2021 (1) TMI 669 - AT - Income Tax

Non granting TDS credit - As per assessee when the return of income was processed by the Centralised Processing Centre ( CPC ) u/s 143(1) in the intimation the CPC did not allow credit of TDS because the same was not reflected in form 26AS per the assessment year 2017-18 but are entirely stood included in form 26AS for the assessment year 2018-19 - HELD THAT - Provisions u/s 199 (3) and also rule 37 BA (3) of the Rules, we are of the considered opinion that in this case where the tax has been deducted at source and paid to the Central government by the Hindustan Aeronautics Limited in the assessment year 2018-19 and such TDS relates to the income assessable over the assessment years 2017-18 and 2018-19, the credit has to be given in the proportion in which the income is assessable to tax for the assessment years 2017-18 and 2018-19 respectively. Ends of Justice would be met by directing AO to look into the fact whether the TDS deducted by the Hindustan Aeronautics Limited and reflected in form 26AS for the assessment year 2018-19, relates to the income/receipt in the hands of the assessee which is assessable for the assessment years 2017-18 and 2018-19, and if so then the assessing officer is directed to grant proportionate credit for such years. We, set aside the impugned order and remand the issue to the file of the assessing officer to verify whether the TDS deducted by the Hindustan Aeronautics Limited and reflected in the 26AS for the assessment year 2018-19 relates to the receipt in the hands of the assessee assessable for the assessment years 2017-18 and 2018-19, and if it is so, AO will allow proportionate credit for these 2 years. With this observation we allow the appeal of the assessee.

Summary

Issues:
1. Disallowance of TDS credit by CIT(A) for assessment year 2017-18.
2. Interpretation of provisions under section 199 of the Income Tax Act and rule 37 BA of the Income Tax Rules 1962 regarding the grant of TDS credit.

Analysis:
1. The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) for not granting TDS credit of ?1,14,17,141/- for the assessment year 2017-18. The assessee, a UK-based company, followed the Mercantile system of accounting and accounted for revenue from a service contract with Hindustan Aeronautics Limited. The issue arose when the TDS amount was not reflected in form 26AS for the assessment year 2017-18 but was included in the form for 2018-19. The CIT(A) directed the assessee to rectify the TDS statement with the deductor. The Tribunal, after considering the provisions of the Income Tax Act and Rules, held that TDS credit should be granted in proportion to the income assessable for the relevant assessment years. The assessing officer was directed to verify and grant proportionate credit for the years 2017-18 and 2018-19.

2. The Tribunal analyzed section 199(3) of the Income Tax Act and rule 37 BA(3) of the Income Tax Rules 1962. These provisions allow for the grant of TDS credit for the assessment year in which the income on which tax was deducted is assessable. It was noted that where income is assessable over multiple years, credit for TDS should be allowed across those years in proportion to the assessable income. In this case, the Tribunal found that the TDS deducted by Hindustan Aeronautics Limited in 2018-19 related to income assessable for both 2017-18 and 2018-19. Therefore, the Tribunal directed the assessing officer to grant proportionate TDS credit for both assessment years based on the income assessable.

Overall, the Tribunal allowed the appeal of the assessee and remanded the issue to the assessing officer to verify and grant proportionate TDS credit for the assessment years 2017-18 and 2018-19.