2022 (12) TMI 74 - AT - Income Tax

Credit for TDS - Income offered on receipt basis - whether assessee is eligible to claim credit of TDS in assessment year 2016-17, when the assessee offers this income on receipt of the same since the assessee is following the cash basis of accounting and offers income on receipt basis? - HELD THAT - ITAT Ahmedabad on identical set of facts in the case of Chirag M Shah 2022 (6) TMI 236 - ITAT AHMEDABAD has also held that the assessee is entitled to get credit of TDS in the year in which he has offered to tax the professional fees income on receipt basis i.e. by following cash basis of accounting, even though the client/deductor had deducted tax in earlier years by following an accrual basis of accounting. ITAT Chennai Bench in the case of Supreme Renewable Energy Ltd. 2008 (8) TMI 432 - ITAT MADRAS-C held that when a particular income is received by assessee after deduction of tax at source and said TDS has been duly deposited with the Government and the assessee has received requisite certificate to this effect, then on production of the said certificate the assessee becomes entitled to credit of TDS, even if the assessee has not directly offered said income for tax as the assessee considers that same is not liable for tax. We are of the considered view that the assessee is eligible to claim credit for TDS in assessment year 2016-17, when such professional income has been offered to tax by the assessee on receipt basis, since the assessee has been consistently following cash basis of accounting since inception, even though TDS was deducted on such income in the prior assessment year 2015-16. Appeal of the assessee is allowed.

Summary

Issues involved:
Claim of TDS credit for professional income received in a different assessment year due to accounting method mismatch.

Detailed Analysis:

Issue 1: Claim of TDS credit for professional income received in a different assessment year
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) regarding the denial of TDS credit of Rs. 2,50,100 brought forward from the earlier year for the assessment year 2016-17. The assessee, a practicing advocate, consistently followed the cash basis of accounting as per section 145 of the Act. The discrepancy arose as the payer deducted TDS based on the accrual system in the earlier assessment year, while the assessee claimed credit in the current year when the income was received, in line with the cash basis of accounting. The Income Tax Department-CPC credited TDS based on the deductor's method, causing a mismatch with the assessee's claim. The Commissioner dismissed the appeal stating that TDS credit should have been claimed in the year of deduction. However, the Tribunal referred to precedents and held that credit for TDS should be allowed in the year the income is assessable/offered to tax, even if deducted in previous years, as per the cash basis of accounting followed by the assessee.

Conclusion:
The Tribunal allowed the appeal, emphasizing that the assessee, following cash basis accounting, is entitled to claim TDS credit in the year the income is offered for tax, despite the deduction occurring in a prior assessment year. The judgment aligns with previous decisions and ensures fair treatment based on the accounting method followed by the assessee.