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2018 (1) TMI 1228 - AT - Income TaxCredit of TDS - TDS claim disallowed on account of the fact that corresponding income was not offered for taxation in the relevant assessment year - Held that - The assessee follows cash system on accounting. The provision of sections of Chapter- XVII Collection and recovery of Tax of the Income Tax Act, 1961 are not charging sections. The deduction of Tax at source is merely one of the mode of collection of tax. Therefore it may not always be possible all the time to co-relate a specific amount of TDS with a specific amount of income earned by the assessee in a particular assessment year. 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. See Chander Shekhar Aggarwal vs. Assistant Commissioner of Income-tax, Circle 37(1), New Delhi, 2016 (2) TMI 420 - ITAT DELHI - Decided in favour of assessee
Issues Involved:
1. Disallowance of TDS claim. 2. Cash system of accounting. 3. Application of Rule 37BA of the Income Tax Rules. Detailed Analysis: 1. Disallowance of TDS Claim: The primary issue in this case revolves around the disallowance of the TDS claim amounting to ?12,07,747/-. The Assessing Officer (AO) did not allow this claim on the grounds that the corresponding income was not offered for taxation in the relevant assessment year. The CIT(A) upheld this disallowance. The assessee contended that the income corresponding to the TDS had already been offered for taxation in the return of income for AY 2011-12, and thus, the disallowance was unjustified. 2. Cash System of Accounting: The assessee follows the cash system of accounting, which means income is recognized upon receipt. The assessee argued that under this system, the income corresponding to the TDS deducted and paid by customers was already included in the return for AY 2011-12. Therefore, the TDS credit should be allowed in the same year. The Tribunal noted that the provisions of Chapter XVII of the Income Tax Act, 1961, which deal with the collection and recovery of tax, are not charging sections but merely modes of tax collection. 3. Application of Rule 37BA of the Income Tax Rules: The Tribunal referred to Rule 37BA, which provides that credit for TDS should be allowed in the year in which the income is assessable. The Tribunal cited the Delhi Bench decision in Chander Shekhar Aggarwal vs. Assistant Commissioner of Income-tax, Circle 37(1), New Delhi, which supported the assessee's position. The Tribunal noted that Rule 37BA(3)(ii) allows credit for TDS across multiple years if the income is assessable over those years. However, this rule is applicable only when the entire compensation is received in advance and not relevant when the assessee follows the cash system of accounting. The Tribunal also referenced the Visakhapatnam Bench decision in Peddu Srinivasa Rao, which held that the amended provisions of Section 199 do not specify the year in which TDS credit should be claimed, implying that credit should be given in the year the TDS is deducted. Conclusion: The Tribunal concluded that the assessee is entitled to the TDS credit in the year the income corresponding to the TDS is offered for taxation. The Tribunal allowed the appeal of the assessee, setting aside the orders of the lower authorities and directing the AO to allow the TDS credit. The Tribunal emphasized that the provisions of Section 198 and 199 of the Income Tax Act support the assessee's claim, as they deem TDS as income received by the assessee for the purpose of computing income. Judgment: The appeal filed by the assessee is allowed, and the AO is directed to grant the TDS credit as claimed by the assessee. The Tribunal's decision is in line with the principles laid out in previous judgments and the relevant provisions of the Income Tax Act and Rules.
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