2019 (10) TMI 624 - AT - Income Tax

Denial of credit for tax deducted at source - selection of year of assessment - HELD THAT - What is material for sub-rule (1) is the beneficiary of credit for the TDS, being the person to whom payment has been made, which in the instant case is the assessee. The ld. CIT(A) has, in addition, relied on sub-rule (4) of Rule 37BA, which again provides that the credit for TDS shall be granted on the basis of information relating to deduction of tax at source furnished by the deductor. How, this rule prejudices the claim of the assessee is anybody s guess. Obviously, the information about the TDS by Ashok Leyland is not denied. Both the sub-rules simply provide for granting of the benefit of TDS. The point of time at which the benefit of TDS is to be given, is governed by sub-rule (3) of Rule 37BA, which unequivocally provides through clause (i) that the credit for tax deducted at source and paid to the Central Government, shall be given for the assessment year for which such income is assessable . It is, ergo, abundantly clear from the mandate of Rule 37BA(3)(i) that the benefit of TDS is to be given for the assessment year for which the corresponding income is assessable. Since the income of ₹ 84.10 lakh, on which tax of ₹ 8,41,050/- was deducted at source, is patently assessable in the year under consideration, we hold that the benefit of the TDS should also be allowed in the same year, namely, the year under consideration. - Decided in favour of assessee.

Summary

Issues:
Denial of credit for tax deducted at source amounting to ?8,41,050.

Analysis:
The appeal arises from the Commissioner of Income-tax (Appeals)-7, Pune's order regarding the denial of credit for tax deducted at source amounting to ?8,41,050 for the assessment year 2011-12. The appellant, engaged in providing software services, claimed the credit for TDS, which was not reflected in Form No.26AS. The Assessing Officer and the CIT(A) rejected the claim based on Rule 37BA(1) of the Income-tax Rules, 1962. The dispute centers around whether the benefit of TDS should be allowed in the year of recording income or in the year of TDS deposit. The relevant provisions are Section 199(3) and Rule 37BA of the Income Tax Act. The AO relied on Rule 37BA(1) to deny the TDS benefit, which grants credit to the person to whom payment was made based on TDS information. The CIT(A) also referred to Rule 37BA(4) for granting TDS credit based on TDS information. However, Rule 37BA(3)(i) mandates that the benefit of TDS should be given for the assessment year in which the income is assessable. Since the income on which TDS was deducted is assessable in the relevant year, the benefit of TDS should also be allowed in the same year. Thus, the Tribunal overturned the order and directed accordingly, allowing the appeal.

This judgment highlights the importance of correctly applying the provisions of Rule 37BA in determining the timing of granting the benefit of TDS. It clarifies that the benefit should align with the assessment year in which the corresponding income is assessable. The decision emphasizes adherence to statutory rules and principles in tax matters to ensure fair treatment and proper application of tax credits.