AVALON CONTAINERS PVT LTD,CHENNAI vs. DCIT CORPORATE CIRCLE-1(1), CHENNAI

The only issue in this appeal of assessee is as regard to the order of CIT(A) confirming the action of AO in denying tax credit of Rs.7,74,977/- to the assessee for the relevant assessment year 2016-17. For this, assessee has raised various grounds which are argumentative and need not be reproduced.

We have heard rival contentions and gone through facts and circumstances of the case. We noted that the assessee company is engaged in the business of logistic services and according to the nature of business, the company has raised invoices after including freight, delivery charges, container detention charges, customs duty, handling charges, etc. These charges are by way of reimbursement and charges so collected are paid to the concerned parties. The AO during the course of assessment proceedings found from Form No.26AS that the total credit amounted to Rs.2,67,10,519/- but the assessee has offered only a sum of Rs.75,91,332/- as receipts. According to Assessing Officer, the tax credit to the expenditure of 1% of service charges of Rs.75,91,332/- will come to Rs.75,913/- as TDS u/s.194C of the Act. Therefore, the AO restricted the TDS credit to the extent of Rs.75,913/- as against the total TDS of Rs.8,50,890/- and thereby denied tax credit of Rs.7,74,977/-. The assessee contended before AO that the persons deducted TDS u/s.194C at 2% as applicable to non-individuals on the total credit of Rs.2,67,10,519/-. It was contended by the assessee before AO that the charges so collected but are paid to the concerned parties and assessee had only received the amount by way of reimbursement of charges which do not form part of its income. It was claimed that the assessee receives its service charges for the services rendered are amounting to Rs.75,91,335/- and which was disclosed in the return of income. It was explained before AO that the clients while remitting the amounts used to deduct TDS on all payments made including payments made as reimbursement of expenses incurred by assessee on behalf of them including service charges. It was claimed that other charges received by assessee are only reimbursement and not its income. It was contended that the AO should have allowed the credit of TDS of Rs.8,50,890/- and for this, he relied on the decision of Co-ordinate Bench of this Tribunal in the case of Supreme Renewable Energy Ltd. vs., ITO in dated 14.08.2008, wherein this issue has been considered in para 9 as under:-

9. From the above it is clear that when a particular income is received by the assessee after deduction of tax at source and the said TDS has been duly deposited with the Government and the assessee has received the requisite certificate to this effect, then on production of the said certificate the assessee becomes entitled for the credit of TDS even if the assessee has not directly offered the said income for tax as the assessee considered the same was not liable to tax.

We noted that the CIT(A) just simply confirmed the action of AO. We noted from the details regarding collections amounting to Rs.6,08,64,678/- and payments are to the tune of Rs.5,29,49,345/- and thereby remaining is only Rs.79,15,332/- has shown as revenue from operations. The tax was deducted on this amount at Rs.8,50,890/-. We noted that the AO as well as the CIT(A) has erred in not giving credit for TDS which was available to the assessee. It is an admitted fact that the reimbursement received by assessee is not taxable in its hand although tax was deducted in its hand. This is evident from the fact that the assessee has disclosed the entire receipts in its details of collections and payments but Form 26AS reflects the service charges received for services rendered which amounted to Rs.2,67,10,519/-. From the above details, it is clear that the above receipts are received by assessee after deduction of TDS and said TDS has been deposited with the Income Tax Department and for this certificates have been received. Hence, we direct the AO to allow the credit for entire TDS of Rs.8,50,890/- and we direct accordingly.

In the result, the appeal of the assessee is allowed.