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Income Tax Appellate Tribunal, DELHI BENCH: ‘A’ NEW DELHI
Before: SHRI N. K. SAINI & MS SUCHITRA KAMBLE
PER SUCHITRA KAMBLE, JM
The appeal has been filed by the assessee against the order dated 22/4/2016 passed by CIT(A)-20, New Delhi for the Assessment Year 2012-13.
The grounds of appeal
are as under:-
1. That the Ld.CIT(A) 2, New Delhi has grossly erred both in law and on facts in not directing the grant of credit of TDS of Rs.7,16,040/- in clear disregard of the order of Hon’ble Income Tax Appellate Tribunal in the case of the appellant for Assessment Year 2011-12, despite specific ground and submission made by the appellant. 1.1. That the findings of the Ld.CIT(A), that “ the A.O is further directed to give credit of TDS strictly as per the provisions of Section 199 to be read with Rule 37BA of the I.T. Rules 1962” is vague finding and is based in disregard of the fact that the Ld. Assessing Officer , though by applying Rule 37BA of the Income Tax Rules’ 1962 (“Rule”) read with Section 199 of the Act give credit when he restricted the credit of TDS to Rs.79,560/- as against credit to be allowed of RS.7,95,600/- and thus he ought to have followed the order of Hon’ble Tribunal in the case of the appellant for Assessment Year 2011-12 and held specifically held that action of Ld. Assessing Officer was highly arbitrary, unjustified and not in accordance with law and directed thus for credit of TDS of Rs.7,95,600/- as claimed.
2. That the Ld.CIT(A) has also grossly erred both in law and on facts in not holding that the ld. Assessing Officer had erred in restricting credit of TDS of Rs.43,31,947/- in TNS 150 despite the fact the assessee had furnished TDs certificates of Rs.97,36,440/- and the said sum was also reflected in Form 26As (except to the extent of Rs.15,000/- which is not disputed and was thus entitled to credit of TDS of Rs.97,36,440/- u/s 199 of the Act.
3. That the Ld.CIT(A) has grossly erred both in law and on facts in not directing the deletion of interest of rs.18,21,816/- u/s 234B of the Act and of Rs.2,32,844/- u/s 234C of the Act. It is, therefore, prayed that the demand raised be directed to be cancelled and the Ld. Assessing Officer be directed to give further credit of rs.7,16,040/- and no interest be directed to be charged from the assessee u/s 234B and 234C of the Act. It is further prayed that since the Assessing Officer has not yet given credit of Rs.4,40,249/- which represented the tax deducted at source of which credit had not been given for the Assessment Year 2011-12 he be directed give credit on the basis of his own findings for that Assessment Year and the appellant be allowed interest u/s 244(1A) of the Income Tax Act, 1961.”
3. The assessee is a Senior Advocate by profession and derived income from Business or Professional income from House Property, Income from Capital Gain and Income from other sources. Return of income declaring at Rs.9,88,74,420/- was filed on 27/9/2012. The case was selected for scrutiny. Notice u/s 143(2) of the I.T Act, 1961 was issued served upon the assessee within stipulated statutory period. Notice u/s 142(1) was also issued from time to time. In response to the notice, Sh. Puneet Singla, CA of the assessee attended from time to time and filed the necessary details information documents etc as required. Books of accounts and vouchers were produced during the course of assessment proceedings which were examined on test check basis. During the course of assessment proceedings, assessee was asked to submit the TDS reconciliation of 26AS viz-a-viz the professional income shown and TDS claimed in return. The assessee vide note sheet dated 9/2/2015 was asked to furnish details of TDS which has been claimed this year but income for the same has not been taken in gross receipts. From the perusal of the reply of the assessee and TDS reconciliation submitted, it was observed that the assessee had shown professional receipts of Rs.7,95,600/- and against the TDS claim of the same amount. During the course of assessment proceedings, the assessee was asked to explain why claim of TDS to the extent of income is not shown for Assessment Year 2012-13. The same was disallowed as per Rule 37BA read along with Section 199 of the I.T. Act, 1961 by the Assessing Officer. The Assessing Officer observed that from the perusal of Rule 37BA of the I.T Rules, 1962, it is clear that TDS credit shall be given for the assessment year for which such income is assessable. Meaning thereby TDS credit shall be allowed only when its corresponding income has been taken for taxation. Thus, the Assessing Officer held that the assessee is offering only such part of the professional income which is equivalent o the TDS claimed, the practice is totally in contravention of Rule 37BA and provisions of Income Tax Act and since, the assessee had shown professional income of Rs.7,95,600/- he was eligible for TDS credit of rs.79,560/- (7,95,600/- X10%) only. Thus, balance TDS credit claim of rs.716040/- (7,95,600-79,560/-) was disallowed in Assessment Year 2012-13. The Assessing Officer further held that the balance will be allowable in the year in which the corresponding professional income would be assessable. After scrutinizing the relevant documents on test check basis and discussing the case with AR of the assessee, income of the assessee was assessed at Rs.9,88,74,420/- u/s 143 (3) of the IT Act, 1961 by the Assessing Officer and Interest was charged u/s 234B and 234C accordingly.
