Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH: ‘D’ NEW DELHI
Before: SHRI SAKTIJIT DEY, VICE- & DR. B.R.R. KUMAR
ORDER Captioned appeal has been filed by the assessee challenging the order dated 23.03.2023 passed by learned Commissioner of Income Tax (Appeals), Delhi-42, pertaining to assessment year 2022-23.
The solitary ground raised by the assessee reads as under:
That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not allowing the TDS credit in FY 2021- 22 for TDS deducted by its Indian customer – Hindalco Industries
Ltd. in FY 2022-23, without appreciating the fact that the income corresponding to such TDS has been duly offered to tax in income tax return for FY 2021-22 as per Percentage of Completion Method (POCM) and accordingly, as per the provisions of the section 199 of the Income Tax Act, 1961 read with Rule 37BA of the Income Tax Rules, 1962, the TDS credit for the income offered to tax in FY 2021- 22 should be granted in the same year even if TDS is deducted by in subsequent year. The Appellant craves leave to add, alter, amend any of the grounds of appeal at the time of hearing.”
2. As could be seen from the ground raised, the dispute is confined to non-grant of TDS credit.
Briefly the facts are, the assessee is a non-resident corporate entity incorporated in Germany and a tax resident of Germany. As stated, the assessee is engaged in manufacturing and supply of complete lines for the production and further processing of cold- rolled carbon steel, stainless steel, and non-ferrous metal strips, including furnaces, presses and acid regeneration equipment. The assessee entered into a contract with Hindalco Industries Ltd. for providing services in the nature of supervision of installation and commissioning and performance acceptance test for De-greasing line and Tension lever line (‘TLL’) at the plant of Hindalco, Orissa.
In terms of the agreement, profit for the on-site activities to be carried out in India attributable to the Permanent Establishment (‘PE’) in India, is Euro 6,42,500 equivalent to INR 5,31,27,330/-.
The on-site services were provided by the assessee between the period April, 2021 till 27th June, 2022. The assessee computed its taxable income attributable to the PE as income from business and profession by Percentage of Completion Method (“POCM”) in terms with section 43CB of the Act read with the provisions of the Income Computation and Disclosure Standards (“ICDS”) and offered it to tax in the return of income filed for the assessment year under dispute.
However, since, Hindalco had not credited/paid any contractual receipts to the assessee during financial year 2021- 22, it did not deduct any tax at source. The entire on-site revenue was credited/paid to the assessee in financial year 2021-22 and corresponding TDS was made in financial year 2022-23. However, the benefit for TDS corresponding to the income declared by the assessee in the impugned assessment year was claimed by the assessee in return filed. However, while processing the return of income filed by the assessee, Centralized Processing Centre (‘CPC’) did not allow the TDS claim, as Form 26AS did not reflect any TDS for the impugned assessment year. Though, the assessee carried the matter to the first appellate authority, however, it was unsuccessful.
Before us, the assessee reiterated the stand taken before the first appellate authority and submitted that TDS claimed is allowable in the impugned assessment year. In support, he relied upon a decision of Coordinate Bench in case of M/s. Interglobe Enterprise Pvt. Ltd. Vs. ACIT (ITA No.6580/Del/2019, order dated 07.06.2022). He also relied upon various other judicial precedents as referred to in the synopsis. However, ultimately, he submitted that the issue may be restored back to the Assessing Officer for enabling the assessee to re-concile the TDS amount with the corresponding receipts offered in assessment year 2022-23 to be offered in assessment year 2023-24.
The learned Departmental Representative fairly submitted that the issue can be restored back to the Assessing Officer to examine assessee’s claim.
We have considered rival submissions and perused the materials on record. As could be seen from the facts on record, total amount to be received by the assessee under the contract with Hindalco is to the tune of Rs.5,31,27,330/-. By applying the Percentage of Completion method, out of the total contractual receipts, the assessee has offered an amount of Rs.3,82,46,331/- in assessment year 2022-23 and has claimed the corresponding 4 | P a g e TDS. However, the contractee has made actual payment of the entire contractual receipts in financial year 2022-23 and deducted TDS thereon. Thus, in assessment year 2022-23, neither there is any credit/payment of contractual receipt by the contractee, nor deduction of tax at source by the contractee.
However, fact remains that the entire contract receipt of Rs. 5,31,27,330/- has been subjected to TDS in financial year 2022- 23 and the assessee remains entitled to claim credit of such TDS.
Since, the assessee has already offered a part of the contractual receipts in assessment year 2022-23, he can only offer the remaining part of the contractual receipts in assessment year 2023-24. However, he has to be given credit of the entire TDS.
In view of the aforesaid, we are inclined to restore the issue to the Assessing Officer for re-examination. The assessee is directed to furnish a reconciliation statement before the Assessing Officer showing the details of contractual receipts offered in different assessment years and the corresponding TDS claimed in respect of the income offered. The Assessing Officer is directed to verify the reconciliation statement and other facts and materials on record and keeping in view the ratio laid down in the judicial precedents to be placed before him, grant credit of TDS 5 | P a g e corresponding to the income offered, either in assessment year 2022-23 and 2023-24 or in assessment year 2023-24 alone.
Grounds are allowed for statistical purposes. Needless to mention, the Assessing Officer must provide reasonable opportunity of being heard to the assessee.
In the result, the appeal is allowed for statistical purposes.
Order pronounced in the open court on 19th September, 2023