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TMI Blog2021 (4) TMI 1140X X X X Extracts X X X X X X X X Extracts X X X X ..... and deduction of TDS was allowed without the corresponding income being declared in the Profit and Loss Account. As per the Agreement entered into between the respondent and M/s.Sun TV Network Limited and for practical purposes, the invoices were raised by them on various Cable Operators and the TDS certificates were issued by the payers (i.e.) the Cable Operators in the name of the respondent assessee, the respondent is entitled to claim the credit for the TDS certificates. Merely because the income has been offered and processed in the hands of M/s.Sun TV Network Limited, credit for TDS deducted in the name of the respondent assessee cannot be denied. It is not in dispute that the respondent assessee has remitted the entire gross amount received from the Cable Operators to M/s.Sun TV Network Limited. The amount remitted by the respondent to M/s.Sun TV Network Limited includes the amount of TDS deducted by the Cable Operators at the time of payment made by them to the assessee - in lieu of the services rendered by the respondent assessee, they are entitled to receive the fixed commission. Since tax has already been deducted and paid to the Government at the time o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... All the three appeals have been filed by the Revenue challenging the orders passed by the Income Tax Appellate Tribunal. Since the issues involved in all these appeals are common, all the three appeals are disposed of by this common judgment. 3.The brief case of the appellant assessee is as follows: (i)For the Assessment Year 2009-10, the assessee filed its return of income declaring an income of ₹ 7,65,36,865/-. The return was processed under Section 143(1) and selected for scrutiny. The Assessing Officer, while completing the assessment under Section 143(3) of the Act, assessed the income at ₹ 7,65,36,865/-. However, the Assessing Officer has not allowed the assessee's claim of credit for TDS of ₹ 1,02,58,243/- on the ground that the concerned income was not offered to tax in the return of income. (ii)For the Assessment Year 2010-11, the assessee filed its return of income declaring an income of ₹ 13,62,81,800/- and the return was processed under Section 143(1) and selected for scrutiny. The Assessing Officer, while completing the assessment under Section 143(3) of the Act, assessed the income at ₹ 13,62,81,800/-. However, the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances of the case,the Appellate Tribunal was right in holding that the assessee is eligible for TDS credit without offering the corresponding income in its hand, which is against the provision to Section 199 of the Income Tax Act? 5.The Tax Case Appeals in T.C.A.Nos.289 of 2016 and 345 of 2016 were admitted on the following substantial questions of law: 1)Whether on the facts and in the circumstances of the case,the Appellate Tribunal was right in holding that the assessee is eligible for TDS credit without offering the corresponding income in its hand, which is against the provision to Section 199 of the Income Tax Act? 2)Whether on the facts and in the circumstances of the case, the Tribunal was right in directing the Assessing Officer to decide the issue by giving credit for TDS deducted on payments which has not been offered as assessee's receipt and this income after ignoring the unambiguous provisions of Section 199(2) of the Income Tax Act? 6.Heard Mr.Karthik Ranganathan, learned Senior Standing Counsel appearing for the appellant Revenue and Mr.Sathish Parasaran, learned Senior Counsel appearing for Mrs.M.Sneha, learned counsel for the respondent asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en taken in the name of the assessee-bank and kept in its possession as a security for the loan advanced to its constituents for the purchase of the bonds. Though the bonds were in the name of the assessee, the interest income from the bonds has not been returned by the assessee as part of its income in the relevant Assessment Year. This is presumably for the reason that the bank itself treated the bonds as security and the interest income from the bonds as the income of the constituents. Since the amounts had been advanced by the assessee- bank to its constituents for the purchase of the bonds, the bank had been collecting the interest on the loans given to its constituents. Therefore, the assessee, on the belief that the income from the bonds is the income of the constituents, has not returned the income from the securities as part of its income. Though these facts were before the ITO at the time of the original assessment, he merely proceeded on the basis of the tax deduction certificate and granted the relief to the assessee, without going into the question as to whether the assessee is entitled in law to get credit for the sum of ₹ 22,975. Normally, before credit is give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bonds is only its constituents. In this case, the Tribunal has placed emphasis on the facts that the bonds are in the name of the assessee and the certificates of deduction have been given in the name of the assessee. That will make the assessee only an ostensible owner. When the assessee itself has admitted that the beneficial owners of the bonds are the constituents, we do not see how a debatable issue arises as to the ownership of the bonds. Even according to the assessee, it is the ostensible owner of the bonds and the real owners are its constituents. This is clear from the stand taken by the assessee that the bonds were purchased with the constituents' money, though they were purchased in the bank's name as security for the payment of the monies advanced to the constituents by the bank. According to us no debatable issue arises on the admitted facts and the facts admitted by the assessee and found by the ITO. It was never the assessee's case that it is the beneficial owner of the bonds purchased. It had the custody of that bonds bought only as a security for repayment of the advances made by it to its constituents. As already stated, once a loan is advanced by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the mistake is treating the assessee as the owner of the securities cannot be treated as a mistake as according to the Tribunal it is a debatable issue, still giving tax credit in a case where the related income has not been offered for assessment is a mistake and that can be taken as the basis by the ITO for initiating proceedings under section 154. (ii)[2017] 84 taxmann.com 53 (Gujarat) ]Naresh Bhavani Shah (HUF) Vs. Commissioner of Income Tax] wherein a Division Bench of Gujarat High Court held as follows: ... 8. It can thus be seen that the Act contains detailed provision for collecting tax at source, depositing such tax with the government revenue and issuance of certificates to the deductee of such tax so deducted. The anxiety of the department, therefore, to ensure the credit of tax deducted at source is given to the rightful person in consonance with the certificate of TDS can easily be appreciated when large number of such transactions in any accounting year are likely to take place. The most dependable identification of the deductee would be his PAN which would be a unique identification number so far as an individual or an entity is concerned. The anxie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deductee and other persons and the income is assessable in their hands in the same proportion as their ownership of the asset: Provided that the deductee files a declaration with the deductor and the deductor reports the tax deduction in the name of the other person in the information relating to deduction of tax referred to in sub-rule (1). (ii) The declaration filed by the deductee under clause (i) shall contain the name, address, permanent account number of the person to whom credit is to be given, payment or credit in relation to which credit is to be given and reasons for giving credit to such person. (iii) The deductor shall issue the certificate for deduction of tax at source in the name of the person in whose name credit is shown in the information relating to deduction of tax referred to in sub-rule (1) and shall keep the declaration in his safe custody. 10.It can thus be seen that under sub-rule 2 of Rule 37BA where whole or part of the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit could be given to such other person and not to the deductee provided the three conditions contained therein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Year for which such income is assessable. Provided that- ( i ) in a case where such person or owner or depositor or unitholder or shareholder is a person, whose income is included under the provisions of section 60, section 61, section 64, section 93 or section 94 in the total income of another person, the payment shall be deemed to have been made on behalf of, and the credit shall be given to, such other person; ( ii ) in any other case, where the dividend on any share is assessable as the income of a person other than the shareholder, the payment shall be deemed to have been made on behalf of and the credit shall be given to, such other person in such circumstances as may be prescribed. [Emphasis supplied] What is clear from the above provision is that the assessee is entitled to credit of tax paid in the assessment in which the income is assessed. In other words, the assessee should claim credit of tax based on TDS certificate in the year in which the assessee returns the income from which deduction is made for the purpose of assessment. Even after the amendment of the section through the introduction of sub-section (3) of Section 199 of the Income Tax Act, the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he income from which tax deducted at source is assessed, we do not know how the Tribunal can over-rule the statutory provisions and allow the claim. In our view, going by the practical difficulty to retain TDS certificates for several years until the interest is returned for assessment on cash basis, prudent assessees should return income on which tax is recovered and remitted by the payer in the Assessment Year following the year in which such income is subject to deduction of tax and remittance by the payer. The assessees who do not do it should follow Section 199 and Rule 37BA, retain the TDS certificates and claim credit in the Assessment Year in which such income is returned for assessment. 12.The finding of the Tribunal that there is no provision in the Income Tax Act or Rules to defer credit of tax in assessments based on TDS certificates obtained is really incorrect because sub-sections (1) and (3) of Section 199 read with Rule 37BA of the Income Tax Rules specifically authorise the assessee to retain TDS certificates and to produce it and claim credit in the year in which income on which recovery of tax made is returned for assessment. As of now, the Act does not provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssees to claim credit based on the very same TDS certificates against the interest income assessed in the year in which such income is assessed. (iv)[2016] 67 taxmann.com 224 (Andhra Pradesh) [ICRCL-KBL (JV) Vs. Assistant Commissioner of Income Tax, Circle-7(1), Hyderabad] wherein a Division Bench of the Andhra Pradesh High Court held as follows: ... 