Being aggrieved by the order of the Assessing Officer. The assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. The CIT(A) held that the assessee is following cash system of account. Therefore, only the income received shall be taken into account while declaring total receipts. The CIT(A) further held that the credit of TDS shall be given as per Section 199 of the Act & Rule 37BA of Income Tax Rules 1962 and further held that all sums deducted as TDS for the purpose of computing the income of the assessee. We deem to be income received as per the provisions of Section 198 of the Act. The CIT(A) did not find any infirmity in declaration of Rs.7,95,600/- which the amount of TDS which is in the line with the provisions of Section 198 of the Act as the assessee is following cash system of account. The A.O thus, directed the Assessing Officer to give credit of TDS strictly as per the provisions of Section 199 to be read with Rule 37BA of the Income Tax Rules 1962.
The Ld. AR submitted that in assessee’s own case for the Assessment Year 2011-12, the Tribunal has allowed the appeal of the assessee on the similar issue (ITA No. 6185/Del/2013 dated 11/1/2016 for Assessment Year 2011-12.)
The Ld. DR could not controvert the same.
We have heard both the parties and perused the ITAT order in assessee’s own case for Assessment Year 2011-2. The Tribunal held as under:-
“10. A reading of the aforesaid will make it apparent that Rule 37BA(1) of the Act provides rules relating to have credit for the purpose of section 199 of the Act as is provided in section 199(3) of the Act. Rule 37BA(3)(i) of the Act provides that credit for tax deducted at source and credited to the account of Central Government shall be given for the assessment year for ITA No.6185/Del./2013 which, such income is assessable. Thus, if the said rule is read, it is clear that the assessee is entitled to get credit of the tax deducted at source once such income is included in his income. The admitted facts of the case of the appellant is that the tax deducted at source has been offered as income by the appellant in his return of income and therefore, having regard to even the rules, the assessee is entitled to credit of the tax deducted at source. The assessee before the CIT(A) had provided an illustration whereby it was submitted that assuming an assessee follows cash system of accounting and raises an invoice of Rs. 100/- for the services rendered in financial year 2010-11 on his client and the said client deposits TDS of Rs. 10/- to the credit of the account of the assessee and issued a certificate of TDS to the assessee and thus, it was submitted that an amount of Rs. 10/- was since deducted in respect of the assessee, the said sum is income of the assessee which is assessable to tax. It was submitted that once an income is assessable to tax, the assessee is eligible for credit despite the fact that remaining amount would be taxable in the succeeding years. We are in an agreement with the above submission that the TDS deducted by the deductor on behalf of the assessee and offered as income is to be allowed as credit in the year of deduction of tax deducted at source. Rule 37BA of the Act provides that credit for TDS should be allowed in the year in which income ITA No.6185/Del./2013 is assessable. Further clause (ii) of Rule 37BA(3) of the Act provides that where tax has been deducted at source 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. In our considered opinion, this rule is only applicable where entire compensation is received in advance but the same is not assessable to tax in that year but is assessable in a number of years. However, such rule has no applicability, where assessee follows cash system of accounting. This can be supported from the illustration that suppose as assessee who is following cash system of accounting raises an invoice of Rs. 100/- in respect of which deductor deducts TDS of Rs. 10/- and deposits to the account of the Central Government. Accordingly, the assessee would offer an income of Rs. 10/- and claim TDS of Rs. 10/-. However in the opinion of the revenue, the assessee would not be entitled to credit of the entire TDS of Rs. 10/- but would be entitled to proportionate credit only. Now let us assume that Rs. 90/- is