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2016 (2) TMI 420 - ITAT DELHI

2016 (2) TMI 420 - ITAT DELHI - TMI - Entitlement to credit of the entire TDS offered - in the opinion of the revenue, the assessee would not be entitled to credit of the entire TDS of ₹ 10/- but would be entitled to proportionate credit only - Held that:- Auppose as assessee who is following cash system of accounting raises an invoice of ₹ 100/- in respect of which deductor deducts TDS of ₹ 10/- and deposits to the account of the Central Government. Accordingly, the assessee w .....

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ccount of the Central Government. Rule. 37BA(3) of the Act cannot be interpreted so as to say that TDS deducted at source and deposited to the account of the Central Government is though income of the assessee but is not eligible for credit of tax in the year when such TDS was offered as income. This view is otherwise also not in accordance with the provisions contained in section 198 and 199 of the Act. The proposition as laid out by the CIT(A) and learned DR before us therefore cannot be count .....

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hich, confirmations have been furnished by the assessee, we feel it appropriate that the issue be restored to the file of the Assessing Officer with a direction that the credit be allowed to the assessee of the entire TDS in respect of which, TDS certificate has been furnished by the assessee in accordance with section 198 read with section 199 of the Act. - Decided in favour of assessee. for statistical purposes. - ITA No.6185/Del./2013 - Dated:- 11-1-2016 - SHRI A.T. VARKEY, JUDICIAL MEMBER AN .....

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als) has erred both on facts and in law in holding that while processing the return of income u/s 143(1) of the Act, the learned Assessing Officer was correct in law in raising a demand of ₹ 11,37,710/- including interest of ₹ 2,74,677/- as outstanding and that too without providing any opportunity as also without bringing any material whatsoever in holding that such a sum was outstanding. 2 That the learned Commissioner of Income Tax (Appeals) has grossly erred both in law and on fa .....

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ppeals) has further erred in failing to appreciate that the credit of the tax granted of ₹ 71,20,267/- instead of ₹ 80,16,290/- was without any basis or material and was thus unsustainable. Infact even the learned Commissioner of Income Tax (Appeals) has given no basis for restricting the credit of the tax deducted at source to ₹ 71,20,267/- and thus levy of interest u/s 234C of ₹ 2,74,677/- and aggregate demand of ₹ 11,37,710/- is unsustainable. 3 That the order pa .....

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icer for the Assessment Year 2009-10 and 2010-11 to allow the claim of credit of tax deducted at source as per deduction certificates filed by the assessee and otherwise mandated by law. 3.2 That the learned Commissioner of Income Tax (Appeals) has absolutely given no basis or brought any material on record and ignored the ratio of the judgment of the Delhi High Court in the case of All India Federation of Tax Practitioners vs. UOI reported in 352 ITR 273 which directed the revenue to allow the .....

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oks the facts of the instant case and has arbitrarily ignored that it is not a case where the assessee has not included any income on which tax has been deducted at source. 4.1 That the learned Commissioner of Income Tax (Appeals) has failed to comprehend that the order of ITAT in the case of Lloyd Insulation (India) Ltd. has no application. The finding that the assessee had claimed credit in respect of the tax deducted at source without including the same in the income is based on factual misco .....

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tion of mind. 5 That even otherwise the learned Commissioner of Income Tax (Appeals) has overlooked that the assessee had furnished a complete reconciliation to establish that each of credit is duly reflected in 26AS statement and that only a sum of ₹ 4,10,870 alone had not been reflected in 26AS statement in respect of which too the assessee furnished confirmation as well as TDS certificates and the learned Assessing Officer could not be justified in not granting the credit thereof. 6 Tha .....

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ion dated 27.9.2011 u/s 143(1) allowed credit of TDS of ₹ 71,20,267/- as against claim of TDS of ₹ 79,91,290/- and as such with held grant of credit by ₹ 8,71,023/- and raised a demand of ₹ 11,37,710/- including interest u/s 234C of ₹ 2,74,677/-. Against the aforesaid order assessee appealed before CIT(A) who vide the impugned order dated 17.10.2013 dismissed the appeal of the assessee and as such the instant appeal. 4. The basic issue raised in this appeal arising .....

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rce 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. It has been further observed that the above rule has been inserted w.e.f. 1.4.2009 and is therefore applicable from assessment year 2009-10. Reference has been made to cases of Lloyd Insulation (India) Ltd. ITA No. 2400 & CO 201/D/2011 and Smt. Varsha G. Salunke vs. DC .....

