2022 (5) TMI 1375 - AT - Income Tax

Short credit of Tax Deducted at Source TDS - turnover reported in Form No. 26AS is less than the turnover as per the return of income filed by the Assessee - Assessee before the Assessing Officer explained that the amounts credited represented the income receipts for multiple years and therefore only the income attributable to this assessment year is offered to tax and in support of the same filed copies of the invoices before the Assessing Officer - HELD THAT - The provisions of the Rules cannot overrule the provisions of the Act and where the Act is omitted, the requirement of the income being offered to the assessment, as a condition to obtain credit for TDS, a rule cannot be quoted to deny the TDS credit to the Assessee, what the Act has given to him. Meaning thereby, as per the amended provisions, once the TDS was deducted, a credit of the same has to be given to the Assessee, irrespective of the year to which it relates. In terms of the provisions of Section 199(1) of the Act, once the TDS was deducted, credit of the same is to be given to the Assessee, irrespective of the year to which it relates. Hence, we direct the Assessing Officer to allow the TDS credit as per the Form No. 26AS after verification of the TDS Certificates. As regards to the CIT(A) restricting the credit of TDS to the extent claimed in the return of income, we noted that the Assessee claimed TDS on the interest at Rs. 2,90,623/- as against the TDS deducted on account of interest amounting to Rs. 4,20,856/- as per Form No. 26AS. We direct the Assessing Officer to allow the entire interest, as the Assessee has disclosed the income, i.e. interest income amounting to Rs. 42,44,457/-. We direct the Assessing Officer accordingly.

Issues Involved:
1. Confirmation of the Assessing Officer's action in allowing short credit for Tax Deducted at Source (TDS).
2. Interpretation of Section 199 of the Income Tax Act, 1961, and Rule 37BA of the Income Tax Rules, 1962.
3. Restriction of TDS credit to the extent claimed in the return of income.
4. Allowance of TDS credit for interest income and business receipts.

Issue-wise Detailed Analysis:

1. Confirmation of the Assessing Officer's action in allowing short credit for TDS:
The primary issue in this appeal was whether the Commissioner of Income Tax (Appeals) [CIT(A)] was correct in confirming the Assessing Officer's (AO) action of allowing short credit for TDS amounting to Rs. 6,76,061/-. The AO restricted the TDS claim to Rs. 38,75,279/- corresponding to the income offered to tax amounting to Rs. 18,22,76,362/-, while the assessee claimed TDS of Rs. 42,89,605/-. The CIT(A) further restricted the TDS credit to Rs. 42,89,605/- against the total TDS credit of Rs. 48,41,750/- as per Form No. 26AS.

2. Interpretation of Section 199 of the Income Tax Act, 1961, and Rule 37BA of the Income Tax Rules, 1962:
The CIT(A) and AO interpreted Section 199 of the Act, read with Rule 37BA, to allow TDS credit only to the extent of income offered for tax. The assessee argued that this interpretation was contrary to the provisions of law and the intention of the statute. The Tribunal noted that the Finance Act, 2008, amended Section 199, removing the requirement that TDS credit should be given in the assessment year for which such income is assessable. The amended provision states that TDS shall be treated as a payment of tax on behalf of the person from whose income the deduction was made, irrespective of the year to which it relates.

3. Restriction of TDS credit to the extent claimed in the return of income:
The CIT(A) restricted the TDS credit to the amount claimed in the return of income, which was Rs. 42,89,605/-. The Tribunal observed that the rules cannot override the provisions of the Act. The Tribunal cited various case laws, including decisions from the Hyderabad Bench and the Andhra Pradesh High Court, which supported the view that TDS credit should be allowed irrespective of the year to which it relates, provided the TDS was deducted and paid to the Central Government.

4. Allowance of TDS credit for interest income and business receipts:
The assessee had declared an interest income of Rs. 42,44,457/- and claimed TDS of Rs. 2,90,623/- against the total TDS deducted on account of interest amounting to Rs. 4,20,856/-. The Tribunal directed the AO to allow the entire TDS credit as per Form No. 26AS after verifying the TDS certificates. The Tribunal emphasized that once TDS was deducted, credit for the same should be given to the assessee irrespective of the year to which it relates.

Conclusion:
The Tribunal concluded that the AO and CIT(A) erred in restricting the TDS credit. The Tribunal directed the AO to allow the full TDS credit as per Form No. 26AS, after verification of the TDS certificates. The appeal of the assessee was partly allowed, and the AO was instructed to allow the entire interest income TDS credit as the income was disclosed by the assessee. The Tribunal's decision ensures that the assessee receives the full benefit of the TDS deducted and paid to the Central Government.

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