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Income Tax Appellate Tribunal, “ SMC ” BENCH, AHMEDABAD
Before: SMT.ANNAPURNA GUPTA & SHRI T.R. SENTHIL KUMAR
PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER The above appeal has been filed by the assessee against the order passed by the Ld.Commissioner of Income-Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “Ld.CIT(A)] dated 09.08.2024 under section 250 of the Income Tax Act, 1961 ("the Act" for short) pertaining to Assessment Year (AY) 2023-2024.
The short issue arising in the present appeal for our adjudication relates to denial of credit of tax deducted at source(TDS)
The facts of the case reveal that in the intimation made to the assessee the total TDS credit claimed by the assessee was to the tune of Rs.5,24,600/-, which was restricted to Rs.4,07,968/- by the CPC, in proportion of the income returned to tax to that on which TDS was deducted. It was noted that while TDS of Rs. 5,24,600/-had been deducted on an income of Rs.5,24,60,000/-, the assessee had returned income only to the tune of Rs.4,07,96,898/- in the return of income. That, accordingly, in terms of the provisions of Section 199 of the Income Tax Act, 1961 ('the Act') read with Rule 37BA of the Income Tax Rules, 1962 ('the Rules'), the TDS credit was restricted to the tune of TDS pertaining to the income returned to tax in the impugned year and the balance credit was accordingly disallowed. Thus, while the assessee has claimed a TDS credit of Rs.5,24,600/- , it was restricted to Rs.4,07,968/- as per Rule 37BA of the IT Rules,1962, which action was upheld by the Ld.CIT(A).
Aggrieved by the order of the Ld.CIT(A), the assessee has come in appeal before us by raising following grounds of appeal:
The Ld. Addl. CIT (A) erred on facts and in law in confirming action of Ld. CPC by restricting TDS credit of Rs.5,24,600/- to Rs.4,07,968/- without justifiable reasons.
The Ld. Addl. CIT (A erred on facts and in law in confirming action of Ld. CPC holding that TDS credit needed to be restricted in view of provisions of Rule 37BA and section 199 of Income-tax Act, 1961 without appreciating that entire income corresponding to the TDS has already been taxed and which is not in dispute.
Space Developers vs. ITO AY : 2023-24 3 3. In alternate to the Ground No. 1 and 2, the Ld. Addl. CIT (A) erred on facts and in law while confirming action of CPC in restricting TDS credit failed to issue directions to grant TDS credit in respective assessment years in which income was already offered by the appellant.
4.1. The findings of the Ld.CIT(A) confirming the restriction of TDS credit as contained at paragraph Nos.6 to 6.2.6 of his order are as under: “6. DECISION:
I have very carefully considered the statement of facts, grounds of appeal and the appellant's submission and proceed to dispose of the appeal accordingly.
6.1. Ground of appeal no. 2 being general in nature requires no adjudication and is therefore Dismissed.
6.2. Ground of appeal no. 1 challenges the action of the AO in restricting the TDS credit to Rs.407,968/- as against the claim of Rs.524,600/-. The appellant has made the following arguments: i. The AO, CPC erred in declared the appellant's return as defective. ii. The credit for TDS is restricted by invoking the provisions of Rule 37BA despite there being no mismatch of TDS. ii. The appellant has already declared the income corresponding to the TDS reflected in 26AS in A.Y.s 2021-22, 2022-23 & 2023-24. Hence the credit is to be allowed.
6.2.1. I have very carefully considered the grounds of appeal, facts of the case and appellant's submissions supra and I am unable to agree with the same due to the following: i. It is an admitted fact that before processing the revised return, the AO, CPC issued a prior communication to the appellant dated 12/12/2023 regarding the mismatch in the gross receipts reflected in the 26AS and that declared by the appellant in its ITR. The appellant filed reply electronically on 22/12/2023 that the gross receipts totaling Rs.524,60,000/- corresponding to the TDS of Rs.524,600/- reflected in the 26AS had already been declared by it in the A.Ys. 2021-22, 2022- 23 & 2023-24 as under:
A.Y. Receipts declared
2021-22 1,95,09,600/- 2022-23 72,50,400/- 2023-24 2,57,00,000/- Total 5,24,60,000/-
Hence, the prior communication was issued to the appellant to rectify the defect. After the reply was received on 22/12/2023, the return was processed by the AO, CPC on 09/01/2024. Hence this argument fails.
6.2.2. The next contention is directed towards the action of the AO, CPC in Invoking Rule 37BA of the IT Rules, 1962 (hereinafter referred to as the Rules). The issue of credit of TDS and taxing the corresponding income are governed by the provisions of section 199 of the Income Tax Act, 1961 and Rule 37BA of the Rules extracted hereunder:
[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 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.
(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 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.] Credit for tax deducted at source for the purposes of section 199.
37BA. (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) [(1) 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.
