POREL DASS WATER & EFFLUENT PVT. LTD.,HOWRAH vs. THE INCOME TAX OFFICER, WARD-1(4), KOLKATA, KOLKATA

The assessee in the present case is a Company, which is engaged in the business of carrying out contractual works. As per the agreement dated 10.07.2009, it had taken over the entire business of M/s. A.K. Dass & Co., a proprietary concern of Shri Soumendu Porel. The said proprietary concern was awarded contract by Executive Engineer, Burdwan Division, Government of West Bengal and although the work under the said contract was taken over by the assessee-company from 15.07.2009 itself as per the agreement dated 10.07.2009, the Principal agreed to assign the contract to the assessee-company only w.e.f. ./2016 Assessment year: 2010-2011 Page 2 of 5 28.04.2010. Meanwhile the contract work was executed by the assessee- company and the receipts from the same were duly taken into account by it while filing the return for the year under consideration. The certificate for tax deducted at source from the said receipts, however, was issued by the Executive Engineer, Burdwan Division, Government of West Bengal in the individual name of Shri Soumendu Porel, Proprietor of M/s. A.K. Dass & Co. The Assessing Officer, therefore, refused to give credit for the said TDS to the assessee-company on the ground that the relevant TDS certificate was issued in the name of proprietary concern and not in the name of assessee-company while completing the assessment of the assessee-company under section 143(3) vide an order dated 19.01.2013.

Against the order passed by the Assessing Officer under section 143(3), an appeal was preferred by the assessee before the ld. CIT(Appeals), who upheld the action of the Assessing Officer in disallowing the claim of the assessee for credit of TDS amounting to Rs.6,48,946/- for the following reasons given in paragraph no. 3 of his impugned order:- “3. In this case only one issue is involved. Sri Soumendu Porel [proprietor of M/ s. A.K. Dass & Co. ] was awarded contract by Executive Engineer, Burdwan Division, Govt. of West Bengal. Subsequently this work was claimed to have been taken over by the assessee company with effect from 15.07.2009. Assessee company wrote to the Executive Engineer, Burdwan Division for raising bills in the name of the assessee company. However, this letter was referred for legal opinion. Finally, with effect from 28.04.2010, Municipal Affairs Department agreed to assessee's request by execution of Assignment and Novotion Agreement. Assessee has claimed that bills of Rs.1,85,34,000/ - and Rs.99,55,000/- were raised in the name of the proprietary concern, M/s. A.K. Dass & Co., even after 15.07.2009 and TDS certificate of Rs.4,19,981/- and Rs.2,28,695/- respectively, were issued in the name of the proprietary concern. Appellant has submitted that the receipts have been offered for tax in company's name. Hence credit for TDS of Rs.6,48,946/ - should be allowed to the assessee. I have carefully considered the facts of the case and the submissions of the assessee. It is seen that work was awarded to individual in the name of his proprietary concern. With effect from 15.07.2009, this work was claimed to have been executed by ./2016 Assessment year: 2010-2011 Page 3 of 5 the assessee company. However, before doing that assessee should have taken prior permission of the Municipal Authorities. Assessee's request have been accepted in the next Financial year, with effect from 28.04.2010. Hence Municipal Authorities have not taken any cognigence of work being executed by the assessee company during the current year. As the TDS certificates are not in the name of the assessee company, its credit cannot be given in the assessment of the company, unless the assessee gets the necessary rectification done by the Municipal Authority in their TDS return. Under the circumstances request of assessee cannot be accepted”.

The ld. counsel for the assessee contended that when the corresponding contract receipts were duly taken into account by the assessee-company while filing its return of income for the year under consideration, the credit for tax deducted at source from the said receipts should be given to the assessee-company, even though the relevant TDS certificate was in the name of the proprietary concern. In support of this contention, he relied on the decision of the Hon’ble Andhra Pradesh High Court in the case of CIT –vs.- Bhooratnam & Co. [357 ITR 396 (A.P.)], wherein the decision of the Tribunal giving credit to the assessee of the TDS mentioned in the TDS certificate issued by the deductor was upheld by the Hon’ble Andhra Pradesh High Court despite the fact that the said TDS certificate was issued in the name of joint venture and not in the name of the assessee-company. It was held by the Hon’ble Andhra Pradesh High Court that the credit for TDS certificate could not be denied to the assessee while assessing contract receipts mentioned in the said TDS certificate as income of the assesese. It was further held that when no return of income for the relevant year was filed by the joint venture and no credit for the TDS as mentioned in the relevant certificate was allowed to the joint venture, it was the assesese, which would be allowed credit for such TDS when the corresponding contract receipts as mentioned in the TDS certificate were assessed as income of the assessee. ./2016 Assessment year: 2010-2011 Page 4 of 5 5. The ld. D.R., on the other hand, invited my attention to the relevant Rule 37BA(2) and contended that the credit for TDS can be allowed in the hands of a person other than the deductee if the whole or part of the income on which tax has been deducted at source is assessable in the hands of such person subject to the condition that the deductee files a declaration to the deductor and the deductor reports that deduction in the name of the other persons in the information relating to deduction of tax as referred to in sub-Rule (1) of Rule 37BA. He contended that the credit for TDS generally is automatically allowed to the deductee in whose name the TDS certificate is issued on the basis of the information furnished by the deductor and the condition stipulated in Rule 37BA(2) for claiming TDS other than the deductee is to ensure that no double credit is claimed or allowed for TDS. He contended that since the said condition is not satisfied in the present case, the assesese is not entitled to claim credit for the TDS as rightly held by the authorities below.

I have heard the rival submissions and also perused the relevant material available on record. It is no doubt true that the condition stipulated in Rule, i.e. 37BA(2) for claiming credit for TDS in the hands of the person other than the deductee is to avoid allowing double credit for TDS amount as rightly contended by the ld. D.R. However, as submitted by the ld. counsel for the assessee in this regard, the concerned proprietor Shri Soumendu Porel has not claimed credit for TDS amount in question nor the same has been allowed to him even by the Department. He has submitted that this mater can be verified by the Assessing Officer to ensure that there is no double crtedit allowed for the TDS amount in question and if it is found on such verification that no credit is allowed for the TDS in the hands of the proprietor/individual, the claim of the assessee for credit of such TDS may be allowed. I find merit in this contention of the ld. counsel for the assessee and since the ld. D.R. has also not raised any objection in this regard, I set aside the impugned order of the ld. CIT(Appeals) and restore the matter to the file of the ./2016 Assessment year: 2010-2011 Page 5 of 5 Assessing Officer for deciding the same afresh after necessary verification.

In the result, the appeal of the assessee is treated as allowed for statistical purposes. Order pronounced in the open Court on March 31, 2017.