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ed in the certificate for the assessment year if income relatable to the amount is not shows and is not assessable in that assessment year. She has held that if instead of entire income referable to amount of tax deducted, only a portion of income is found assessable the benefit has to be allowed only on the portion shown and if balance income, on account of system of accounting followed by the assessee or for some other reasons is found to be assessable in future, then the credit for the balanc .....

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on of tax was made. He also submitted that provision of Rule 37BA is inapplicable where assessee is following cash system of accounting since if TDS is deducted however payment is not received in the subsequent assessment years, the TDS deducted would never be allowed to such an assessee though the assessee is entitled for such TDS as per section 198/199 of the Act. In support he placed reliance on the decision of Ahmedabad Bench in the case of M/s Sadbhav Engineering Ltd. vs. DCIT ITA No(s). 61 .....

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hed his return of income claiming credit of TDS of ₹ 79,91,290/- which was further revised to ₹ 80,16,290/-. The AO restricted the credit of ₹ 71,20,267/- in the intimation u/s 143(1) of the Act. The CIT(A) has upheld the restriction inter-alia on the ground that credit of TDS is to be allowed in terms of Rule 37BA(2) of the Rules and as such the credit would be allowable on pro rata basis in the year in which the certificate is issued and also in future where balance of such i .....

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made. In view thereof, since the tax was deducted at source by the deductor and the amount was deposited by the deductor on behalf of the assessee, the said sum is deemed to be the payment of tax made on behalf of the assessee. Also, section 198 of the Act provides that all sums deducted in accordance with Chapter XVIIB of the Act shall for the purposes of computing the income of an assessee be deemed to be income received. Thus, section 198 of the Act specifically provides that tax deducted at .....

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th the cash system of accounting followed by the assessee. The CIT(A) in her order has laid much emphasis on Rule 37BA of the Rules. Rule 37BA as inserted w.e.f. 1.4.2009 reads as under:- 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 dedu .....

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ed 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 .....

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ble 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. (4) Credit for tax deducted at source and paid to the account of the Central Government shall be granted on the basis of- (i) the information relating to deduction of tax furnished by the deductor to the income-tax authority or the person authorized by such authority; and (ii) the information in the return of income in respect of the c .....

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ent year for which, such income is assessable. Thus, if the said rule is read, it is clear that the assessee is entitled to get credit of the tax deducted at source once such income is included in his income. The admitted facts of the case of the appellant is that the tax deducted at source has been offered as income by the appellant in his return of income and therefore, having regard to even the rules, the assessee is entitled to credit of the tax deducted at source. The assessee before the CI .....

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assessee which is assessable to tax. It was submitted that once an income is assessable to tax, the assessee is eligible for credit despite the fact that remaining amount would be taxable in the succeeding years. We are in an agreement with the above submission that the TDS deducted by the deductor on behalf of the assessee and offered as income is to be allowed as credit in the year of deduction of tax deducted at source. Rule 37BA of the Act provides that credit for TDS should be allowed in t .....

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in that year but is assessable in a number of years. However, such rule has no applicability, where assessee follows cash system of accounting. This can be supported from the illustration that suppose as assessee who is following cash system of accounting raises an invoice of ₹ 100/- in respect of which deductor deducts TDS of ₹ 10/- and deposits to the account of the Central Government. Accordingly, the assessee would offer an income of ₹ 10/- and claim TDS of ₹ 10/-. Ho .....

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nterpreted so as to say that TDS deducted at source and deposited to the account of the Central Government is though income of the assessee but is not eligible for credit of tax in the year when such TDS was offered as income. This view is otherwise also not in accordance with the provisions contained in section 198 and 199 of the Act. The proposition as laid out by the CIT(A) and learned DR before us therefore cannot be countenanced. In arriving at the above conclusion, we also derive support f .....

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assessment year for which such income is assessable. But in the amended provisions the words "for the assessment year for which such income is assessable" has been omitted. Meaning thereby, that the legislature was quite conscious about the facts and hardships faced by some assessees, while making the amendments in section 199 and in amended provisions nothing has been stated about the year in which the credit of TDS is to be claimed. As per amended provisions of section 199, in sub-se .....

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"Section 199: 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 depositor or owner of property or of unitholder or of the shareholder, as the case may be, and credit shall be given to him for the amount so deducted on the production of the certificate furnished .....

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(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 b .....

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