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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGHAND SHRI MANOJ KUMAR AGGARWAL
आदेश आदेश /O R D E R आदेश आदेश
PER MAHAVIR SINGH, VP:
This appeal by the Assessee is arising out of the order of the Commissioner of Income Tax (Appeals)-11, Chennai in I.T.A.
No.64/18-19, dated 28.03.2019. The assessment was framed by the Assistant Commissioner of Income Tax, Corporate Circle – 3(1), Chennai for the Assessment Year 2016 – 2017, u/s.143(3) of the Income Tax Act, 1961, (hereinafter ‘the Act’) vide order dated 25.12.2018.
The only issue in this appeal of the Assessee is as regards to the order of the CIT(A) confirming the action of the Assessing Officer in allowing the short credit for the Tax Deducted at Source [TDS] amounting to Rs.6,76,061/-. For this, the following three facets were argued:
I. According to the CIT(A), TDS is allowable only to the extent, income is offered as per Section 199 of the Act, read with rule 37BA of the Income Tax Rules, 1962 (hereinafter ‘the Rules’).
II. The CIT(A) restricting the credit of TDS to the extent claimed in the return of income.
III. The Assessee has offered interest income during the year and claimed TDS of Rs.2,90,623/- as against the total TDS deducted on account of the interest amounting to Rs.4,20,856/- as per Form No.26AS.
For this, the Assessee has raised the following grounds:
2. The CIT(A) erred in not directing the Assessing Officer to give full credit of Rs.48,41,750/- as reflecting in Form 26AS but restricting the same to Rs.41,65,734/- resulting in short credit of Rs.6,76,016/-.
3. The CIT(A) erred in holding that TDS is allowable only to the extent income is offered as per section 199 of the Act read with rule 37BA. It is submitted that such interpretation is contrary to the provisions of the law and the intention of the statute.
4. The CIT(A) failed to appreciate that post of amendment in Section 199 of the Act, the requirement of income being assessed in the year of TDS credit is withdrawn.
5. The learned Assessing Officer failed to appreciate that the Rules cannot override the provisions of the Act and TDS credit is to be :: 3 :: 199.
6. The Assessing Officer erred in restricting the credit of TDS to the extent claimed in the return of income of the Appellant. The CIT(A) ought to have directed the Assessing Officer to give full credit, as appearing in Form No.26AS.
The brief facts are that the Assessing Officer while framing the assessment noticed that the turnover reported in Form No.26AS is less than the turnover as per the return of income filed by the Assessee. The Assessee before the Assessing Officer explained that the amounts credited represented the income receipts for multiple years and therefore only the income attributable to this assessment year is offered to tax and in support of the same filed copies of the invoices before the Assessing Officer. However, the Assessing Officer noted that the TDS corresponding to the business receipts amounting to Rs.19,64,09,110/- was claimed in entirety, but according to him this is not acceptable in view of the provisions of Section 199 of the Act read with rule 37BA of the Rules. Therefore, the Assessing Officer restricted the TDS claim pertaining to business receipts of the financial year 2015 – 2016 relevant to the Assessment Year 2016 – 2017 for an amount of Rs.38,75,279/- corresponding to the income offered to tax amounting to Rs.18,22,76,362/-. The Assessee himself claimed TDS to the extent of Rs.42,89,605/- which includes TDS of income from other sources offered to tax. Against the restriction of TDS credited at :: 4 :: Rs.38,75,279/- as against the claim of the Assessee to Rs.42,89,605/-, the Assessee preferred an appeal before the CIT(A).
The CIT(A) restricted the TDS claimed to the extent of Rs.42,89,605/-, as against the revenue declared by the Assessee at Rs.18,22,76,362/-. The Assessee company has a total TDS credit of Rs.48,41,750/- in Form No.26AS. The Assessee has declared an interest income of Rs.42,45,457/- and TDS portion for Rs.4,20,855/- and the balance TDS credit was Rs.44,20,895/- towards the business receipts of Rs.19,87,88,005/- as per Form No.26AS but the CIT(A) had restricted the TDS credit to the extent of Rs.42,89,605/- and for the balance TDS credit the CIT(A) directed the Assessing Officer to allow the TDS credit of Rs.1,31,290/- in the year in which the balance business receipt of Rs.1,65,11,643/- is offered for taxation.
Aggrieved, the Assessee came in appeal before the Tribunal.
