2008 (10) TMI 303 - AT - Income Tax

Summary

Issues:
1. Denial of TDS credit by AO and CIT(A) - s. 154 of the IT Act.
2. Interpretation of s. 205 of the IT Act regarding TDS credit.

Issue 1: Denial of TDS credit by AO and CIT(A) - s. 154 of the IT Act:
The appeal was against the AO's refusal to give TDS credit of Rs. 2,09,414, leading to an application under s. 154 of the IT Act. The AO rejected the application citing defective TDS certificates from M/s Milestone Automobiles (P) Ltd. The CIT(A) upheld the AO's decision, emphasizing that the certificates lacked crucial details like the date and challan number of tax deposit into the Central Government account. The CIT(A) dismissed the claim despite the appellant's argument that the certificates provided were sufficient for TDS credit.

Issue 2: Interpretation of s. 205 of the IT Act regarding TDS credit:
The ITAT analyzed s. 205 of the IT Act, which bars direct demand on an assessee for tax deducted at source. The section specifies that once tax is deductible at source and has been deducted, the assessee is not required to pay the tax to the extent of the deduction. The case referred to a previous judgment where the High Court ruled in favor of the deductee, emphasizing that TDS certificates showing tax deduction relieve the deductee from any further tax liability. The ITAT highlighted that s. 205 focuses on two key conditions: tax should be deductible at source under the IT Act, and the tax must have been deducted at source. If these conditions are met, the deductee is entitled to TDS benefits. The ITAT emphasized that the deductee should not be denied TDS benefits solely because the deducted tax was not paid to the Central Government. The responsibility to recover such amounts from the deductor lies with the Department, ensuring the deductee is not penalized for the deductor's actions.

In conclusion, the ITAT allowed the appeal for statistical purposes, emphasizing the importance of fulfilling the conditions of s. 205 for TDS benefits and clarifying that the deductee should not be penalized for the deductor's failures in paying the deducted tax to the Central Government.