2023 (10) TMI 546 - AT - Income Tax

TDS credit - year in which income was declared there was no reflection of TDS amount in Form No. 26AS and vice versa in succeeding year - assessee is following mercantile system of accounting and declared the income during the assessment year 2018-19, whereas the deductor deducted and deposited the amount of TDS on payment basis i.e. in AY 2019-20, accordingly TDS credit in Form No. 26AS also reflected in assessment year 2019-20 - HELD THAT - AO has relied on sub-rule (1) of section 37BA for denying the benefit of TDS which provides that the credit for TDS shall be given to the person to whom payment has been made or credit has been given on the basis of information relating to TDS furnished by the deductor. What is material for sub-rule (1) is the beneficiary of credit for the TDS, being the person to whom payment has been made, which in the instant case is the assessee. CIT (A) has, in addition, relied on sub-rule (4) of Rule 37BA, which again provides that the credit for TDS shall be granted on the basis of information relating to deduction of tax at source furnished by the deductor. How, this rule prejudices the claim of the assessee is anybody's guess. Obviously, the information about the TDS by KMAMC is not denied. Both the sub-rules simply provide for granting of the benefit of TDS. The point of time at which the benefit of TDS is to be given, is governed by sub-rule (3) of Rule 37BA, which unequivocally provides through clause (i) that the 'credit for tax deducted at source and paid to the Central Government, shall be given for the assessment year for which such income is assessable' . It is, ergo, abundantly clear from the mandate of Rule 37BA (3) (i) that the benefit of TDS is to be given for the assessment year for which the corresponding income is assessable. Since the income, on which tax was deducted at source, is patently assessable in the year under consideration, we hold that the benefit of the TDS should also be allowed in the same year, namely, the year under consideration. We, therefore, overturn the impugned order and direct accordingly.

Summary

Issues involved:
The issues involved in the judgment are the validity of the order passed by the Commissioner of Income Tax (Appeals), the denial of TDS credit, the charging of interest under sections 234B and 234C of the Income Tax Act, and the condonation of delay in filing the appeal.

Validity of Order by CIT (Appeals):
The appellant contended that the order passed by the Commissioner of Income Tax (Appeals) was invalid and bad in law as the appellant's submissions were not considered during the appellate proceedings. Despite offering to explain the facts through virtual hearing, the CIT (Appeals) did not take this into account, leading to the appellant filing a grievance on the Income Tax Portal which remained unresolved.

Denial of TDS Credit:
The appellant had claimed TDS credit as per the provisions of section 199 of the Income Tax Act read with Rule 37BA(3)(i) of the Income Tax Rules. The appellant argued that the credit for tax deducted at source and paid to the Central Government should be given for the assessment year for which such income is assessable. However, the CIT (Appeals) failed to consider this provision and disallowed the TDS credit, leading to the appellant's appeal.

Charging of Interest under Sections 234B and 234C:
The appellant challenged the charging of interest under sections 234B and 234C of the Income Tax Act as invalid and bad in law. The appellant sought relief from the interest charges imposed by the tax authorities.

Condonation of Delay in Filing Appeal:
The appellant's appeal was time-barred by 96 days, and the appellant provided an affidavit to explain the delay. The delay was attributed to efforts made by the appellant to resolve the issue with the jurisdictional AO and the TDS officer, leading to the delay in filing the appeal. The Tribunal found the explanation reasonable and condoned the delay, allowing the appeal to be heard on its merits.

Summary of Judgment:
The Appellate Tribunal, after considering the arguments presented by the appellant and reviewing the relevant documents, found in favor of the appellant. The Tribunal directed the jurisdictional AO to grant the refund of TDS credit to the appellant for the assessment year 2018-19. The Tribunal emphasized that the benefit of TDS should be given for the assessment year for which the corresponding income is assessable, overturning the decision of the CIT (Appeals). As a result, the appeal of the appellant was allowed, providing relief in the matter of TDS credit denial.