We have heard the rival contentions and gone through the facts of the case. We noted that the undisputed fact is that the Assessee’s total business revenue is at Rs.19,87,88,005/- which includes the income of future years to the extent of Rs.1,65,11,643/-. The Assessee has also an interest income of Rs.42,44,457/- and the TDS portion of interest received is at Rs.4,20,855/-. The balance TDS credit on Rs.44,20,895/- is towards the business receipts of Rs.19,87,88,005/- [which includes the business receipts of future years amounting to Rs.1,65,11,643/-]. The Assessing Officer and :: 5 :: CIT(A) allowed the TDS credit for the portion of interest received at Rs.4,20,855/- and the TDS credit to the extent of Rs.42,89,605/- in relation to the business receipts of Rs.18,22,76,362/- declared by the Assessee in the return of income.
Now before us, the learned Counsel for the Assessee explained that for the Financial Year 2015 – 2016 relevant to the Assessment Year 2016 – 2017, the turnover, i.e. business receipts declared is to the tune of Rs.18,22,76,362/- and interest income earned and declared is Rs.42,44,457/-. The business receipts as per Form No.26AS is Rs.20,29,96,863/- comprising of interest income of Rs.42,08,858/- and business receipts of Rs.19,87,88,005/-. The learned Counsel for the Assessee stated that the Assessing Officer has given proportionate credit for TDS for an amount of Rs.41,65,734/- as against the amount claimed in the return of income at Rs.42,89,605/-, thereby denying TDS credit of Rs.1,23,871/-. The learned Counsel for the Assessee explained that the Assessing Officer is of the view that as per Section 199 of the Act, read with rule 37BA of the Rules, TDS can be allowed to the credit of the Assessee, only to the extent of income that is offered to tax. The learned Counsel for the Assessee stated that this approach is erroneous and is not applicable to the Assessee’s case for the reason that the requirement of income being assessed in the year on the TDS claim has been withdrawn by the Finance Act, 2008;
:: 6 :: Section 199 of the Act was substituted by a new Section; wherein from the old Section, a portion deleted was “and credit shall be given to him for the amount so deducted on the production of the certificate furnished under section 203 in the assessment made under this Act for the assessment year for which such income is assessable.”
The learned Counsel for the Assessee also stated that the Sub-section (3) of Section 199 of the Act which is the enabling Section to frame the Rules for the purpose of this Section, does not apply in the present case. It was argued that the Rules that may be prescribed include the rules for the purpose of giving credit to the person, other than this rather to in Sub-section (1) and Sub-Section (2) and also the assessment year for which such credit is given. He explained that a plain reading of the Sub-section makes it clear that the rules regarding the Assessment Year for which such credit is to be given, is restricted to a person other than those referred to in Sub-section (1) and Sub-section (2), meaning that this is not applicable when no person other than the person in whose account the TDS is credited is claiming credit for TDS. The learned Counsel for the Assessee submitted that there are numerous decisions which states that the provisions of the rules cannot overrule the provisions of the Act. He specifically stated that where the provision is omitted in the Act, the requirement of income being offered to assessment, is :: 7 :: TDS, a rule cannot be quoted to deny the Assessee, what the Act has given. The leaned Counsel for the Assessee relied on the decision of the Hyderabad Bench of this Tribunal in the case of Zelan Exports Vs. Deputy Commissioner of Income Tax reported in [2015] 63 Taxmann.com 334 (Hyderabad – Trib.) and the decision of the Hon’ble High Court of Andhra Pradesh in the case of IVRCL-KBL(JV) Vs. The Assistant Commissioner of Income Tax, Hyderabad reported in [2016] 67 Taxmann.com 224 (Andhra Pradesh).
In regard to the claim of lesser amount of TDS in the return of income of the Assessee, the learned Counsel for the Assessee relied upon the decision of the Delhi Bench of this Tribunal in the case of Escorts Limited Vs. Deputy Commissioner of Income Tax, Circle – 11(1), New Delhi reported in [2007] 15 SOT 368 (Delhi) and in the case of the Income Tax Officer Vs. Krishraj Hotels and Motels (P) Limited reported in [2012] 27 Taxmann.com 178 (Delhi – Trib.).
