LEC-TPL UJV,MUMBAI vs. INCOME TAX OFFICER WARD 41(1)(2), MUMBAI

Facts

The assessee, a joint venture, received an advance from HPCL for a project, on which TDS was deducted. A portion of the TDS credit was claimed in AY 2020-21, and the balance of Rs. 17,50,660/- was carried forward to AY 2021-22. The project was subsequently cancelled, and the advance amount (including the related TDS) was refunded to HPCL. HPCL did not revise its TDS returns, leading the assessee to claim the balance TDS credit, which was denied by the CPC and Addl. CIT(A) citing Rule 37BA.

Held

The tribunal ruled that the assessee is entitled to claim the brought-forward TDS credit, even though the underlying transaction was cancelled and the advance refunded. The AO was directed to allow the credit, after verifying that HPCL had not claimed a refund of the same TDS by revising its returns. The tribunal relied on CBDT circulars and judicial precedents, emphasizing that the deductor's failure to revise TDS returns should not penalize the assessee.

Key Issues

Whether the assessee is entitled to claim TDS credit for an advance received in an earlier year, when the project was subsequently cancelled, the advance (along with TDS) was refunded, and the deductor failed to revise its TDS returns.