2023 (6) TMI 1021 - AT - Income Tax

Credit for TDS denied - transfer of business - TDS credit has been claimed by the assessee in its original as well as revised return of income - claim denied as TDS credit did not appear in Form 26AS of the assessee - Appellant transferred business of generation, transmission and distribution of electricity to another company Adani Electricity Mumbai Ltd. (AEML) vide share purchase agreement. Maharashtra Electricity Regulatory Commission (MERC) transferred the distribution license from the Appellant to AEML - substitution of name of Rinfra in place of AEML who received the amount as trustee on behalf of Rinfra. HELD THAT - As deductor, i.e., Tata Power Company has refused to issue a certificate in favour of the assessee or comply with the Rules u/s.37BA due to whatever perceptions and apprehensions they had. There is no provision or mechanism also to enforce such certificate from Tata Power Company. Here is the case the deductor, i.e., Tata Power Company have refused to issue certificate or rectify the form and when assessee had made specific request, then instead they stated that they are not in a position to issue TDS certificates in favour of the assessee based on AAR order which is applicable to AEML and RInfra who are party to it. Instead Tata Power Company have requested AEML to get directions from the Income Tax department asking TPC to issue TDS certificate in favour of RInfra. When the same was done, then again officials from Tata Power Company stated that they have already made the payment to AEML, deducted and deposited the tax thereon and filed the TDS return accordingly and if a revised TDS return is filed and a revised TDS certificate in favour of Rinfra would be issued, they would receive queries from the Income tax department resulting in unnecessary litigation. They suggested alternatives to the assessee in their email, that AEML may declare in their return of income that TDS pertains to Rinfra and Rinfra may claim TDS in their assessment following the provisions of section 199.Rinfra/ AEML may approach the AO/CIT(TDS) for Issue of direction to TPC for issue of revised TDS certificate in the name of Rinfra. But Rinfra Official suggested that alternatives were not viable and the only legal and proper course of action was that TPC should revise the TDS return and substitute the name of Rinfra in place of AEML who received the amount as trustee on behalf of Rinfra A Form or a Rule is an aid to implement the provisions of the main enactment, i.e., Income Tax Act and the procedure prescribed under the Rule is to facilitate and implement tax. Rules and Form cannot be interpreted so as to make the main provisions of the Act subservient to such Rules or forms prescribed therein to make the procedure cumbersome and lead to grueling situation to comply like here in this case or lead to denial of credit which assessee is otherwise eligible under the provisions of the Act. There is no prescribed form available, at least nothing has been brought to our knowledge either under the Rules or provided by the CBDT. To make such rectification, if deductor fails to issue certificate or comply with the provisions of the Rules, other than deductor revising its Form 26AS online which due to many circumstances and apprehensions deductor may not do it. In such genuine cases, at least Assessing Officer should be authorised or empowered to examine the matter and give the credit of TDS to which assessee is eligible for it. Herein in this case, it is not even disputed by the department that assessee is entitled for credit for TDS. Either some mechanism should be devised by the department to address such grievances in such circumstances or authorised the Assessing Officer to examine it and allow; or the strict conditions provided in Rule 37BA should be read in the provisions of Section 199(1) to make it workable in genuine cases where department is sure no double credit is allowed or claimed. We direct the AO of the assessee to ensure that credit of the TDS amount is given to the assessee. Accordingly, the order of the ld. CIT (A) is confirmed and the appeal filed by the Revenue is dismissed.

Summary

Issues Involved:

1. Whether the CIT (A) erred in allowing the appeal of the assessee to grant the claim of TDS to a person other than the deductee as per section 199(3) of the Act read with rule 37BA.
2. Whether the procedural requirements under Rule 37BA were fulfilled for granting TDS credit.
3. Whether the TDS credit should be granted to the assessee despite non-compliance by the deductor.

Summary:

Issue 1: Grant of TDS Credit to a Person Other than the Deductee

The Revenue appealed against the CIT (A)'s decision to grant TDS credit to the assessee, arguing that the conditions in Rule 37BA were not met. The assessee had transferred the business to Adani Electricity Mumbai Ltd. (AEML) but claimed TDS credit for payments made by Tata Power Company Ltd. (TPC) to AEML. The CIT (A) observed that AEML transferred the TDS credit to the assessee in their return of income, acknowledging that the income and corresponding TDS credit belonged to the assessee.

Issue 2: Compliance with Rule 37BA

The CIT DR argued that the procedural requirements under Rule 37BA were not followed, and thus, TDS credit should not be granted. The Tribunal noted that AEML had not claimed the TDS credit and had transferred it to the assessee's PAN in their return of income. The Tribunal emphasized that the intention of the legislature was to grant TDS credit to the person from whose income the deduction was made, as per Section 199(1).

Issue 3: Granting TDS Credit Despite Non-Compliance by the Deductor

The Tribunal acknowledged that Tata Power Company refused to revise their TDS return to reflect the assessee's PAN, causing procedural challenges. The Tribunal highlighted that rules and forms should not frustrate the main provisions of the Act. Given the unique circumstances, the Tribunal directed the Assessing Officer to grant the TDS credit to the assessee, confirming the CIT (A)'s order.

Conclusion:

The Tribunal dismissed the Revenue's appeals, directing that TDS credit be granted to the assessee despite procedural non-compliance by the deductor, ensuring that the assessee is not drawn into further litigation. The order was pronounced on 16th May 2023.