27.On being asked how the Revenue could retain the amount representing the tax deducted at source from the petitioners bills, and not pay it either to the petitioner or to the sub-contractor, Sri T. Vinod Kumar, learned Senior Standing Counsel for Income Tax, would submit that, as the income is assessable in the hands of the sub-contractor, it is they, and not the petitioner, who can claim credit and, whenever any such claim is made, the Department would give them credit for the TDS, and refund the amount in accordance with Rule 37BA of the Rules. It is, however, not in dispute that the sub-contractor has not made any claim for being given credit for the tax deducted at source by the Government from the bills of the petitioner herein. It is not as if there were conflicting claims by the petitioner-JV on the one hand, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the submissions made by the learned senior standing counsel appearing for the appellant Revenue, Mr.Sathish Parasaran, learned senior counsel appearing for the respondent assessee submitted that the provisions of Rule 37BA (2)(i) was amended on 01.11.2011 and the new provisions came into effect only with effect from 01.11.2011 and therefore, the said provision is not applicable to the case of the respondent assessee for the reason that the subject matter of the above appeals are pertaining to the Assessment Years 2009-10, 2010-11 and 2011-12. The learned senior counsel further submitted that the judgments relied upon by the learned senior standing counsel for the appellant Revenue are not applicable to the facts and circumstances of the present appeals. The learned senior counsel further submitted that the respondent assessee was only a collection agent of M/s.Sun TV Network Limited, collecting the Subscription Charges and the invoices, which had been raised in the name of the respondent assessee on the subscription income from the pay channels during the relevant year and remitted to M/s.Sun TV Network Limited, had been accounted. The learned senior counsel further submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n No. 57/2011 dated 24-10-2011, being procedural in nature, would have retrospective effect and has to be given effect to. 20.The Revenue cannot be allowed to retain tax deducted at source without credit being available to anybody. If credit of tax is not allowed to the assessee, and the joint venture has not filed a return of income, then credit of the TDS cannot be taken by anybody. This is not the spirit and intention of law. 21.Therefore, in our view, the Assessing Officer erred in denying the benefit of the TDS mentioned in the TDS certificates filed by the assessees on the ground that the TDS certificate is issued in the name of the joint venture ora Director and not the assessee. 22.In this view of the matter both the appeals are dismissed as they are without any merit. There is no question of law much less any substantial question of law to be considered in these appeals. No costs. 12.On a careful consideration of the materials available on record, the submissions made by the learned counsel on either side and the judgments relied upon by the learned counsel on either side, it could be seen that the Assessing Officer disallowed the assessee's claim on cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome and interest income. Therefore, the Subscription Charges collected on behalf of M/s.Sun TV Network Limited is chargeable as income only in the hands of M/s.Sun TV Network Limited and does not partake the character of any expenditure revenue or capital in the hands of the assessee. 14.As per Section 199(2), credit for TDS can be allowed only when the corresponding income is offered for taxation in the year in which such TDS is claimed and deduction of TDS was allowed without the corresponding income being declared in the Profit and Loss Account. As per the Agreement entered into between the respondent and M/s.Sun TV Network Limited and for practical purposes, the invoices were raised by them on various Cable Operators and the TDS certificates were issued by the payers (i.e.) the Cable Operators in the name of the respondent assessee, the respondent is entitled to claim the credit for the TDS certificates. Merely because the income has been offered and processed in the hands of M/s.Sun TV Network Limited, credit for TDS deducted in the name of the respondent assessee cannot be denied. It is not in dispute that the respondent assessee has remitted the entire gross amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s constituent subcontractor on the other hand, both seeking credit for the tax deducted at source by the Government, necessitating retention of these amounts by the Revenue till resolution of the conflicting claims. In the said case, both the petitioner as well as the sub-contractor sought credit of the tax deducted at source, hence, the said ratio cannot be applied to the cases on hand. 18.Since the provisions of Rule 37BA (2)(i) came into effect only on 01.11.2011, the ratio laid down in the judgment reported in [2017] 84 taxmann.com 53 (Gujarat) ]Naresh Bhavani Shah (HUF) Vs. Commissioner of Income Tax] has no application to the present appeals. 19.So far as the judgment reported in [1987] 30 taxmann 265 (Mad.) [Commissioner of Income Tax Vs. Tanjore Permanent Bank Ltd.] , cited supra, is concerned, the Division Bench of this Court clearly held that when the bonds were taken in the assessee's name and kept in its possession as security for the payment of the money advanced to its constituents, the legal inference which will normally follow from this admission is that the bank has got the custody of the bonds only as a security for the payments of the money advan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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