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2025 (2) TMI 772 - HC - Income TaxDenying credit for Tax Deduction at Source (TDS) - Whether ITAT erred in confirming the action of the Respondent in denying the credit for the TDS amount although TDS Certificates stood in the name of the Appellant and credit could be given only to the Appellant as the deductee and not to any one else? - HELD THAT - It is not in dispute that the income corresponding to the TDS was not offered to tax by the appellant. It is stated to have been offered to tax by ISPL alongwith the TDS. The Appellant has not placed on record as to what was the exact position in respect of the returns of the ISPL qua the said amount and whether the ISPL in offering the relevant income has claimed TDS or otherwise. Admittedly in the present case the assessee has filed a NIL return. It would not require any elaboration that the TDS is on the income/receipt of the assessee and forms part of the income of the assessee. Thus when there is no income being offered qua the corresponding TDS and as TDS is part of the assessee s income the position being taken by the appellant is a position contrary to its returns. There cannot be a situation that the principal income corresponding to the TDS as claimed is not offered for assessment as a NIL return is filed however merely the benefit of TDS income is claimed. This would be contrary to the provisions of Section 198 which provides that the tax deducted at source would be the income received. Admittedly in the present case for the Assessment Year in question independent tax returns have been filed by the assessee as also by the ISPL. Thus such incongruence and a position contrary to the return of the appellant goes contrary to the provisions of Section 198 read with Section 199 of the Income Tax Act. Decided in favour of the Revenue.
1. ISSUES PRESENTED and CONSIDERED:
- Whether the Appellant is entitled to credit for Tax Deduction at Source (TDS) amounting to Rs. 30,10,549. - Interpretation of Section 199 and related provisions of the Income Tax Act regarding TDS credit. 2. ISSUE-WISE DETAILED ANALYSIS: Relevant legal framework and precedents: The case involves the denial of TDS credit to the Appellant based on the interpretation of Section 199 and related provisions of the Income Tax Act. Court's interpretation and reasoning: The Court observed that the Appellant had not disclosed the income corresponding to the TDS claimed and had filed a NIL return. The Court emphasized that TDS is considered part of the assessee's income and must be offered for assessment. The Court found the Appellant's position contrary to the provisions of Section 198 and 199 of the Income Tax Act. Key evidence and findings: The Appellant had transferred its income to another entity, ISPL, without offering it for tax assessment. The TDS amount was not reflected in the Appellant's accounts, and the income was declared by ISPL along with TDS in its return. Application of law to facts: The Court held that the Appellant's claim for TDS credit was not justified as it did not disclose the income corresponding to the TDS and filed a NIL return, contrary to the provisions of the Income Tax Act. Treatment of competing arguments: The Appellant argued that it should be granted TDS credit as the TDS Certificates were in its name, and the income was transferred to ISPL. The Respondent contended that the Appellant's position was a tax avoidance arrangement and requested a remand to assess ISPL's tax filings. Conclusions: The Court dismissed the appeal, upholding the decisions of the lower authorities. It found no merit in the Appellant's claim for TDS credit, considering the failure to disclose the income corresponding to the TDS and the filing of a NIL return. 3. SIGNIFICANT HOLDINGS: - The Court emphasized that TDS is part of the assessee's income and must be offered for assessment, as per Section 198 and 199 of the Income Tax Act. - The Appellant's failure to disclose the income corresponding to the TDS and filing a NIL return led to the denial of TDS credit amounting to Rs. 30,10,549. - The Court rejected the Appellant's arguments and upheld the decisions of the lower authorities, ruling in favor of the Revenue.
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