to the above conclusion for the simple reason that, the Assessing Officer misread the financial statements filed by the assessee along with income tax return and wrongly inferred that the income from contract receipts from NFR was offered by the constituent partners. However, the fact remains that the assessee itself has disclosed the relevant profit or loss from the above contract in its hands and also claimed corresponding TDS deducted, in terms of Section 199(1) of the Act and Rule 37BA(1) of the I.T. Rules, 1962. Further, as per Section 199(1) of the Act, any deduction made, in accordance with the foregoing provisions of this Chapter and paid to the Central Government, shall be treated as payment of tax on behalf of the person in whose name the deduction was made and in the present case, going by the facts available on record, there is no dispute with regard to the fact that NFR has deducted TDS on the payment made to the assessee and also remitted TDS to the Central Government account in the name of the assessee, which is evident from Form 26AS filed by the assessee.
Further, as per Rule 37BA(1) of I.T. Rules, 1962, it is abundantly clear that credit for tax deducted at source and paid to the Central Government account shall be given to the person to whom payment has been made or credit has been given. Since the payment has been made to the assessee and credit has been given to the assessee towards TDS deducted on gross contract receipts, in our considered view, the assessee alone is eligible to claim credit for TDS in accordance with Section 199(1) and Rule 37BA(1) of the I.T. Rules, 1962. Therefore, we are of the considered view that the Assessing Officer and LD.CIT(A) have erred in withdrawing the TDS credit claimed by the assessee in the return of income filed for the impugned assessment year.
In this regard, the assessee has relied upon the decision of Hon'ble Andhra Pradesh High Court in the case of IVRCL-KBL Vs. ACIT (supra), where the Hon'ble jurisdictional High Court on identical set of facts and after considering the relevant provisions of Section 199(1) and (2) and Rule 37BA of I.T. Rules, 1962, held as under :
“Joint venture was constituted only for it to enter into a contract with the Government, and for one of its constituents to execute the work, the fact remains that there is no privity of contract between the Government and the constituent of the JV i.e the sub-contractor. The rights and obligations under the first contract are only that of the Government and the petitioner; and those, in the second contract, are only that of the petitioner and the sub-contractor. The contractual obligation, to execute the work for the Government, is that of the joint venture alone, and not that of the constituent member of the JV i.e the sub-contractor. Any action which the Government of Andhra Pradesh could have taken, for breach of the terms and conditions of the first contract, was only against the petitioner JV and not its constituent. While the sub- contractor, no doubt, executed the work, they did so in terms of the second contract entered into between them and the petitioner-JV. It is evident, therefore, that the contractual receipts under the first contract is only that of the petitioner; and the income, arising out of the said contract, is assessable only in their hands, and not in the hands of the sub-contractor. The sub-contractor is assessable to tax on their income earned out the amounts received by them from the petitioner in terms of the second contract, and not in terms of the first contract between the Government of Andhra Pradesh and the petitioner- JV. As noted hereinabove, not only did the Government of Andhra Pradesh deduct tax at source from the petitioners bills, the petitioner, in turn, while making payment to the sub-contractor, also deducted tax at source from the bills of the latter. Credit for the tax deducted at source, by the petitioner from the bills of the sub-contractor, was given to the sub-contractor as such income was assessable in their hands. Likewise credit for the tax deducted at source, from the bills of the petitioner, was required to be given to the petitioner alone as the income, from the contract entered into between them and the Government of Andhra Pradesh, was assessable only in their hands, and not in the hands of the sub- contractor. It is, however, not in dispute that the sub-contractor has not made any claim for being given credit for the tax deducted at source by the Government from the bills of the petitioner herein. It is not as if there were conflicting claims by the petitioner-JV on the one hand, and its constituent sub-contractor on the other, both seeking credit for the tax deducted at source by the Government, necessitating retention of these amounts by the Revenue till resolution of the conflicting claims. As held by the Division Bench of High Court, in Bhooratnam and Co.24, the Revenue cannot be allowed to retain the amounts representing the tax deducted at source without credit being given to anybody. If credit of tax is not allowed to the petitioner-assessee, and the sub-contractor has not made any claim for refund, it would result in credit of the TDS not being taken by anybody and this, as has been rightly pointed out by the Division Bench in Bhooratnam and Co.22, is not the spirit and the intention of the law. To the limited extent the assessing authority denied credit to the petitioner, for the tax deducted at source from their bills by the Government, the impugned assessment orders/rectification orders are set aside. The assessing authority shall determine the quantum of credit for TDS which the petitioners are entitled to in terms of this order, and refund the amount so computed to the petitioners herein in accordance with law. The entire exercise, culminating in final orders being passed, shall be completed within a period of three months from the date of receipt of a copy of this order.”
In this view of the matter, considering the facts and circumstances of the case and also by following the decision of Hon'ble jurisdictional High Court in the case of IVRCL-KBL (JV) Vs. ACIT (supra), we are of the considered view that the assessee has rightly claimed credit for TDS deducted by NFR and remitted to the Central Government in the name of the assessee and said claim is in accordance with Section 199(1) of the Act and Rule 37BA(1) of I.T. Rules, 1962. The Assessing Officer and LD.CIT(A) without appreciating this fact, simply withdrawn the TDS credit claimed by the assessee. Thus, we set aside the order of the LD.CIT(A) and direct the Assessing Officer to allow the credit for TDS amounting to Rs.5,20,58,733/-.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Open Court on 24th February, 2025.