1[(3A) Notwithstanding anything contained in sub-rule (1), sub-rule (2) or sub-rule (3), for the purposes of section 194N, credit for tax deducted at source shall be given to the person from whose account tax is deducted and paid to the Central Government account for the assessment year relevant to the previous year in which such tax deduction is made.] (4) Credit for tax deducted at source and paid to the account of the Central Government shall be granted on the basis of (1) the information relating to deduction of tax furnished by the deductor to the income- tax authority or the person authorised 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.] 6.2.3. As per the provisions of Section 199 of the Act and Rule 37BA(2) of the Rules, both income and TDS are to be considered in the hands of the same person. It is an admitted fact that the TDS was made by the purchaser of flat wrongly for A.Y. 2023-24 instead of A.Ys. 2021-22, 2022-23 & 2023-24. Thus, the credit thereof ought not to have been claimed by the appellant in the return for A.Y. 2023-24. Instead, as provided u/s 199 and Rule 37BA(2) of the Act, the appellant ought to have filed the declaration with the deductor and ought to have got the appropriate corrections carried out in the TDS statements filed by the deductor, by filing with the deductor the necessary declarations requesting that TDS be issued for A.Ys. 2021-22, 2022-23 & 2023-24. Despite the deficiency letter issued by the AO, CPC, no such action has been carried out by the appellant and the TDS continues to appear for A.Y. 2023- 24 instead of A.Ys. 2021-22, 2022-23 & 2023-24.
6.2.4. As on the date of processing, the impugned income was appearing in Form 26AS of the appellant's PAN but was not included in computing the total income in the return filed by the appellant, credit for such TDS was not allowed and necessary adjustments u/s 143(1)(a) have been carried out by CPC as per the Act which is found to be tenable on facts and in law.
6.2.5. The short credit of TDS granted in respect of TDS deducted against its own PAN is dependent upon the filing of TDS statement by the deductor as mandated u/s 199 and Rule 37BA(1). If there is any mismatch in the TDS claimed as per the return vis a vis the TDS statement filed by the deductor, the same can be rectified by getting appropriate correction statement filed by the deductor. Appellant is at liberty of seek appropriate remedy thereafter. Thus contentions (ii) & (iii) of the appellant fail.
6.2.6. In view of the above facts and discussions, on the issue of granting of credit for TDS, there is no infirmity in the action of the AO, CPC and therefore no interference is warranted. The TDS u/s 1941A of the Act to the tune of Rs.407,968/- has been rightly granted by the AO, CPC. This ground of appeal is Dismissed.”
4.2. As is evident from the above, the Ld.CIT(A) has interpreted the provisions of Section 199 of the Act, 1961 read with Rule 37BA of the Income Tax Rules, 1962 and noted that TDS credit, as per law, is to be allowed only to that portion of the TDS deducted on income which is returned to tax in the impugned assessment year and noting the said interpretation of law and taking into consideration the fact ,which was pointed out by the Ld.Counsel for the assessee before us also, that the TDS deducted during the impugned year of Rs.5,24,600/- on receipts of Rs.5,24,60,000/-, pertained to receipts of three assessment years as under:
A.Y. Receipts declared (Rs.) 2021-22 1,95,09,600/- 2022-23 72,50,400/- 2023-24 2,57,00,000/- Total 5,24,60,000/- the Ld.CIT(A) held that the CPC was correct in restricting the grant of TDS credit to the extent of that relating to the receipts reflected in the return of income filed in the impugned assessment year.
The Ld.Counsel for the assessee before us was unable to point out any infirmity in the findings of the Ld.CIT(A), as stated above, both with regard to the interpretation of law on the grant of TDS credit in terms of provisions of Section 199 of the Act, 1961 read with Rule 37BA of the Income Tax Rules, 1962, as also with respect to the fact of the TDS being deducted on a portion of income which had already been returned to tax in the preceding assessment years.
In the light of the same, we see no reason to interfere with the order of the Ld.CIT(A) dated 09/08/2024 confirming the adjustment made by the CPC in the intimation made u/s.143(1) of the Act, restricting the grant of TDS credit to the tune of Rs.4,07,968/- as against TDS credit of Rs.5,24,600/- claimed by the assessee. But, at the same time, since the assessee has consistently pleaded both before the CPC and also the Ld.CIT(A) that the gross receipts on which TDS was deducted during the impugned assessment year amounting to Rs.5,24,60,000/- included receipts which had already been returned to tax in the preceding two assessment years; i.e. AYs 2021-22 & 2022-23 as tabulated above, the AO is directed to give necessary credit of TDS to the income returned to tax in those years. In terms of the aforesaid directions given by us, the appeal of the assessee is dismissed.
In the result, the appeal of the assessee stands dismissed.
Order pronounced in the Court on 19th November, 2024 at Ahmedabad. Sd/- Sd/- (T.R. SENTHIL KUMAR) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER