2021 (9) TMI 360 - AT - Income Tax

Credit of TDS - payments were received as an agent of the Government of Maharashtra - Assessee a wholly owned company of Government of Maharashtra and it is acting as an agent of the Government for carrying out all activities and statutory duties for the development of new town and the taxes were deducted on various payment made to the assessee - whether said amount is not included in the total income of the assessee? - HELD THAT - The assessee had received the payments as an agent for representing as Development Authority or Special Planning Authority on behalf of the Government of Maharashtra. Therefore, the payments received by the assessee is not belongs to the assessee. Therefore, the TDS deducted on amount which is not the income of the assessee then whatever tax deducted as to be refunded to the assessee and which is belongs to the Government of Maharashtra. DR raised the issue that this refund will be income of the assessee or how this amount will be handled by the assessee is not known. This apprehension may not be proper as the assessee received only commission income as their service charges and all other income or money belong to the Government of Maharashtra and the payments never intended for the assessee - Decided against revenue.

Issues:
1. Allowance of TDS credit claimed by the assessee.
2. Dispute regarding the nature of income received by the assessee.
3. Interpretation of provisions under section 199 of the Income Tax Act, 1961.

Analysis:
1. The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2016-17. The case involved the allowance of TDS credit claimed by the assessee, amounting to ?15,38,15,311. The Assessing Officer rejected the claim for TDS credit, citing provisions under section 199 of the Income Tax Act, which state that any deduction made and paid to the Central Government shall be treated as payment of tax on behalf of the person from whose income the deduction was made. The Assessing Officer based the rejection on Rule 37BA(3)(i) of the Income Tax Act, which specifies the credit for tax deducted at source and paid to the Central Government over the assessment year for which the income is assessable.

2. The assessee contended that the TDS credit should be allowed as the payments were received as an agent of the Government of Maharashtra and were not liable to tax. The Commissioner of Income Tax (Appeals) allowed the appeal of the assessee, noting that although the income was not offered to tax as the assessee acted as a collecting agent for the government, the commission income was declared. The Commissioner directed the Assessing Officer to grant TDS credit to the assessee, emphasizing that failure to do so would make the tax collection by the exchequer unconstitutional.

3. The Tribunal considered the fact that the assessee is a wholly owned company of the Government of Maharashtra, acting as an agent for the government's activities and statutory duties. The Tribunal observed that taxes were deducted on payments made to the assessee, totaling ?1,53,81,15,311. It was clarified that the payments received by the assessee, representing the Development Authority or Special Planning Authority on behalf of the government, did not belong to the assessee. Therefore, the TDS deducted on non-assessee income should be refunded to the assessee, as it rightfully belonged to the Government of Maharashtra. The Tribunal dismissed the Revenue's appeal, affirming the findings of the Commissioner of Income Tax (Appeals) and concluding that the amount in question was not income of the assessee.

In conclusion, the Tribunal upheld the decision to allow the TDS credit claimed by the assessee, emphasizing the nature of the income received and the role of the assessee as an agent for the Government of Maharashtra.

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