2022 (10) TMI 1209 - AT - Income Tax

Short TDS credit granted - tax had not been deducted by the deductor in the relevant year therefore the claim of the assessee for TDS was not acceptable - difference in the amount of TDS credit as per Form 26AS and amount claimed by the assessee in its return of income - CIT(A) had dismissed the appeal of the asssesse stating difference is due to the fact that the assessee s client had booked the expenses in the same financial year in which the assessee had recognized the income however assessee s client had deducted tax while making payment in the subsequent financial year as a result of which the said tax was included in the TDS return of the subsequent financial year - HELD THAT - CIT(A) has not adjudicated the claim of the assessee in accordance with the provisions of Sec. 199 r.w.rule 37BA(3) of the I.T. Rules 1962 and also not taken into consideration the decision of ITAT in the case of the asessee itself. As gone through the decision of the ITAT in the case of the assessee itself 2020 (2) TMI 21 - ITAT MUMBAI it is observed that the ITAT has decided the issue in fovour of the assessee in accordance with the provisions of Sec. 199 r.w.rule 37BA(3) of the Act. The point of time at which the benefit of TDS is to be given is governed by sub-rule (3) of Rule 37BA which unequivocally provides through clause (i) that the 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 . It is ergo abundantly clear from the mandate of Rule 37BA(3)(i) that the benefit of TDS is to be given for the assessment year for which the corresponding income is assessable. As income on which tax was deducted at source is patently assessable in the year under consideration we hold that the benefit of the TDS should also be allowed in the same year namely the year under consideration. Appeal of assessee allowed.

Summary

Issues Involved:
1. Entitlement to TDS credit for the assessment year 2018-19.
2. Applicability of Rule 37BA(3) regarding TDS credit.
3. Consistency with previous ITAT decisions on similar facts.

Detailed Analysis:

1. Entitlement to TDS Credit for the Assessment Year 2018-19:
The assessee, a shipping company providing offshore oilfield services, contested the shortfall in TDS credit granted by the Centralized Processing Center (CPC), Bangalore. The CPC granted TDS credit of Rs. 17,51,85,759/- against the claimed amount of Rs. 17,80,18,807/-, resulting in a shortfall of Rs. 28,33,048/-. The assessee argued that the entire amount should be credited as the corresponding income had been fully offered to tax.

2. Applicability of Rule 37BA(3) Regarding TDS Credit:
The Commissioner of Income-tax (Appeals) [CIT(A)] dismissed the assessee's appeal, stating that the shortfall was due to the TDS amount not being reflected in Form 26AS. The CIT(A) noted that the discrepancy arose because the assessee's client deducted tax in the subsequent financial year, not the relevant year. Thus, the CIT(A) held that the TDS claim was not acceptable as per the provisions of Rule 37BA(3), which mandates that TDS credit should be granted for the assessment year in which the income is assessable.

3. Consistency with Previous ITAT Decisions on Similar Facts:
During the appellate proceedings, the assessee's counsel cited a previous ITAT decision in the assessee's favor for A.Y. 2015-16 (ITA No. 5562/Mum/2018, dated 8.01.2020), where the ITAT had adjudicated a similar issue. The ITAT had ruled that as per Section 199 read with Rule 37BA, TDS credit must be allowed in the year the corresponding income is assessable. The ITAT emphasized that credit for TDS cannot be separated from the year the income is assessable, as doing so would distort the tax/interest liability.

The ITAT in the present case reiterated that Rule 37BA(3)(i) clearly states that TDS credit should be given for the assessment year in which the income is assessable. The ITAT also referenced a similar decision by the Pune Bench in the case of Mahesh Software Systems P. Ltd vs. ACIT, where it was held that TDS credit should be allowed in the year the income is recorded, even if the TDS was deposited in the subsequent year.

Conclusion:
The ITAT concluded that the CIT(A) had not adjudicated the claim in accordance with Section 199 and Rule 37BA(3). Following the precedent set in the assessee's own case and other judicial decisions, the ITAT directed the Assessing Officer (A.O.) to allow the TDS credit as claimed by the assessee. The ITAT emphasized that the credit for TDS and the corresponding assessable income are inextricably linked and must be considered together in the same assessment year. Consequently, the appeals for both A.Y. 2018-19 and A.Y. 2019-20 were allowed.

Order Pronouncement:
The appeals of the assessee were allowed, and the order was pronounced in the open court on 14.10.2022.