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Income Tax Appellate Tribunal, “G” Bench, Mumbai
Before: Shri S. Rifaur Rahman, Accountan Member & Shri Ravish Sood
O R D E R
PER RAVISH SOOD, JM
The present appeal filed by the assessee is directed against the order passed by the CIT(A)-10, Mumbai, dated 28.06.2018, which in turn arises from the intimation issued by the Assessing Officer (in short, the „A.O‟) under Sec. 143(1) of the Income Tax Act, 1961 (for short, „Act‟), dated 31/01/2017. The assessee has assailed the impugned intimation on the following effective grounds of appeal before us :-
“1. The Commissioner of Income-tax (Appeals) erred in holding that the Appellant was not entitled to TDS credit of Rs. 45,41,995/- in AY 2015-16. 2. The Commissioner of Income-tax (Appeals) erred in ignoring the provisions of Rule 37BA(3) which provide that credit for TDS should be given for the assessment year for which the income is assessable.
P a g e | 2 A.Y 2015-16 M/s. Greatship (India) Ltd. vs. DCIT
Briefly stated, the assessee company had e-filed its return of income for A.Y 2015-16 on 29/11/2015, declaring its total income at Rs.56,94,20,730/-. On the basis of its return of income the assessee had claimed a refund of Rs.13,88,56,070/-. The return of income filed by the assessee was processed and an intimation u/s. 143(1), dated 31-01-2017 was issued to the assessee. On a perusal of the aforesaid intimation, it was gathered by the assessee that as against the TDS credit of Rs. 22,74,02,171/- claimed in the return of income, the A.O had allowed a credit of Rs.22,28,60,176/- only. In sum and substance, the A.O while processing the return of income of the assessee had allowed a short credit for TDS of Rs.45,41,995/-. Resultantly, as against the refund of Rs.13,88,56,070/- claimed by the assessse in its return of income (excluding interest u/s. 244A), the A.O had issued a refund of Rs.13,43,14,070/- (principal amount) only.
Aggrieved, the assessee carried the matter in appeal before the ld. CIT(A). It was submitted by the assessee that the tax credit of Rs. 45,41,995/- (principal amount) was not granted by the A.O in the intimation that was issued by him u/s. 143(1), for the reason, that the amount of TDS to the said extent was not reflected in the “Form 26AS” of the assessee. It was submitted by the assessee that TDS of Rs.45,41,995/- pertained to the invoices which the assessee had raised at the fag end of the year under consideration on its client viz. M/s. BG Exploration & Production India Ltd. It was the claim of the assessee that the difference in the amount of TDS credit as per “Form 26AS”, as against that claimed by the assessee company in its return of income was for the reason, that though the assessee at the fag end of the year under consideration viz. F.Y. 2014-15 had raised invoices on its client viz. M/s. BG Exploration & Production India Ltd., however, the latter had deducted the tax at source while making the payment to the assessee in the subsequent financial year i.e F.Y. 2015-16. It was submitted by the ld. A.R that because the amount of TDS credit of Rs. 45,41,995/- formed part of the TDS return of M/s. BG Exploration & Production India Ltd. for the subsequent year, therefore, the same stood reflected in the „Form 26AS‟ of the assessee for the said year i.e A.Y. 2016-17. However, the aforesaid explanation of the assessee did not find favour with the CIT(A). It was observed by the CIT(A) that as per the post amended provisions of section 199 r.w.r 37BA, the credit for the amount of tax deducted at source (TDS) and paid to the Central Government was P a g e | 3 A.Y 2015-16 M/s. Greatship (India) Ltd. vs. DCIT to be given to the assessee in the year of deduction. Accordingly, finding no infirmity in the declining of the TDS credit by the A.O, the CIT(A) dismissed the aforesaid claim of the assessee.
