2018 (12) TMI 453 - AT - Income Tax

Denial of credit of TDS - corresponding income has not been offered to tax - TDS belongs of assessee or HUF - Exemption u/s 10(37) claimed by HUF - contention of the assessee that once TDS certificates are in the name of the assessee and credit for such TDS is appeared in the name of the assessee in AIR data base and also the fact that the 6 particular income is not taxable either in the hands of the assessee or in the hands of the HUF credit for TDS cannot be rejected. Held that - We find merit in the arguments of the assessee for the reason that when a particular income is exempt from tax in view of specific provisions provided under section 10(37) of the Act and also the fact that the HUFs have declared the compensation received on account of compulsory acquisition of agricultural land in their return of income and claimed exemption under section 10(37) there is no reason for AO to deny credit for TDS merely on the ground that no income has been offered to tax in the hands of the assessee. As compensation received on account of compulsory acquisition of agricultural land is exempt from tax under section 10(37) - HUFs have declared the said compensation in the return of income. It is also undisputed that the HUFs have not claimed credit for TDS in their return of income. Therefore, when the facts are clear in respect of exemption of particular receipt in the hands of the assessee as well as HUFs, the question of offering such income for tax in the hands of the assessee does not arise. When the credit for such TDS is appearing in the name of the assessee in AIR data base and the assessee has furnished necessary TDS certificate in his name, the Assessing Officer erred in rejecting the claim of credit for TDS by citing the provisions of section 199 of the Act r/w rule 37BA of the I.T. Rules. This legal position is supported by the findings of the Hon ble Delhi High Court in Relcom 2015 (11) TMI 284 - DELHI HIGH COURT wherein the Court held that this Court relies upon the well settled dictum for procedure is the hand made of justice and it cannot be used to hamper the cause of justice. Therefore, the Revenue s contention that the assessee instead of claiming the entire TDS amount ought to have sought a correction of vendor s mistake would unnecessarily prolonged the entire process of seeking refund based on TDS credit. AO erred in denying credit of TDS to the assessee - Decided in favour of assessee.

Summary

Issues:
1. Denial of credit for TDS in the hands of the assessee by the Assessing Officer.
2. Interpretation of provisions of section 199 of the Income Tax Act and rule 37BA of the Income Tax Rules, 1962.
3. Claiming exemption under section 10(37) of the Income Tax Act for compensation received on account of compulsory acquisition of agricultural land.
4. Discrepancy in TDS certificates issued in the name of the assessee for compensation on agricultural land owned by HUFs.
5. Failure of the Commissioner (Appeals) to direct the Assessing Officer to give credit for TDS in the hands of the assessee.

Analysis:

1. The appeal was against the order passed by the Commissioner (Appeals)-I, Nagpur, for the assessment year 2013-14. The issue revolved around the denial of credit for TDS by the Assessing Officer, amounting to a demand of INR 37,94,300, which included tax and interest. The assessee argued that the TDS was made on agricultural land compensation exempt under section 10(37) of the Income Tax Act, and the refund was initially issued but later withdrawn during assessment proceedings under section 143(3).

2. The Commissioner (Appeals) considered the provisions of section 199 of the Act and rule 37BA of the Income Tax Rules, 1962. It was held that credit for TDS should be given to the person in whose hands the income is assessable. The Commissioner directed the Assessing Officer to refer the matter to the concerned HUF to give credit for TDS, as the income was assessable in the HUF's hands.

3. The assessee claimed exemption under section 10(37) for compensation received on agricultural land acquisition. The HUFs had not claimed credit for TDS in their returns. The Commissioner (Appeals) acknowledged this but failed to direct the Assessing Officer to give credit for TDS in the hands of the assessee, despite the income being non-taxable under section 10(37).

4. The Tribunal found merit in the assessee's argument that credit for TDS should not be denied solely because the corresponding income was not offered for tax, especially when the income was exempt under section 10(37). The Tribunal emphasized that the Assessing Officer erred in rejecting the TDS credit, considering the specific provisions and the HUFs' disclosure of compensation.

5. The Tribunal set aside the Commissioner (Appeals)'s order and directed the Assessing Officer to allow credit for TDS to the assessee based on the TDS certificate issued in the name of the assessee. The appeal was allowed in favor of the assessee.