2024 (7) TMI 81 - AT - Income Tax

Allowance of TDS credit - Restricting the TDS being the sales relating to the F.Y. 2015-16 According to A.O, there is mismatch in turnover reported as per financials and turnover as appearing in Form No. 26AS - contention of the ld. D.R. is that the income and TDS has to go together in an assessment year where the income has been offered for taxation - HELD THAT - A.R. relied on the order of lower authorities. In our opinion, as rightly pointed out by the ld. D.R., income and TDS credit to go together in any assessment year when the income has been accrued to the assessee. The contention of the ld. A.R. is that in earlier assessment year, it has been shown as a mobilization advance by payee and not an expenditure in the hands of that assessee as the assessee has no right to receive such amount as sales receipt. It is only payment made in advance. In our opinion, this issue requires to be examined at the end of ld. AO and TDS credit to be given to the assessee in the year of offering the said amount of Rs.24,85,54,177/- TDS as income of the assessee. TDS cannot be isolatedly taken in any assessment year without offering the corresponding income for taxation. With this observation, we remit the issue to the file of ld. AO for fresh consideration. Restricting the TDS being the mobilization advance received during the F.Y. 2016-17 - case of the assessee that when the issue of availability of TDS credit in the appropriate assessment year is examined in the light of Section 199(3) r.w. Rule 37BA(3) of the Income Tax Rules, it would be clear that 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 - assessee contends that the TDS credit is available in the financial year where the corresponding income has been offered by the assessee - HELD THAT - A 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 , should not be deferred to some other assessment year. In the instant case, if the Revenue has allowed the credit in the subsequent assessment year when the TDS is shown to have been credited in the form 26AS , then assessee cannot claim the same in this A.Y. However, as stated on behalf of the assessee , the corresponding income will not be f o und to be recorded and therefore such direction would be lie the letter and spirit of Section 199 ( 3) and Rule 37 BA(3) there to. Thus , on first principles, we are inclined to agree with the stand taken on behalf of the assessee for eligibility of TDS credit in the Assessment Year 2017-18 itself when income has been claimed to have accrued/ arisen and included for determination to chargeable income. We note that no positive finding of the Revenue Authorities below is available to show as to whether tax credit for TDS reflected in form No. 26AS in Assessment Year 2017-18 has been claimed or otherwise in another assessment year. A verification of factual position is required to shun the possibility of double claim. The assessee shall be entitled to credit of TDS corresponding to the income reported in the Assessment Year 2017-18 itself provided; (i) the assessee has not claimed any credit of TDS in any other assessment year; (ii) an undertaking/affidavit is to be placed by the assessee before the Revenue Authorities to lend assurance that such credit claimed in Assessment Year 2017-18 shall not be doubly claimed in any other assessment year in future based on form 26AS or any other document. On being satisfied, the Assessing Officer shall grant the TDS credit in terms of observations made hereinabove. With these observations, the impugned order of the CIT(A) is set aside and restore back to the file of the Assessing Officer for grant of credit in AY 2017-18 in terms of our observations herein.

Summary

Issues:
1. Allowance of TDS credit for sales of F.Y. 2015-16 in A.Y. 2017-18.
2. Allowance of TDS credit for mobilization advance received in F.Y. 2016-17 in A.Y. 2017-18.

Analysis:

Issue 1 - TDS Credit for Sales of F.Y. 2015-16:
The appeal by the revenue challenges the allowance of TDS credit of Rs. 49,71,083 for sales of F.Y. 2015-16 in A.Y. 2017-18. The dispute arises from a mismatch in turnover reported and turnover in Form No. 26AS due to sales considered in a different financial year. The Revenue contends that TDS credit should align with the year in which income was offered for taxation. The relevant provisions of Rule 37BA(3)(ii) regarding credit for TDS across multiple years are examined. The Assessee argues that TDS was deducted when payment was made, even though income was previously reported. The CIT(A) directed the AO to allow the TDS credit after verifying the income offered for taxes in previous years. The Tribunal remitted the issue to the AO for fresh consideration, emphasizing that TDS credit should correspond with the income offered for taxation.

Issue 2 - TDS Credit for Mobilization Advance of F.Y. 2016-17:
The second dispute concerns the allowance of TDS credit for mobilization advance received in F.Y. 2016-17 in A.Y. 2017-18. The AO restricted the TDS credit of Rs. 37,37,514 as the income from the advance was not offered in the current year. The Assessee argued that the advance was adjusted against subsequent bills and income was reported proportionately. The NFAC directed the AO to verify the consistency of the Assessee's approach and allowed the TDS credit subject to verification. The Tribunal held that TDS credit should align with the year in which the income was reported, emphasizing the need for factual verification to prevent double claims. Referring to a similar case, the Tribunal directed the AO to grant TDS credit in A.Y. 2017-18 based on the income reported for that year.

In conclusion, the Tribunal partly allowed the revenue's appeal for statistical purposes, emphasizing the importance of aligning TDS credit with the year in which corresponding income was offered for taxation. The judgments in similar cases were referenced to support the decision.