Being aggrieved with the impugned order of the CIT(A), the assessee has carried the matter in appeal before us. As is discernible from the records, the A.O had given a short credit of TDS of Rs.45,41,995/- while processing the return of income of the assessee under Sec. 143(1) of the Act. As claimed, the short/deficit TDS credit had emerged in respect of the following invoices which were raised by the assessee on its client, viz. M/s. BG Exploration & Production India Ltd. at the fag end of the year under consideration viz. F.Y. 2014-15 :-
Name of the Party Particulars of invoice Invoice Amount TDS Amount (Rs,) (Rs.) BG Exploration & Meal & Accommodation For Feb-15 14,79,850 29,597 Production India Ltd Charter Hire for Mar-15 22,23,30,150 44,46,603 Meal & Accommodation For Mar-15 12,96,000 25,920 Reimbursement of expenses for BG 16,83,4000 33,668 Induction programme Rignet Mobilization Commission for 3,10,350 6,207 December 2014 Total 22,70,99,750 45,41,995
5. It is the claim of the assessee that as it follows the „mercantile system‟ of accounting, therefore, it had accounted for the aforesaid invoices as part of its sales/receipts, as soon as those were raised on the client. On the basis of its aforesaid claim, it was submitted by the ld. A.R that the assessee was duly entitled for the TDS credit of Rs. 45,41,995/- as per the specific provisions of section 199 of the Act. On the contrary, the lower authorities had declined the aforesaid claim of credit to the assessee, for the reason, that as per the post amended provisions of section 199 the credit for tax deducted at source (TDS) and paid to the Central Government was to be given to the assessee in the year of deduction of tax at source.
6. We have given a thoughtful consideration to the issue before us and are unable to persuade ourselves to subscribe to the view taken by the lower authorities. On a perusal of section 199(3) of the Act, we find, that the same reads as under:-
“(3) 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 P a g e | 4 A.Y 2015-16 M/s. Greatship (India) Ltd. vs. DCIT 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 credit may be given. (Emphasis supplied by us).” In our considered view, the aforesaid statutory provision contemplates that the Board may, for the purpose of giving credit in respect of tax deducted or tax paid in terms of the provisions of Chapter VII of the Act, 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. On a perusal of the relevant Rule 37BA, we find, that the same reads as under :
"Credit for tax deducted at source for the purposes of section 199. (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. (iii) 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. (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 authorized by such authority: and P a g e | 5 A.Y 2015-16 M/s. Greatship (India) Ltd. vs. DCIT (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.” Rule 37BA(3)(i) clearly provides that 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. In other words, it is specifically provided that the credit for the tax deducted at source cannot be divorced and/or separated from the year in which the corresponding income is assessable. In fact, we find that Rule 37BA(3)(ii) goes to the extent of providing that 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. Accordingly, the legislative intent of emphasizing an inextricable nexus between the credit for tax deducted at source (TDS) and the correlating assessable income, can safely be gathered beyond any doubt. In fact, we hold a strong conviction, that the credit for tax deducted at source (TDS) and the corresponding assessable income is so much inextricably interlinked or rather interwoven, that in case they are divorced and considered on a standalone basis in separate years, then the same would result to a distorted tax/interest liability of the assessee under the Act. As such, we are unable to comprehend as to on what basis the aforesaid claim of the assessee for credit of TDS of Rs.45,41,995/-, which as claimed by the assessee pertains to its duly accounted for sales/receipts for the year under consideration i.e. A.Y 2015-16, had been declined by the lower authorities. Our aforesaid view that as per section 199(1) r.w.r 37BA, the credit for the tax deducted at source has to be allowed to the assessee in the year in which the correlating income is assessable is fortified by the order of a co-ordinate Bench of the Tribunal viz. ITAT, Pune, „B‟ Bench in the case of Mahesh Software Systems P.Ltd Vs. ACIT, Cir-11(2), dt. 20-09-2019 for A.Y 2011-12. In the said case, it was observed by the Tribunal, as under: “4. We have heard both the sides and gone through the relevant material on record. A copy of the Sale register of the assessee has been placed at pages 46 and 47 of the paper book depicting total sales for the year under consideration at Rs.3,69,53,687.33. This amount of turnover of Rs.3.69 crore includes the invoice dated 28-03-2011 amounting to Rs.80,10,000/- raised on Ashoka Leyland. It is in respect of this amount of invoice Rs.80,10,000 plus other taxes etc. totalling to Rs.84,10,000/-, that Ashoka Leyland deducted tax at source amounting to Rs.8,41,050/-. Thus, it is established that the assessee recorded invoice of Rs.84.10 lakh in its accounts for the year under consideration. It is also equally true that Ashoka Leyland deducted tax at source on such amount to the tune of Rs.8,41,050/- but deposited it with the exchequer in the month of April, 2011. The dispute has arisen because of this only. Whereas P a g e | 6 A.Y 2015-16 M/s. Greatship (India) Ltd. vs. DCIT the claim of the assessee is that the benefit of TDS should be allowed in the year in which the assessee has recorded the corresponding income and the Revenue is contending that such benefit can be given only in the year of deposit of TDS.
