2017 (5) TMI 1667 - AT - Income Tax

Rectification of mistake u/s 154 - AO withdrawing TDS credit in an order u/s 154 on the ground that corresponding income has not been offered for tax in the relevant assessment year - debatable issue -assessment completed u/s 143(3) - CIT-A confirmed AO order - HELD THAT - As in the case of ACIT v. Peddu Srinivasa Rao 2011 (3) TMI 1495 - ITAT VISAKHAPATNAM shows that the issue raised u/s 154 of the I.T.Act is a debatable one. For the aforesaid reasons, we are of the view that withdrawal of tax credit which was given in the assessment completed u/s 143(3) of the I.T. Act by resorting rectification proceedings u/s 154 of the I.T.Act is legally untenable and cannot be sustained. TDS which is given due credit in this assessment year, the same should not be given credit during any other assessment year when income was offered for taxation - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of TDS claim on mobilization advances.
2. Interpretation of Section 199 of the Income Tax Act.
3. Applicability of TDS credit in subsequent years.

Analysis:
1. The appellant, engaged in civil construction business, claimed TDS credit on mobilization advances received during FY 2008-09 for assessment year 2009-10. The Assessing Officer disallowed the TDS claim of ?8,77,950 as the advances were not credited to the profit and loss account. The appellant contended that the consistent method of accounting supported TDS credit, as per provisions of sub rule (3)(i) and (ii) of rule 37BA read with section 199 of the Income Tax Act, 1961.

2. The appellant argued that mobilization advances were received against furnishing bank guarantees for construction work, and the TDS deduction was arbitrary. They emphasized that Section 199 is an enabling provision for TDS credit, not a computation provision. The appellant highlighted that the work executed far exceeded the advances received, justifying the TDS credit claim. They challenged the assessment as against the law and facts of the case.

3. The ITAT, Delhi referred to a precedent from the ITAT, Visakhapatnam, where it was established that mobilization advances were in the nature of loans, not subject to TDS. The ITAT held that once TDS was deducted, irrespective of the year, credit must be given to the assessee. The tribunal directed the Assessing Officer to grant TDS credit of ?8,77,950 to the appellant, overturning the CIT(A)'s decision. The ITAT emphasized the importance of avoiding complications by allowing TDS credit in the year of deduction.

In conclusion, the ITAT, Delhi allowed the appeal, citing the precedent from the ITAT, Visakhapatnam, and directed the Assessing Officer to grant TDS credit to the appellant. The judgment highlighted the significance of consistent accounting methods and the obligation to provide TDS credit to avoid unnecessary complexities in subsequent years.