2023 (3) TMI 35 - AT - Income Tax

Denial of TDS credit - Return of income as processed by CPC u/s 143(1) - mis-match of year of reporting of TDS by the tenant deductor - HELD THAT - Credit for tax deducted and paid to the Central Government shall be allowed to the deductee assessee for the assessment year for which such income is assessable or assessed. We find force in the contention of the appellant that, the TDS credit is available in the assessment year where the corresponding income has been offered to tax by the assessee, and as such the TDS credit cannot be postponed to a different assessment year on the basis of reporting by the deductor, when the accrued income from such transaction has been reported in the present impugned AY. To rest the adjudication, it suffice to voice that, the combined reading of Section 199(3) r.w. Rule 37BA(3) makes the position of law clear that, credit for TDS is available in the year in which the income is reported and as a corollary, credit of TDS (deducted therefrom) cannot be deferred to some other assessment year. In the instant case, the Revenue proposed to allow the credit in the subsequent AY 2021-22 i.e. when the TDS is shown to have been credited in the form 26AS. As stated by the Ld. AR, the corresponding income will not be found to be recorded in the subsequent AY and therefore such action would belie the letter and spirit of Section 199(3) and Rule 37BA(3) thereto. Thus, on first principles, we are inclined to agree with the stand taken on behalf of the assessee for eligibility TDS credit in the Assessment Year 2020-21 itself when income has been claimed to have accrued/arisen, included for determination to taxable income and offered to tax undisputedly. And we find that, a similar view has been taken by the co-ordinate bench in Mahesh Software System Pvt. Ltd. 2019 (10) TMI 624 - ITAT PUNE Thus, no hesitation to accept the plea of the appellant against the denial of TDS credit in contradiction of provisions of Section 199 r.w.r 37BA is clearly in the league of apparent error deserves to be reversed, ergo we set aside the orders of Ld. NFAC and direct the Ld. CPC to allow the TDS credit pertaining corresponding income of rent maintenance accrued / received / received from M/s Bosch Limited and offered to Tax in the impugned AY. Appeal of the appellant is Allowed.

Summary

Issues:
Challenge to order denying TDS credit by National Faceless Appeal Centre under Income Tax Act, 1961 for assessment year 2020-21.

Analysis:
The appellant challenged the order of the National Faceless Appeal Centre (NFAC) denying TDS credit by CPC under the Income Tax Act for the assessment year 2020-21. The primary ground of appeal was directed against the denial of TDS credit by CPC. The tribunal heard both parties and examined the case records in accordance with the ITAT Rules. The appellant, a resident individual, had income from various sources except capital gains for the relevant assessment year. The appellant's return of income was processed by CPC, denying TDS credit due to a mis-match in the reporting year by the tenant deductor, M/s Bosch Limited.

The denial of TDS credit was partially rectified under section 154 of the Act, but the appellant sought further relief by approaching the NFAC, without success. The appellant contended that the actions of the tax authorities were contrary to the law and sought rightful TDS credit against the income offered for tax in the assessment year. The tribunal noted that the tenant deductor had reported the TDS for the appellant's rental income for the subsequent year, resulting in a shortfall of credit for the impugned assessment year.

Upon examining the availability of TDS credit under Section 199(3) read with Rule 37BA(3) of the Income Tax Rules, the tribunal found that the credit should be allowed for the assessment year in which the income is assessable or assessed. The tribunal agreed with the appellant's argument that TDS credit cannot be postponed to a different assessment year based on the deductor's reporting, especially when the income from the transaction had been reported in the impugned assessment year.

The tribunal held that the law was clear that TDS credit should align with the year in which the income is reported, and it cannot be deferred to a subsequent assessment year. The tribunal cited a similar view taken by a co-ordinate bench in a previous case. Therefore, the tribunal accepted the appellant's plea against the denial of TDS credit and directed the CPC to allow the TDS credit for the corresponding income of rent and maintenance accrued from M/s Bosch Limited and offered for tax in the impugned assessment year. Consequently, the appeal of the appellant was allowed based on the clear position of the law and the apparent error in denying the TDS credit.

The tribunal pronounced the order in open court, reversing the decision of the NFAC and directing the CPC to allow the TDS credit for the appellant in the assessment year 2020-21.