Section 199(3) of the Act, which is relevant for our purpose, 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 relevant rule is 37BA which is reproduced as under: “Credit for tax deducted at source for the purposes of section 199. (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 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.
(iii) 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.
(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 authorized 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.
7. The AO has relied on sub-rule (1) of section 37BA for denying the benefit of TDS during the year under consideration. This part of the Rule provides that the credit for TDS shall be given to the person to whom payment has been made or credit has been given on the basis of information relating to TDS furnished by the deductor. What is material for sub-rule (1) is the beneficiary of credit for the TDS, being the person to whom payment has been made, which in the instant case is the assessee. The ld. CIT(A) has, in addition, relied on sub-rule (4) of Rule 37BA, which again provides that the credit for TDS shall be granted on the basis of information relating to deduction of tax at source furnished by the deductor. How, this rule prejudices the claim of the assessee is anybody‟s guess. Obviously, the information about the TDS by Ashok Leyland is not denied. Both the sub-rules simply provide for granting of the P a g e | 7 A.Y 2015-16 M/s. Greatship (India) Ltd. vs. DCIT benefit of TDS. The point of time at which the benefit of TDS is to be given, is governed by sub-rule (3) of Rule 37BA, which unequivocally provides through clause (i) 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‟. It is, ergo, abundantly clear from the mandate of Rule 37BA(3)(i) that the benefit of TDS is to be given for the assessment year for which the corresponding income is assessable. Since the income of Rs.84.10 lakh, on which tax of Rs.8,41,050/- was deducted at source, is patently assessable in the year under consideration, we hold that the benefit of the TDS should also be allowed in the same year, namely, the year under consideration. We, therefore, overturn the impugned order and direct accordingly.”
On the basis of our aforesaid deliberations, we are unable to subscribe to the view taken by the lower authorities that despite the fact that the sales/receipts were accounted for by the assessee during the year under consideration viz. A.Y 2015-16, the corresponding credit of TDS of Rs.45,41,995/- was not be allowed to it in the said year. In fact, we are unable to persuade ourselves to subscribe to the view taken by the lower authorities, that the credit for the tax deducted at source (TDS) was to be allowed to the assessee in the immediately succeeding year i.e A.Y 2016-17, despite the absence of the assessable income in the said year. Accordingly, we restore the matter to the file of the A.O, with a direction to allow the short/deficit credit of TDS of Rs.45,41,995/- to the assessee in the year under consideration i.e A.Y 2015-16. Before parting, we may herein observe, that the A.O before allowing the credit of the TDS of Rs. 45,41,995/- shall verify the veracity of the claim of the assessee that the sales/receipts corresponding to the TDS credit of Rs.45,41,995/- were accounted for by it during the year under consideration viz. A.Y. 2015-16. Also, as a word of caution, the A.O shall take necessary steps in order to ensure that no TDS credit of the aforesaid amount of Rs. 45,41,995/- is/was availed by the assessee in the immediately succeeding year i.e A.Y 2016-17 in which the same is reflected in its “Form 26AS”.
Resultantly, the appeal filed by the assessee is allowed in terms of our aforesaid observations.