TMI Blog2017 (2) TMI 917X X X X Extracts X X X X X X X X Extracts X X X X ..... cellation of contract has not been denied by the assessing officer and it is not the contention of the assessing officer that the assessee or the sub contractor has executed a part of the contract and therefore, income was accrued to the assessee or to the sub contractor. Therefore, in the absence of any such finding by the assessing officer that the assessee or the sub contractor has executed a part of the contract, the question of accruing income to the assessee from this contract does not arise, hence in our considered view, the assessing officer should not have denied credit for TDS refund to the assessee. - Decided in favour of assessee - ITA No. 6674/MUM/2014 - - - Dated:- 10-2-2017 - Shri Rajendra, Accountant Member And Shri CN Prasad, Judicial Member Appellant by : Shri Nitesh S Joshi Revenue by : Shri KV Vispute ORDER Per C. N. Prasad (J.M.) : This appeal is filed by the assessee against the order of the Ld. CIT (Appeals)-9, Mumbai dated 28.08.2014 for the assessment year 2010-11. In this appeal, the assessee raised the following grounds : 1. The Learned Commissioner of Income Tax (Appeals)-9, Mumbai, { the CIT (A) ]} erred in confirming the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Project. The assessee submitted that during the year only mobilization advance was received for pooling the resources into the project and the same is deducted from the progress payments, whereas TDS is deducted on advances paid as per the provisions of Section 194J. Therefore, it was contended that once the milestone is achieved and income is recognized, the assessee company will be paying the applicable tax on that income. It was contended that TDS claim in the year in which the advance is received, as per the contract and TDS is deducted, it cannot be stated that the assessee is not showing the income in the year of TDS. Therefore, the assessee contended that receipt of advance payments on which the TDS is deducted contains income element of zero and thus the tax payable on that amount is zero in which case, the TDS is to be refunded. 4. The assessing officer further noticed that the assessee, as per the intent letter should have completed the contract by 08.10.2009 within the assessment year itself and since the assessee has not furnished the payment schedule of the contract and since the assessee also claimed to have given above contract work to Essar Engineering Serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r taxation for the Assessment Year 2010-11, the claim for TDS of ₹ 5,68,84,546/- granted to the assessee should be withdrawn. He placed reliance on the decision of Hyderabad Bench in the case of ITO Vs. Limak-Soma J.V. in ITA No.99/Hyd/2010 dated 24.09.2010 and Mumbai Bench in the case of Smt. Varsha G. Salunke Vs. DCIT (2006) 98 ITD 141 (TM). The assessment was completed accordingly. 6. On appeal by the assessee, the Ld. CIT (Appeals) sustained the action of the assessing officer in denying credit for the TDS for the reason that the assessee has not offered income to tax during Assessment Year 2010-11. He also concluded that the mobilization advance is taxable in the hands of the assessee and since the said receipt is not offered as income, the assessee is not entitled for TDS credit. The Ld. Counsel for the assessee reiterated the submissions made before the lower authorities and submits that the assessee has not carried out any contract work and the contract ultimately got cancelled and the entire contract amount which was received as advance is refundable and therefore since no income is accrued to the assessee, the assessee has not offered income and since the entire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of Hyderabad ITA in ITA No 99/Hyd/2010 in the matter of ITO v Limak Soma J. V. and that of Mumbai ITAT in the matter of Smt Varsha G. Salunke v DCIT (98 lTD 141) for not giving credit for the TDS duly deducted and paid to the credit of the Central Government. Both these cases deal with the question of the particular assessment year in which the credit for TDS needs to be given based on the year in which the sum on which the TDS was made was assessable to tax. However, as already stated above, the receipt on which the TDS was made in the case of the assessee was an advance in nature which would be deducted in the bills to be raised in future on execution of contract and thus cannot be treated as taxable income. Further, the contract itself has since been cancelled without performing any work and the advance is to be refunded in full as clearly mentioned in the assessment order itself. Thus, the question of taxability of this sum does not arise at all and therefore the question of the assessment year in which the said sum is taxable also does not arise. In view of the facts of the case, the TDS deducted has to be refunded as such. Thus the case laws relied on by the AO are irrele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e necessarily allowed credit somewhere. It cannot be a case that the amount of such tax deducted and paid to the exchequer is not to be refunded, if the tax due on the amount of income received is either lower than the amount of tax deducted or there does not exist any liability to tax in respect of the amount received. From the above discussion it follows that the amount of tax deducted at source needs to be adjusted against some tax liability of the payee and in case there is no such liability, it has to be refunded to payee because of the very mandate of section 199 as per which such amount is 'treated as a payment of tax on behalf of the person from whose income the deduction was made' that is the payee. (Para 14) As the amount on which tax was deducted at source is not at all chargeable to tax, then the command of section 199 will have to be harmoniously and pragmatically read as providing for allowing credit for the tax deducted at source in the year of the receipt of the amount, on which tax was deducted at source. If the viewpoint canvassed by the revenue is accepted and the assessee is not allowed credit for the tax deducted at source, an arduous situation wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made as his income since it was considered as not taxable. In both the cases, the AO did not allow the credit for TDS in the absence of corresponding taxable income, similar to the act of the AO in the assessment order in our case. In this situation, the ITAT has held that the TDS is to be refunded in the year in which it was deducted since the receipt on which the TDS was made not chargeable to tax. On going through the assessment order, it can be seen that the amount received in our case was in the nature of an advance and not an income as such. Further, the contract against which this advance was received has been cancelled without performing any work and thus the advance is to be repaid in full. Thus the amount on which the tax was deducted can never be taxed as income in any assessment year and therefore, the TDS has to be refunded in the year which it has been deducted as categorically held by the jurisdictional ITAT of Mumbai as above and also supported by the decision of ITAT of Chennai. Thus the action of the AO in not giving credit for the above TDS is not in accordance with the law in this regard. As per the decision of the jurisdictional bench of ITAT which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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