2022 (12) TMI 876 - AT - Income Tax

Short Credit for TDS - Whether TDS credit to be given in the year under consideration based on the evidence in the form of ITR filed by the ld. AR of the assessee claiming that the same is already disclosed in the ITR-6 filed ? - HELD THAT - DR fairly accepting the contention of the assessee not objected to the factual aspects of the case. Based on these arguments supported by the evidences which was fairly accepted by the revenue we are of the considered view that since the law is clear on the issue as to allow the carry forward of the credit TDS in subsequent year and the credit for TDS is required to be matched with the income declared by the assessee. Since the ld. AR demonstrated us that the assessee has followed the applicable method permitted under the law and therefore, he has not objected to the propositions of ld. DR to get this factual aspect be verified by the jurisdictional AO. Based on these set of facts and arguments advanced before us we are of the considered view that the credit for prepared taxes carry forward for A.Y 2017-18 as claimed by the assessee in A.Y 2081-19 is required to be allowed subject to verification of the amount carry forward with that of the income offered in the year under consideration. Addition of the sales promotion expenses - Allowable business expenses u/s 37(1) - HELD THAT - It is not disputed by both the parties that the assessee is engaged in the business of Business Support Services. Therefore, the expenditure is required to be incurred by the assessee as per instructions of the client. We have also gone through the orders of the lower authorities and details submitted by the assessee. The contentions as raised by the Revenue are factual and based on the inadequate details filed by the assessee and revenue argued that why the missing details is required which the assessee has not submitted to the satisfaction of the assessing officer and therefore, we are of the considered view that the Assessing Officer was not in a position to verify various aspect on account of the on account of non-submission of the various details by the assessee called for by the ld. AO. All these details will facilitate the ld. AO to decided so as to allowability of the claim of the assessee as per provision of section 37(1) of the Act. In the light of these observations, we set aside this issue and the ld. AO is directed to verify all these aspects as raised by the Revenue and at the same time, the assessee is directed to submit all the details that has been called for by the Revenue so as to decide on the expenses claimed in accordance with the law. With these observations, the solitary ground raised by the Revenue is allowed.

Summary

Issues Involved:
1. Credit for Tax Deducted at Source (TDS)
2. Disallowance of Sales Promotion Expenses under Section 37(1) of the Income Tax Act

Issue-wise Detailed Analysis:

1. Credit for Tax Deducted at Source (TDS):
The assessee claimed a TDS credit of Rs. 56,42,822 for the Assessment Year (AY) 2018-19. However, the Assessing Officer (AO) allowed only Rs. 47,90,086, resulting in a shortfall of Rs. 8,52,736. The CIT(A) upheld the AO's decision, noting that the TDS was deducted in the previous year (AY 2017-18) and thus should be reflected in that year's TDS return. The CIT(A) suggested that the deductor should revise the TDS returns for both years to correct the discrepancy.

The assessee argued that under Rule 37BA(3) of the Income Tax Rules, credit for TDS should be given in the year the related income is assessable. The assessee had not claimed the TDS credit in AY 2017-18 and had carried it forward to AY 2018-19, where the corresponding income was declared. The assessee cited the ITAT Indore Bench decision in Shivganga Drillers (P) Ltd. vs. CPC, which supports the claim that TDS credit should be allowed in the year the income is assessed, even if the TDS was deducted in a different year.

The Tribunal accepted the assessee's argument, noting that the law allows for TDS credit to be carried forward and matched with the income declared. The Tribunal directed the AO to verify the carry-forward amount and the corresponding income declared in AY 2018-19 and allow the TDS credit accordingly.

2. Disallowance of Sales Promotion Expenses under Section 37(1) of the Income Tax Act:
The AO disallowed Rs. 2,63,00,865 out of the total sales promotion expenses of Rs. 5,51,07,678 claimed by the assessee, limiting the allowable expenses to 25% of the turnover. The AO noted inconsistencies in the expenses, such as some expenses exceeding the revenue from specific clients and a significant increase in the ratio of sales promotion expenses to turnover compared to previous years.

The CIT(A) deleted the disallowance, noting that the expenses were incurred for the promotion of the clients' businesses, not the assessee's. The CIT(A) found that the AO had not pointed out any specific instances of bogus expenses or defects in the audited accounts. The CIT(A) also noted that after excluding the receipts and corresponding expenses related to AU Small Finance Bank, the remaining expenses were reasonable.

The Revenue appealed, arguing that the CIT(A) failed to conduct further investigation or call for a remand report. The Revenue highlighted discrepancies in the expenses, such as personal nature expenditures and unsupported claims.

The Tribunal agreed with the Revenue, noting that the AO had not received adequate details to verify the expenses. The Tribunal emphasized that the assessee must substantiate the claims with proper documentation. The Tribunal set aside the issue, directing the AO to verify the details and decide on the allowability of the expenses as per Section 37(1) of the Income Tax Act.

Conclusion:
- The appeal of the assessee regarding the TDS credit was allowed, subject to verification by the AO.
- The appeal of the Revenue regarding the disallowance of sales promotion expenses was also allowed, with directions for the AO to conduct a detailed verification.