2022 (8) TMI 98 - AT - Income Tax

Credit of tds - availability of TDS credit in the appropriate assessment year - TDS credit cannot be postponed to a different assessment year on the basis of deduction carried out by the deductor when the accrued income from such transact ion has been reported in the earlier assessment year - 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, the Revenue has allowed the credit in the subsequent assessment year when the TDS is shown to have been credited in the form 26AS. As stated on behalf of the assessee, the corresponding income will not be found to be recorded and therefore such direct ion would belie the letter and spirit of Sect ion 199(3) and Rule 37BA(3) thereto. Thus, on first principles, we are inclined to agree with the stand taken on behalf of the assessee for eligibility TDS credit in the Assessment Year 2016-17 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 that 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 2016-17 itself provided; (i) the assessee has not claimed any credit of TDS in any other assessment year; (ii) an undertaking/affidavit is placed by the assessee before the Revenue Authorities to lend assurance that such credit claimed in Assessment Year 2016-17 shall not be doubly claimed in any other assessment year in future based on form 26AS or any other document. On being satisfied, the AO 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 fi le of the AO for grant of credit in accordance with law.

Summary

Issues:
- Discrepancy in granting TDS credit for Assessment Year 2016-17
- Postponement of TDS credit to Assessment Year 2017-18
- Interpretation of Section 199(3) and Rule 37BA(3) regarding TDS credit

Analysis:
The appeal was filed against the Commissioner of Income Tax (Appeals) order concerning the assessment for Assessment Year 2016-17. The assessee declared an income for that year and claimed credit for TDS deducted in the subsequent Assessment Year 2017-18. The Assessing Officer did not grant credit for TDS in 2016-17 as it was not reflected in form 26AS for that year. The CIT(A) directed the credit to be allowed in 2017-18 based on form 26AS for that year, leading to the appeal before the Tribunal.

The Tribunal analyzed the provisions of Section 199(3) and Rule 37BA(3) of the Income Tax Act, which state that TDS credit should be given for the assessment year in which the income is assessable. Referring to a previous decision, the Tribunal held that TDS credit cannot be postponed to a different assessment year if the income from the transaction has been reported in an earlier assessment year. Therefore, the Tribunal agreed with the assessee's claim for TDS credit in Assessment Year 2016-17 itself.

However, the Tribunal noted that there was no evidence to show whether the TDS credit reflected in form 26AS for Assessment Year 2017-18 had been claimed in that year. To prevent double claiming, the Tribunal directed the assessee to provide an undertaking that the credit claimed in 2016-17 would not be claimed again in any future assessment year. Once satisfied, the Assessing Officer was instructed to grant the TDS credit for 2016-17. The CIT(A)'s order was set aside, and the case was remanded to the Assessing Officer for granting credit in accordance with the law.

In conclusion, the appeal of the assessee was allowed for statistical purposes, and the Tribunal's decision was pronounced in open court on 07/06/2022.