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2016 (2) TMI 420 - AT - Income TaxEntitlement to credit of the entire TDS offered - in the opinion of the revenue, the assessee would not be entitled to credit of the entire TDS of ₹ 10/- but would be entitled to proportionate credit only - Held that - Auppose as assessee who is following cash system of accounting raises an invoice of ₹ 100/- in respect of which deductor deducts TDS of ₹ 10/- and deposits to the account of the Central Government. Accordingly, the assessee would offer an income of ₹ 10/- and claim TDS of ₹ 10/-. However in the opinion of the revenue, the assessee would not be entitled to credit of the entire TDS of ₹ 10/- but would be entitled to proportionate credit only. Now let us assume that ₹ 90/- is never paid to the assessee by the deductor. In such circumstances, ₹ 9/- which was deducted as TDS by the deductor would never be available for credit to the assessee though the said sums stand duly deposited to the account of the Central Government. Rule. 37BA(3) of the Act cannot be interpreted so as to say that TDS deducted at source and deposited to the account of the Central Government is though income of the assessee but is not eligible for credit of tax in the year when such TDS was offered as income. This view is otherwise also not in accordance with the provisions contained in section 198 and 199 of the Act. The proposition as laid out by the CIT(A) and learned DR before us therefore cannot be countenanced. Thus the claim of the assessee is allowed in as much as it is held that the assessee would be entitled to credit of the entire TDS offered as income by the assessee in his return of income. - Decided in favour of assessee. Restriction of credit of TDS - Held that - Having regard to the submission of assessee TDS certificates were furnished by the assessee and such credit was also reflected in 26AS statement prepared by the revenue except to the sum of ₹ 4,10,870/- for which, confirmations have been furnished by the assessee, we feel it appropriate that the issue be restored to the file of the Assessing Officer with a direction that the credit be allowed to the assessee of the entire TDS in respect of which, TDS certificate has been furnished by the assessee in accordance with section 198 read with section 199 of the Act. - Decided in favour of assessee. for statistical purposes.
Issues Involved:
1. Legality of the demand raised by the Assessing Officer (AO) while processing the return of income under section 143(1) of the Income Tax Act. 2. Entitlement to tax credit for Tax Deducted at Source (TDS) claimed by the assessee. 3. Application of Section 199 of the Income Tax Act read with Rule 37BA(3) of the Income Tax Rules. 4. Assessment of interest levied under section 234C of the Income Tax Act. Issue-wise Detailed Analysis: 1. Legality of the Demand Raised by the AO: The assessee contested the demand of Rs. 11,37,710/- including interest of Rs. 2,74,677/- raised by the AO without providing any opportunity or material evidence. The Tribunal noted that the AO, in an intimation dated 27.9.2011 under section 143(1), allowed credit of TDS of Rs. 71,20,267/- against the claimed TDS of Rs. 79,91,290/-, withholding credit of Rs. 8,71,023/- and raising the demand. The Tribunal found the AO's action to be procedurally flawed as no opportunity was given to the assessee to present their case. 2. Entitlement to Tax Credit for TDS: The assessee claimed a TDS credit of Rs. 80,16,290/- based on TDS certificates provided, whereas the AO restricted the credit to Rs. 71,20,267/-. The Tribunal observed that the CIT(A) upheld the restriction based on Rule 37BA(2), which requires TDS credit to be allowed on a pro-rata basis in the year the income is assessable. However, the Tribunal found that the assessee, following the cash method of accounting, had declared the entire TDS as income in the return. The Tribunal held that the assessee is entitled to the full TDS credit in the year it was deducted, as per sections 198 and 199 of the Income Tax Act, which deem TDS as income received. 3. Application of Section 199 Read with Rule 37BA(3): The CIT(A) concluded that TDS credit should be given in the year the income is assessable, as per Rule 37BA(3). The Tribunal, however, disagreed, stating that Rule 37BA(3) applies where income is assessable over multiple years, which is not the case here since the assessee follows the cash method of accounting. The Tribunal emphasized that TDS deducted and deposited to the Central Government should be credited to the assessee in the year it is deducted, aligning with sections 198 and 199. The Tribunal supported its view with precedents from the Visakhapatnam Bench in the case of Peddu Srinivasa Rao and the Ahmedabad Bench in the case of Sadhbav Engineering Ltd. 4. Assessment of Interest Levied under Section 234C: The assessee argued that the interest of Rs. 2,74,677/- levied under section 234C was erroneous. The Tribunal, after allowing the assessee's claim for full TDS credit, directed the AO to reassess the interest under section 234C accordingly, as the initial demand was based on restricted TDS credit. Conclusion: The Tribunal allowed the appeal, directing the AO to grant full TDS credit as claimed by the assessee and to reassess the interest under section 234C. The Tribunal restored the issue of TDS credit restriction to the AO for verification and appropriate action in accordance with sections 198 and 199 of the Income Tax Act. Order Pronounced: The appeal was allowed, and the order was pronounced in open court on 11th January 2016.
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