9911796707
TMI Blog2025 (3) TMI 592X X X X Extracts X X X X X X X X Extracts X X X X ..... t partners as its expenses and therefore, from the above project, the assessee has reported a nil profit. However, it does not mean that the assessee has not reported any profit or loss from the project. Therefore, we are of the considered view that, going by the provisions of Section 238(1) of the Act, and facts of the present case, the Assessing Officer is completely erred in invoking Section 238(1) of the Act, to deny the credit for TDS to the assessee.' Assessee itself has disclosed the relevant profit or loss from the above contract in its hands and also claimed corresponding TDS deducted, in terms of Section 199(1) of the Act and Rule 37BA(1) of the I.T. Rules, 1962. Further, as per Section 199(1) of the Act, any deduction made, in accordance with the foregoing provisions of this Chapter and paid to the Central Government, shall be treated as payment of tax on behalf of the person in whose name the deduction was made and in the present case, going by the facts available on record, there is no dispute with regard to the fact that NFR has deducted TDS on the payment made to the assessee and also remitted TDS to the Central Government account in the name of the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o construction of railway tunnels. The constituents entered into a Joint Venture Consortium Agreement on 28.04.2010, wherein the allocation of total work to the constituents is 60% to HCCL and 40% to CPL. The JV did not execute any contract work and the gross contract receipts from NFR were distributed between the two constituent partners in the ratio stated above and the constituent partners executed the work. NFR deducted tax at source from the gross contract amounts paid to the assessee under Section 194C and credited to the Central Government account. The assessee in the books of accounts credited gross contract receipts from NFR, as its Revenue from operations and amount distributed to constituent partners as other expenses. The assessee has declared nil profits from the contract works. 3. The assessee company has filed its return of income for A.Y. 2018-19 on 31.10.2018 declaring total income of Rs. nil and claimed TDS refund of Rs. 5,20,58,733/-. The case was selected for scrutiny and during the course of assessment proceedings, the Assessing Officer observed that the assessee company has awarded works contract by NFR, a central Government Agency for execution of works rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee is not entitled for credit for TDS, as the income is assessable in the hands of the constituent partners. Further, as per the provisions to Rule 37BA, the deductee shall file a declaration with the deductor, and the deductor shall report the tax deduction in the name of the other person as per Rule 37BA(2)(i). Since NFR has deducted TDS in the name of the assessee and reported it accordingly, the assessee is not entitled to credit for TDS in terms of Section 199 read with Rule 37BA of the I.T. Rules, 1962. Therefore, rejected the arguments of the assessee and withdrawn credit for TDS of Rs. 5,20,58,733/-. The relevant findings of the AO are as under: "4.4. The assessee was issued a show cause notice on 29.01.2021, requiring it to explain as to why the TDS credit should not be withdrawn. A copy of the draft assessment order was al included in the show cause notice. In response to the show cause notice, the assessee uploaded a response on 15.02.2021. The arguments put forth by the assessee and the reasons why the same are not acceptable are discussed herein under; (a) It is stated that the provisions of section 238(1) are not applicable to the assessee. This argument of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee JV are fit for acceptance. Accordingly, the same are not accepted. 4.5. On going through the provisions related to credit of TDS in the Income Tax Act and Income Tax Rules, it is clear that all provisions contained in section 238 and 199 of the Act and Rule 37BA of the Rules are perfectly in consonance with each other. The action of the assessee is out of place and does not fit in the enactment. By raising invoices, taking all liabilities of work contract and receiving payments of contract proceeds, the assessee JV declares before the N.F. Railway to be the rightful owner of the receipts and consequently the corresponding income. However, before Income Tax Department, the assessee JV puts up a different stand. In view of the provisions contained in section 238 and 199 of the Act and Rule 37BA of the Rules, it is clear beyond any doubt that the assessee JV cannot be granted credit of the TDS amount claimed by it in its ITR. The facts of the case referred by the assessee are different from the case of the assessee and hence the same cannot be applied to the case of the assessee. 4.6. In light of the above discussions, the credit of TDS of Rs. 5,20,58,733/- claime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given by the Assessing Officer to withdraw the credit for TDS. 7. Aggrieved by the order of LD.CIT(A), the assessee is in appeal before the Tribunal. 8. The Ld. AR for the assessee, Shri G.V.N. Hari, Advocate, submitted that the Ld. CIT(A) erred in upholding the denial of credit for TDS by the Assessing Officer without appreciating the fact that the provisions of Section 238(1) of the Act read with Rule 37BA(2)(i) of the I.T. Rules, 1962, do not apply to the assessee. The learned counsel for the assessee, referring to Section 238(1) of the I.T. Act, 1961, submitted that as per the said provision, when the income of one person is included in the total income of another person under the provisions of the Act, the latter alone shall be entitled to a refund under this Chapter in respect of such income. Since the contract receipts from NFR are assessable in the hands of the assessee, the provisions of Section 238(1) are not applicable. The learned counsel for the assessee further, referring to Section 199(1) of the Act and Rule 37BA of the I.T. Rules, 1962, submitted that as per Section 199 of the Act, the tax deduction shall be treated as payment of tax on behalf of the deductee. Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elow. There is no dispute with regard to the fact that the assessee is a JV / Consortium with two constituent partners i.e., HCCL and CPL. The assessee company was awarded a contract by NFR, which deducted TDS on the gross contract receipts as per Section 194C of the Act, and reported it in the name of the assessee company, as required under the law. The assessee company has distributed the gross contract receipts in the ratio agreed upon between the constituent partners, who subsequently executed the contract works. There is no dispute with these facts. Further, the assessee company has accounted for the gross contract receipts received from NFR, as its income from operations and has treated the payment made to the constituent partners, as its expenses, in the ratio as agreed upon between the partners. Thus, the assessee company reported zero profit from the contracts in its books of accounts, filed its return of income accordingly, and also claimed a refund of TDS deducted by NFR, which was remitted in the name of the assessee. The Assessing Officer has withdrawn the refund claimed by the assessee on the ground that income relatable to the contract receipts from NFR was not offer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r considered view, the Assessing Officer has grossly misunderstood the provisions of Section 238 of the Act, in as much as, going by the facts of the present case, the income relatable to gross contract receipts from NFR was disclosed by the assessee in its books, and filed ITR for the impugned assessment year, which is evident from the ITR and financial statements, where the assessee has credited the gross contract receipts as income and debited the payments made to constituent partners as expenses, and thereby disclosed nil profit from the contract works. Therefore, from the evidence filed by the assessee, there is no dispute that the profit or loss from the contracts, on which TDS has been deducted under Section 194C of the Act and remitted in the name of the assessee, has been considered in the hands of the assessee alone and not in the hands of the constituent partners, as alleged by the Assessing Officer. The Assessing Officer, merely because the assessee has transferred the gross contract receipts on back to back basis to constituent partners, has assumed that the profit from such contracts, is also transferred to the constituent partners. However, the fact remains that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s safe custody. (3) (i) Credit for tax deducted at source and paid to the Central Government, shall be given for the assessment year for which such income is assessable. (ii) Where tax has been deducted at source and paid to the Central Government and the income is assessable over a number of years, credit for tax deducted at source shall be allowed across those years in the same proportion in which the income is assessable to tax. [(3A) Notwithstanding anything contained in sub-rule (1), sub-rule (2) or sub-rule (3), for the purposes of section 194N, credit for tax deducted at source shall be given to the person from whose account tax is deducted and paid to the Central Government account for the assessment year relevant to the previous year in which such tax deduction is made.] (4) Credit for tax deducted at source and paid to the account of the Central Government shall be granted on the basis of- (i) the information relating to deduction of tax furnished by the deductor to the income-tax authority or the person authorised by such authority and (ii) the information in the return of income in respect of the claim for the credit, subject to verification in accordance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, shall be treated as payment of tax on behalf of the person in whose name the deduction was made and in the present case, going by the facts available on record, there is no dispute with regard to the fact that NFR has deducted TDS on the payment made to the assessee and also remitted TDS to the Central Government account in the name of the assessee, which is evident from Form 26AS filed by the assessee. 15. Further, as per Rule 37BA(1) of I.T. Rules, 1962, it is abundantly clear that credit for tax deducted at source and paid to the Central Government account shall be given to the person to whom payment has been made or credit has been given. Since the payment has been made to the assessee and credit has been given to the assessee towards TDS deducted on gross contract receipts, in our considered view, the assessee alone is eligible to claim credit for TDS in accordance with Section 199(1) and Rule 37BA(1) of the I.T. Rules, 1962. Therefore, we are of the considered view that the Assessing Officer and LD.CIT(A) have erred in withdrawing the TDS credit claimed by the assessee in the return of income filed for the impugned assessment year. 16. In this regard, the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government of Andhra Pradesh, was assessable only in their hands, and not in the hands of the sub-contractor. 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 its constituent sub-contractor on the other, 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. As held by the Division Bench of High Court, in Bhooratnam and Co.24, the Revenue cannot be allowed to retain the amounts representing the tax deducted at source without credit being given to anybody. If credit of tax is not allowed to the petitioner-assessee, and the sub-contractor has not made any claim for refund, it would result in credit of the TDS not being taken by anybody and this, as has been rightly pointed out by the Division Bench in Bhooratnam and Co.22, is not the spirit and the intention of the law. To the limited extent the assessing authority denied credit to the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
