9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2025 (5) TMI 613 - AT - Income TaxCredit of TDS - mismatch of corresponding income - assessee has not shown the receipts as exempt income in ITR though claimed to be exempt income but corresponding TDS amount was claimed - buyer has deducted TDS @1% u/s. 194IA of the Act on the sale consideration of Rs. 10.50 crores. Since the land sold by the assessee being agricultural land no TDS was required to be deducted by the purchaser HELD THAT - From the perusal of the section 194IA it is ample clear that this section 194IA applies to immovable property other than agricultural land. Rule 37BA of the Income Tax Rules 1962 also does not apply to the appellant for the reason that it only applies in the case of income that is assessable to tax. We also find that the AO CPC does not take into account the agricultural income declared in the return of income when comparing the gross receipts of the ROI with that of the Form 26AS. This is evident from the Rule 37BA working of the AO CPC . Further we note that the AO CPC has not taken into consideration the agricultural income shown in the schedule EI. Therefore we accept the contention of assessee that even if the assessee had shown the exempt sale consideration of Rs. 10, 50, 00, 000/- as agricultural income in the return of income the present restriction of TDS would still have been carried out owing to the incorrect application of Rule 37BA. The above factual matrix we direct the AO to give credit to the entire TDS claimed appearing in the Form 26AS and claimed by the appellant in the return of income. Appeal of the assessee is allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Appellate Tribunal (AT) in this appeal are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Applicability of Section 194IA to Agricultural Land and Eligibility of TDS Credit Relevant Legal Framework and Precedents: Section 194IA mandates deduction of TDS at 1% on consideration paid for transfer of immovable property other than agricultural land. The Explanation to Section 194IA clearly excludes agricultural land from the definition of immovable property for the purpose of this section. Rule 37BA of the Income Tax Rules, 1962, prescribes conditions for credit of TDS and requires that credit be given only for income that is assessable to tax. Court's Interpretation and Reasoning: The Tribunal observed that the land sold was agricultural land situated in a rural area, hence exempt from tax and outside the purview of Section 194IA. The purchaser's deduction of TDS on this transaction was inadvertent and not mandated by law. Consequently, the TDS deducted on exempt agricultural income should be credited to the assessee. Key Evidence and Findings: The assessee declared agricultural income in the ITR but did not show the exempt capital gains from sale of agricultural land. The Form 26AS reflected TDS of Rs. 10.50 lakhs deducted on the sale consideration of Rs. 10.50 crores. The CPC denied credit on the ground that the corresponding income was not shown in the ITR. Application of Law to Facts: Since Section 194IA excludes agricultural land, the TDS deduction was not legally required. Rule 37BA applies only to income assessable to tax; agricultural income and exempt capital gains do not qualify. The Tribunal noted that the AO and CPC failed to consider agricultural income shown in the return while comparing gross receipts with Form 26AS, leading to erroneous denial of credit. Treatment of Competing Arguments: The Revenue argued that credit of TDS must be denied if corresponding income is not reflected in the ITR. The Tribunal rejected this, citing that exempt income need not be shown in the "Exempt Income Schedule" for the purpose of TDS credit, especially when the income is not taxable and the TDS was deducted erroneously. Conclusion: The Tribunal held that Section 194IA does not apply to agricultural land and that Rule 37BA does not restrict credit of TDS on exempt income. The entire TDS amount deducted erroneously must be credited to the assessee. Issue 2: Requirement of Showing Corresponding Income in ITR for Claiming TDS Credit Relevant Legal Framework and Precedents: The CIT(A) relied on the principle that for claiming TDS credit, the corresponding income must be shown in the return of income. The Tribunal referred to judicial precedents including (2015) 155 ITD 41-44 (Mum) where non-mention of income in a specific schedule was held to be an inadvertent mistake and not a ground to deny TDS credit. Court's Interpretation and Reasoning: The Tribunal observed that the assessee had shown agricultural income and other incomes in the return but did not specifically show the exempt capital gains from agricultural land sale. The Tribunal emphasized that the failure to mention exempt income in a particular schedule should be treated as inadvertent and not a valid reason to deny TDS credit. Key Evidence and Findings: The assessee's return showed agricultural income and other taxable income, and the TDS was reflected in Form 26AS. The CIT(A) and AO did not consider the agricultural income declared and restricted credit solely due to non-reflection of exempt capital gains. Application of Law to Facts: The Tribunal held that since the income was exempt and not assessable, non-inclusion in the exempt income schedule cannot justify denial of credit. The TDS credit claim is independent of showing the exempt income in the return, especially when the TDS was deducted erroneously. Treatment of Competing Arguments: The Revenue's contention that absence of corresponding income in the return disentitles the assessee from credit was rejected. The Tribunal relied on the principle that credit of TDS should not be denied on debatable grounds and that the AO's reliance on Section 143(1)(a) to restrict credit was misplaced. Conclusion: The Tribunal concluded that non-mention of exempt income in the return is not a valid ground to deny TDS credit and directed full credit of TDS to the assessee. Issue 3: Application and Interpretation of Rule 37BA of the Income Tax Rules, 1962 Relevant Legal Framework: Rule 37BA provides that credit for TDS shall be given for the assessment year in which the income is assessable. It further provides for proportionate credit when income is assessable over multiple years. Court's Interpretation and Reasoning: The Tribunal clarified that Rule 37BA applies only to income assessable to tax and does not govern credit for exempt income. The AO and CPC incorrectly applied Rule 37BA to deny credit on exempt agricultural income, which is outside the scope of this rule. Key Evidence and Findings: The AO's computation under Rule 37BA failed to consider agricultural income declared in the return and wrongly compared gross receipts in Form 26AS with return income excluding exempt income. Application of Law to Facts: The Tribunal held that Rule 37BA's provisions cannot be invoked to deny TDS credit on exempt income, and that the AO's approach was erroneous. Conclusion: The Tribunal directed that credit of the entire TDS be granted without restriction under Rule 37BA. Issue 4: Validity of AO's and CIT(A)'s Denial of TDS Credit under Section 143(1)(a) Relevant Legal Framework: Section 143(1)(a) provides for processing of return and issuance of intimation but does not empower the AO to restrict TDS credit on debatable issues of exempt income. Court's Interpretation and Reasoning: The Tribunal noted that none of the sub-clauses of Section 143(1)(a) authorize denial of TDS credit on the ground of mismatch of income and TDS, especially when the issue is debatable and relates to exempt income. Application of Law to Facts: The AO's denial of credit at the processing stage was held to be beyond the scope of Section 143(1)(a) and hence not sustainable. Conclusion: The Tribunal ruled that the AO's action to restrict TDS credit under Section 143(1)(a) was incorrect and directed full credit be given. 3. SIGNIFICANT HOLDINGS The Tribunal's key legal reasoning and holdings include the following verbatim excerpts and principles:
Core principles established:
Final determinations on each issue:
|