9 (i) In view of the above, the learned Counsel for the Assessee stated that the Assessing Officer cannot deny the credit on TDS for an amount of Rs.48,41,750/- for the amount that appears in the Form No.26AS and therefore the CIT(A) as well as the Assessing Officer erred in restricting the credit on TDS to the claim made in the income tax return.
:: 8 :: (ii) That the credit on TDS cannot be denied to an Assessee merely because the Assessee has claimed a lesser amount of TDS in the return of income, because the amount of TDS remitted to the Government account cannot be denied to the Assessee. Therefore, it was urged to give full credit of TDS of Rs.48,41,750/-.
On the other hand, the learned Senior Departmental Representative relied upon the orders of the Assessing Officer and that of the CIT(A) and also relied on the decision of the Tribunal, Kolkata Bench in the case Garden Reach Shipbuilders and Engineers Limited, Kolkata Vs. The Commissioner of Income Tax, Kolkata in dated 22.03.2017
We noted that, as regards to the provisions of Section 199 of the Act by virtue of which TDS has been claimed by the Assessee, the requirement of income being assessed in the year of TDS claimed has been withdrawn by the Finance Act, 2008; wherein the existing Section 199 of the Act was substituted by a new Section of 199 of the Act. The earlier Sub-section (1) of Section 199, prior to amendment read as under:
“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, or depositor or owner of property or of unit holder or of the shareholder, as the case may be, and credit shall be given to :: 9 :: 203 in the assessment made under this Act for the Assessment Year for which such income is assessable.”
The substituted Sub-section (1) of Section 199 omitted the line regarding giving of credit for the assessment year for which such income is assessable. The present position of the Sub-section (1) is as under:
“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, or of the depositor or of the owner of property or of the unit holder, or of the shareholder, as the case may be.”
Further, we noted that Sub-Section (3) of Section 199 of the Act, which is the enabling Section to frame the Rules for the purpose of this section, does not apply in this case. Sub-section (3), post the amendment reads as under:
“The Board may, for the purposes of giving credit in respect of tax deducted or tax paid in terms of the provisions of this Chapter, make such rules as may be necessary, including the rules for the purposes of giving credit to a person other than those referred to in sub-section (1) and sub- section (2) and also the assessment year for which such credit may be given.
The Rules that may be prescribed include the Rules for the purposes of giving credit to a person other than those referred to in sub- section (1) and sub-section (2) and also the assessment year for which such credit is given. A plain reading of the sub-section makes it clear
:: 10 :: that the rules regarding the assessment year for which such credit is to be given, is restricted to a person other than those referred to in sub- section (1) and sub-section (2), meaning that this is not applicable when no person other than the person in whose account the TDS is credited is claiming credit of TDS. The power of the CBDT to frame Rules under this Section is restricted to make rules for the purpose of giving credit to a person, other than a person from whom amounts, tax is deducted at source.
We further note that the Commentary to the Finance Act, 2008 reads as under:
“Sub-section (3) provides that the Board may, for the purposes of giving credit in respect of tax deducted or tax paid in terms of the provisions of this Chapter, make the following rules:
(a) Rules for the purposes of giving credit to a person other than those referred to in sub-section (1) and sub-section (2), (b) Rules for the assessment year for which such credit may be given, and (c) Such other rules as may be necessary.”
We noted that this position is discussed by the Hon’ble Hyderabad Bench of this Tribunal in the case of Zelan Exports Vs. Deputy Commissioner of Income Tax (supra); wherein it is held as under:
“According to the pre-amended provisions of Section 199, the credit of deduction made in accordance with the relevant provisions of this Chapter and paid to the Central Government, shall be given for the amount so deducted on the production of the Certificate furnished under Section 203 for the assessment made under this Act for the assessment year for which such income is assessable. But in the amended
:: 11 :: provisions, the words in the assessment year for which such income is assessable’ has been omitted. Meaning thereby, that the Legislature was quite conscious about the facts and hardships faced by some Assessees, while making the amendments in Section 199 and in amended provisions nothing has been stated about the year in which the credit of TDS is to be claimed. As per the amended provisions of Section 199, in sub-section (1), it has been stated that any deductions 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. Therefore, a per the amended provisions, once the TDS was deducted, a credit of the same to be given to the Assessees, irrespective of the year to which it relates.”
