TMI Blog2020 (9) TMI 610X X X X Extracts X X X X X X X X Extracts X X X X ..... relating to the deferred revenue but also added the TDS so disallowed as income - HELD THAT:- In view of the undisputed factual position explained by the assessee and following the order passed by the coordinate Bench of the Tribunal in the case of HCL Comnet Systems and Services Ltd . [ 2020 (1) TMI 403 - ITAT DELHI ] we are of the considered view that the TDS credit is to be taken irrespective of the year to which it relates even when a related revenue is booked in subsequent financial year, the assessee is entitled to make claim of the entire TDS in the years of deduction. Assessee is entitled for credit for tax deducted at source proportionately across those years in which income is assessable to tax. Consequently, AO is directed to allow credit of TDS on proportionate basis as required under Rule 37BA (3)(ii). - ITA No.1113/Del./2017 - - - Dated:- 4-9-2020 - Shri O.P. Kant, Accountant Member And Shri Kuldip Singh, Judicial Member For the Assessee : Shri Ajay Vohra, Senior Advocate, Shri Aditya Vohra, Advocate, Shri Arpit Goyal, CA For the Revenue : Shri S.N. Meena, Senior DR ORDER PER KULDIP SINGH, JUDICIAL MEMBER : Appellant, M/s. HCL Comne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unds and thereby earned the dividend income of ₹ 6,07,08,212/- and claimed the same exempt from taxation. AO by invoking the provisions contained under section 14A of the Income-tax Act, 1961 (for short the Act ) read with Rule 8D of the Income-tax Rules, 1962 ( for short the Rules ) and by relying upon the circular No.5 of 2014 dated 11.02.2014 issued by Central Board of Direct Taxes (CBDT) proceeded to make disallowance under section 14A read with Rule 8D (3) to the tune of ₹ 24,70,095/-. 3. AO also made addition of ₹ 2,48,71,145/- on account of credit of tax deducted at source on deferred revenue on the ground that the same will be allowed in the relevant assessment year in which underlying revenue has been offered to tax. 4. Assessee carried the matter before the ld. CIT (A) by filing the appeal who has partly allowed the appeal. Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal. 5. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see in the manner indicated i.e. after examining the Assessee's accounts, the question of applying the formula under Rule 8D (2) does not arise. That this is a mandatory pre-requisite for applying Rule 8D (2) is fairly well-settled. 9. Hon ble Supreme Court in case of Maxopp Investment Ltd. vs. CIT 347 ITR 272 also held that satisfaction of the AO is mandatory that suo moto disallowance made under section 14A was not correct by returning following findings :- 41) Having regard to the language of Section 14A(2) of the Act, read with Rule 8D of the Rules, we also make it clear that before applying the theory of apportionment, the AO needs to record satisfaction that having regard to the kind of the assessee, suo moto disallowance under Section 14A was not correct. It will be in those cases where the assessee in his return has himself apportioned but the AO was not accepting the said apportionment. In that eventuality, it will have to record its satisfaction to this effect. Further, while recording such a satisfaction, nature of loan taken by the assessee for purchasing the shares/making the investment in shares is to be examined by the AO. 10. Following the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the revenue from such services is recognized by the appellant on year to year basis. The appellant company recognizes the revenue on percentage completion method and thus the revenue is recognized over the tenure of the concerned AMC contract. For example, if the contract is of four years, the appellant recognizes 25% of the payment for each year. b) But the TDS by the customer is made on the whole of the upfront payment as per the provisions of the Act, being statutorily bound to deduct the tax at the time of credit or payment, whichever is earlier. c) The AO has not only not allowed the TDS related to this deferred revenue but also added the TDS so disallowed as income, and both the actions of the AO are improper. d) From the legal angle, it is the contention of the AR that with the change in law in section 199, the TDS credit is to be given irrespective of the year to which it relates. More importantly the AR relied on the decision of ACIT vs. Peddu S Rao. It is contended that when a related revenue is booked a subsequent financial years, the appellant should be eligible to make a claim of the entire TDS in the year of deduction. Reliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , credit for tax deducted at source shall be allowed across those years in same proportion in which income is assessable to tax. We, accordingly, direct the Assessing Officer to give proportionate credit of TDS for the income declared during the year under consideration. With these directions, Ground no. 3 is allowed. 16. So, in view of the undisputed factual position explained by the assessee and following the order passed by the coordinate Bench of the Tribunal in the case of HCL Comnet Systems and Services Ltd. (supra), we are of the considered view that the TDS credit is to be taken irrespective of the year to which it relates even when a related revenue is booked in subsequent financial year, the assessee is entitled to make claim of the entire TDS in the years of deduction. So, the assessee is entitled for credit for tax deducted at source proportionately across those years in which income is assessable to tax. Consequently, AO is directed to allow credit of TDS on proportionate basis as required under Rule 37BA (3)(ii). So, Grounds No.2 and 2.1 are allowed. 17. Resultantly, the appeal filed by the assessee is hereby allowed. Order pronounced in open court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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