never paid to the assessee by the deductor. In such circumstances, Rs. 9/- which was deducted as TDS by the deductor would never be available for credit to the assessee though the said sums stand duly deposited to the account of the Central Government. Rule. 37BA(3) of the Act cannot be interpreted so as to say that TDS deducted at ITA No.6185/Del./2013 source and deposited to the account of the Central Government is though income of the assessee but is not eligible for credit of tax in the year when such TDS was offered as income. This view is otherwise also not in accordance with the provisions contained in section 198 and 199 of the Act. The proposition as laid out by the CIT(A) and learned DR before us therefore cannot be countenanced. In arriving at the above conclusion, we also derive support from the decision of Visakhapatnam Bench in the case of Peddu Srinivasa Rao (supra) has held as under:
"8. We have carefully perused the provisions of section 199 of the Act and 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 u/s 203 for the assessment made under this Act for the assessment year for which such income is assessable. But in the amended provisions the words "for 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 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, as 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. The pre- amended and the amended provisions of section 199 are extracted hereunder: "Section 199: Credit for tax deducted - (1) 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 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: (3) ITA No.6185/Del./2013 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. Section 199. (1) 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. (2) Any sum referred to in sub-section (1A) of section 192 and paid to the Central Government shall be treated as the tax paid on behalf of the person in respect of whose income such payment of tax has been made."
In-fact the above view has also been followed by Ahmedabad Bench in the case of Sadhbav Engineering Ltd. (supra) wherein it was held as under:
"26. We find that the Visakhapatnam Bench in the case of Peddu Srinivasa Rao (supra) has held as under:
The ld. DR could not cite any contrary decision or any other good reason for which the aforesaid decision of the Co-ordinate Bench of the Tribunal should not be followed by us. Respectfully following the aforesaid order of the Tribunal, we set aside the orders of the lower authorities and direct the AO to allow credit for the TDS to the assessee. Thus, the ground of appeal of the assessee is allowed."
12. For the reasons stated above, the claim of the assessee is allowed in as much as it is held that the assessee would be entitled to credit of the entire TDS offered as income by the assessee in his return of income. The grounds raised are therefore, allowed.
Ground Nos.2, 3 and 5 of the Grounds of Appeal essentially are regarding restriction of credit of TDS. The learned counsel for the assessee submitted that the authorities below has restricted credit of TDS despite the ITA No.6185/Del./2013 fact that TDS certificates were furnished by the assessee and such credit was also reflected in 26AS statement prepared by the revenue except to the sum of Rs.4,10,870/- for which, confirmations have been furnished by the assessee. Having regard to the above submission, we feel it appropriate that the issue be restored to the file of the Assessing Officer with a direction that the credit be allowed to the assessee of the entire TDS in respect of which, TDS certificate has been furnished by the assessee in accordance with section 198 read with section 199 of the Act. Thus the grounds are therefore, allowed for statistical purposes.”
The issue is squarely covered as the tax credit was allowed to the assessee of Rs. 94,60,649/- instead of Rs.97,36,440/-. In other words, the issue remains relating to non grant of credit of Rs.2,75,791/- i.e. the difference of Rs.97,36,440/- less Rs.94,60,649/-. As regarding Ground No. 3 levy of interest of Rs.18,21,816/- u/s 234B & Rs.2,32,844/-/- u/s 234 C of the Act. The same is not leviable as the main issue is allowed.
In result, the appeal of the assessee is allowed.
Order pronounced in the Open Court on 07th November, 2017.