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2021 (12) TMI 1181 - AT - Income TaxTDS credit - AO did not allow the TDS credit on the ground that the corresponding income of this TDS has not been offered to tax by the assessee as it was not received during the impugned assessment year - assessee during the impugned assessment year has adopted cash method of accounting - HELD THAT - We find an identical issue had come-up before the Coordinate Bench of the Tribunal in the case of Chander Shekhar Aggarwal 2016 (2) TMI 420 - ITAT DELHI wherein the Tribunal after considering the identical set of facts has held that assessee would be entitled to credit of the entire TDS offered as income in the year of deduction. We hold that the Ld. CIT(A) is not justified in denying the credit of TDS. Accordingly, order of the Ld. CIT(A) is set aside and the AO is directed to allow the credit of TDS - Decided in favour of assessee.
Issues Involved:
1. Disallowance of TDS credit amounting to ?1,00,081/-. 2. Applicability of cash system of accounting for TDS credit. 3. Proportionate credit of TDS as per Rule 37BA and Section 199 of the Income Tax Act. Issue-wise Detailed Analysis: 1. Disallowance of TDS credit amounting to ?1,00,081/-: The assessee, a firm engaged in the profession, filed its return of income declaring ?1,21,28,560/-. During assessment proceedings, the A.O. noted that the assessee claimed TDS of ?1,00,081/- without offering the corresponding income to tax, as it was not received in the previous year. Consequently, the A.O. disallowed the TDS claim under Section 199 of the I.T. Act, 1961. The CIT(A) partially upheld this disallowance but directed the A.O. to give proportionate TDS credit. The assessee appealed, arguing that the entire TDS credit should be allowed in the year of deduction. 2. Applicability of cash system of accounting for TDS credit: The assessee contended that it follows the cash system of accounting and had offered the corresponding income to tax in A.Y. 2015-16. The Tribunal, referencing the case of Chander Shekhar Aggarwal vs. ACIT, noted that under the cash system, the assessee is entitled to credit for the entire TDS amount in the year it is deducted. The Tribunal found merit in this argument, noting that the income corresponding to the TDS was offered to tax in the subsequent year, and thus, the TDS credit should be allowed in the year of deduction. 3. Proportionate credit of TDS as per Rule 37BA and Section 199 of the Income Tax Act: The CIT(A) had directed proportionate TDS credit based on Rule 37BA and Section 199, which allow credit across years if the income is assessable over multiple years. However, the Tribunal emphasized that this rule applies to advance payments assessable over several years, not to cases where the cash system of accounting is followed. The Tribunal cited the decision in Peddu Srinivasa Rao and Sadhbav Engineering Ltd., which support the view that TDS credit should be given in the year of deduction if the income is offered in that year. Conclusion: The Tribunal concluded that the CIT(A) erred in denying the full TDS credit of ?1,00,081/-. It set aside the CIT(A)'s order and directed the A.O. to allow the full TDS credit for the year under consideration. The appeal of the assessee was allowed, affirming the principle that under the cash system of accounting, TDS credit should be given in the year of deduction when the corresponding income is offered to tax. Order Pronouncement: The appeal was allowed, and the order was pronounced in the open court on 24.12.2021.
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