Further, the Hon’ble High Court of Andhra Pradesh discussing on the provisions of Section 199(3) of the Act has considered this issue in the case of IVRCL-KBL (JV) Vs. The Assistant Commissioner of Income Tax, Circle – 7(1), Hyderabad (supra) and held as under:
“8. While examining the applicability of the Rules, it must be borne in mind that the Rules made by the CBDT, in the exercise of the powers conferred under Section 199(3) of the Act, must be read harmoniously with all the clauses of Section 199 and the other provisions of the Act. It is settled law that Rules, made under the Act, should be interpreted in conformity with the provisions of the Act, (Ispat Industries Limited Vs. Commissioner of Customer [2006] 12 SCC 583), and not the other way around. A rules should be read as supplemental to the provisions of the parent Act. It cannot be interpreted in a manner as to come into conflict with the parent Act, in which case the Act will prevail. (STO, Moradabad Vs. H. Farid Ahmed and Sons [1976] 1 SCC 245). A piece of :: 12 :: Act. (Bombay Dyeing and Mfg. Co. Limited Vs. Bombay Environmental Action Group [2006] 3 SCC 434). Rules made for carrying out the purposes of the Act cannot be so framed as not to carry out the purposes of the Act, and cannot be in conflict therewith. (Laghu Udyog Bharati Vs. Union of India [1999] 105 Taxmann 630 (SC)). An expression used in a rule must, unless there is anything repugnant in the subject or context, have the same meaning as is assigned to it under the Statute. (Onkarlal Nandlal Vs. State of Rajasthan [1985] 4 SCC 404). Rules should be consistent with the provisions of the Act. (State of U.P. Vs. Babu Ram Upadhya AIR 1961 SC 751). A statutory rule cannot enlarge or restrict the meaning of a Section. If a rule goes beyond, or is contrary to, what the Section contemplates, the rule must yield to the Statute. (Central Bank of India Vs. Workmen AIR 1960 SC 12). It is necessary, therefore, to read Rule 37BA(2)(i) of the Rules in conformity with Sections 194C and 199(1) of the Act.”
From the above provisions and case-laws, we are of the view that the provisions of the Rules cannot overrule the provisions of the Act and where the Act is omitted, the requirement of the income being offered to the assessment, as a condition to obtain credit for TDS, a rule cannot be quoted to deny the TDS credit to the Assessee, what the Act has given to him.
Meaning thereby, as per the amended provisions, once the TDS was deducted, a credit of the same has to be given to the Assessee, irrespective of the year to which it relates.
In the present case, the previous year, i.e., Financial Year involved is 2015 – 2016 relates to the Assessment Year 2016 – 2017
:: 13 :: Assessee is Rs.18,22,76,362/- and the interest income earned is Rs.42,44,457/-. As per Form No.26AS, the business receipts is Rs.19,87,88,005/- and the interest income is of Rs.42,08,858/-, thereby the total turnover is Rs.20,29,96,863/- and the TDS as per Form No.26AS is Rs.48,41,750/-. The Assessee claimed TDS of Rs.42,89,605/- and out of which TDS to the interest income is amounting to Rs.4,20,856/- and for business receipts it is Rs.44,20,895/- towards the total business receipts of Rs.19,87,88,005/-. Thereby, the Assessee in the return of income made a short claim of Rs.2,90,623/- from the interest income and the Assessing Officer restricted the TDS claim at Rs.38,75,279/- as against the total TDS of Rs.42,89,605/- from the business receipts.
Thereby, the Assessing Officer denied the full claim on the TDS to the extent of Rs.44,20,895/- on the business receipts and Rs.4,20,856/- against the interest income.
In terms of the provisions of Section 199(1) of the Act, once the TDS was deducted, credit of the same is to be given to the Assessee, irrespective of the year to which it relates. Hence, we direct the Assessing Officer to allow the TDS credit as per the Form No.26AS after verification of the TDS Certificates.
As regards to the CIT(A) restricting the credit of TDS to the extent claimed in the return of income, we noted that the Assessee
:: 14 :: TDS on the interest at Rs.2,90,623/- as against the TDS deducted on account of interest amounting to Rs.4,20,856/- as per Form No.26AS. We direct the Assessing Officer to allow the entire interest, as the Assessee has disclosed the income, i.e. interest income amounting to Rs.42,44,457/-. We direct the Assessing Officer accordingly.
In the result, the appeal of the Assessee in I.T.A No.:1734/CHNY/2019 is partly allowed.
Order pronounced in the court on 6th May, 2022 at Chennai.