2017 (12) TMI 1831 - AT - Income Tax

Credit of TDs deducted towards Mobilization Advance recovered - HELD THAT - The Act and Rules are clear that credit of TDS can be granted only in the year in which the income/receipt on which such tax deducted at source is assessable to tax. Thus, in my view the order of Ld. CIT(A) is against the provision of the Act. Hence, the same is reversed and the appeal of the revenue is allowed. Coming to the cross objection the claim of the assessee is in accordance with Section 199 read with Rule 37BA(3) of the Act. The assessing officer directed to grant credit as per law to the assessee in the year which mobilization receipt is offered to tax as income.Appeal of the Revenue is allowed and the Cross objection of the assessee is disposed off as above.

Summary

Issues:
1. Allowance of credit for TDS on mobilization advance by the Ld. CIT(A)
2. Cross objection by the assessee regarding TDS credit allocation over assessment years

Analysis:
1. The appeal and cross objection in this case revolve around the allowance of credit for TDS on a mobilization advance by the Ld. CIT(A). The assessee, a joint venture engaged in construction activities, claimed credit for TDS of &8377;12,96,167 deducted by M/s Moser Baer Construction Pvt. Ltd. The Assessing Officer contended that as per Section 199 of the Income Tax Act, credit for TDS on the mobilization advance cannot be allowed in the current year. However, the Ld. CIT(A) ruled in favor of the assessee, citing a judgment of the Hon'ble Karnataka High Court, which held that the mobilization advance was not taxable income as it was granted against a bank guarantee and was interest-bearing. Consequently, the Ld. CIT(A) allowed the credit of &8377;12,96,167 to the assessee, leading to the revenue's appeal questioning this decision.

2. The Tribunal analyzed the relevant provisions of the Income Tax Act and Rules, specifically Section 199(3) and Rule 37BA(3)(i) and (ii). These provisions dictate that credit for TDS can only be granted in the year in which the income or receipt, on which the tax was deducted at source, is assessable to tax. The Tribunal found that the Ld. CIT(A)'s decision to allow the TDS credit was contrary to the provisions of the Act. Consequently, the Tribunal reversed the Ld. CIT(A)'s order and allowed the revenue's appeal.

3. Regarding the cross objection filed by the assessee, the Tribunal noted that the claim for TDS credit allocation over assessment years was in line with Section 199 read with Rule 37BA(3) of the Act. The Tribunal directed the assessing officer to grant credit to the assessee in the year in which the mobilization receipt is offered as taxable income. Ultimately, the appeal of the Revenue was allowed, and the cross objection of the assessee was disposed of accordingly.

In conclusion, the Tribunal reversed the Ld. CIT(A)'s decision to allow the credit for TDS on the mobilization advance, emphasizing that such credit can only be granted in the year when the income is assessable to tax. The Tribunal also addressed the cross objection by directing the assessing officer to allocate the TDS credit in accordance with the relevant provisions of the Act.