2024 (11) TMI 1260 - AT - Income Tax

Credit of TDS - as per DR claim of the assessee is not in conformity with the provisions of Rule 37BA(3)(ii) - HELD THAT - The provisions of section 199 of the Act, deals with credit for taxes deducted and as per the said provisions, any deduction made in accordance with the foregoing provisions of this Chapter and paid to the Central Government, shall be treated as a payment of tax on behalf of the person from whose income, the deduction was made. Rule 37BA(3)(ii) of the Income Tax Rules, 1962, deals with the credit for tax deducted at source and paid to the Central Govt. and as per said rule credit for TDS shall be given for the A.Y for which such income is assessable. We find, there is no dispute with regard to the provisions of section 199 r.w Rule 37BA(3)(ii) of the Income Tax Rules, 1962, however, whether the said provision is applicable to the given facts of the present case are not is to be seen. Admittedly, the assessee has received mobilization advances of Rs. 157.65 crores on which the TDS of Rs. 3,15,30,612/- has been deducted. CIT (A) has recorded a categorical finding that the works allotted to the appellant for which mobilization advance has been paid was cancelled. Once the contract awarded to the appellant got cancelled and no income accrues to the assessee from the said contract, then the question of spreading the income over the years does not arise and consequent Rule 37BA(3)(ii) cannot be applied to the assessee. Since the findings of the facts recorded by the learned CIT (A) that, works awarded to the appellant has been cancelled and mobilization advances received from the principal has been returned net of taxes, in our considered view, the assessee has rightly claimed credit for TDS deducted on said mobilization advance, because there is no income to be offered in the subsequent financial years. No error in the reasons given by the learned CIT (A) to allow credit for the impugned A.Y - Decided against revenue.

Summary

Issues:
Allowance of TDS credit under Rule 37BA(3)(ii) of the Income Tax Rules, 1962 for A.Y. 2017-18.

Analysis:
The appeal by the Revenue challenged the order of the CIT (A) regarding the allowance of TDS credit under Rule 37BA(3)(ii) of the Income Tax Rules, 1962 for A.Y. 2017-18. The Revenue contended that the CIT (A) erred in directing the Assessing Officer to allow the TDS credit without considering the provisions of Rule 37BA(3)(ii) and section 199 of the Income Tax Act, 1961. The appellant had received mobilization advance on which TDS was deducted, but the works were later cancelled, leading to a claim for TDS credit for the A.Y. 2017-18. The CIT (A) relied on the decision of ITAT Ahmedabad in a similar case and directed the Assessing Officer to allow the TDS credit, stating that Rule 37BA(3)(ii) was not applicable in this scenario. The Revenue argued that the CIT (A) erred in not considering the provisions of section 199 and Rule 37BA(3)(ii) which allow credit for TDS only in the year in which income is offered to tax. The Revenue sought to set aside the CIT (A) order and uphold the Assessing Officer's decision.

The learned Counsel for the assessee contended that the appellant rightly claimed TDS credit for A.Y. 2017-18 as the works were cancelled, and there was no income to be offered for subsequent years. The CIT (A) correctly held that section 199 and Rule 37BA(3)(ii) were not applicable to the appellant in this case and directed the Assessing Officer to allow the TDS credit. The appellant argued that there was no error in the CIT (A) decision, and it should be upheld.

The Tribunal analyzed the provisions of section 199 and Rule 37BA(3)(ii) of the Income Tax Rules, 1962. It noted that while these rules govern the credit for TDS, their applicability to the present case needed assessment. The Tribunal observed that the appellant had received mobilization advance on which TDS was deducted, but the works were cancelled, resulting in no income accrual. As per the facts, the Tribunal agreed with the CIT (A) that Rule 37BA(3)(ii) did not apply in this scenario, and the appellant rightly claimed TDS credit for the relevant assessment year. Therefore, the Tribunal upheld the CIT (A) decision and dismissed the Revenue's appeal.

In conclusion, the Tribunal upheld the CIT (A) decision to allow TDS credit for A.Y. 2017-18, based on the cancellation of works and the absence of income to be offered in subsequent years, concluding that Rule 37BA(3)(ii) did not apply in this context.