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TMI Blog2025 (3) TMI 592X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant is eligible to claim credit for TDS of Rs. 5,20,58,733 in its hands." 2. The brief facts of the case are that the assessee is a non-integrated work sharing Joint Venture (JV) constituted by Hindustan Construction Company Limited (HCCL) and Costal Projects Ltd (CPL). The assessee had entered into agreements with North-East Frontier Railway (NFR), a Central Government Agency, for execution of works relating to 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 profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een deducted is assessable in the hands of a person other than the deductee, credit for the whole or part of the TDS, as the case may be, shall be given to such other person and not to the deductee. In the instant case, NFR is the deductor, the JV (assessee) is the deductee, and the constituent partners are the persons in whose hands the income is assessable. Therefore, even as per Rule 37BA of the IT Rules, 1962, the assessee 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 Therefore, rejected the arguments of the assessee and withdrawn credit for TDS of Rs. 5,20,58,733/-.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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not eligible to claim credit of taxes and the same is allowable only in the hands of its constituents. (d) The facts of the judicial pronouncement in the case of IVRCL-KBL (JV) Vs ACIT Circle 7(1), Hyderabad, (2016) 67 Taxmann.com 224 (AP) are different from the case of the assessee and hence, the same cannot be applied to the case of the assessee. In the circumstances, it is seen that none of the arguments put forth 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deductee. Since the assessee has distributed the contract receipts between its constituent partners and the constituent partners have executed the work, the income relatable to the said contract is assessable in the hands of the constituent partners, and consequently, the constituent partners alone can claim credit for TDS, but not the assessee and therefore, rejected the submissions of the assessee and upheld the reasons 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds of the constituent partners, but not in the hands of the assessee. Since the income on which TDS has been deducted is not assessable in the hands of the assessee, the Assessing Officer has rightly denied the credit for TDS and therefore, the order of the Assessing Officer and LD.CIT(A) should be upheld. 10. We have heard both the parties, perused the material on record and gone through the orders of the authorities below. 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 rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, makes it very clear that if the income of one person is included in the total income of any other person, then the other person shall be entitled to a refund, but not the person in whose name TDS has been credited. The Assessing Officer was of the opinion that the income of the assessee was included in the income of the constituent partners and, therefore, invoked provisions of Section 238(1) of the Act. In our 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 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. (ii) 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. (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 ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuent partners. However, the fact remains that the 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, 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 gros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o deducted tax at source from the bills of the latter. Credit for the tax deducted at source, by the petitioner from the bills of the sub-contractor, was given to the sub-contractor as such income was assessable in their hands. Likewise credit for the tax deducted at source, from the bills of the petitioner, was required to be given to the petitioner alone as the income, from the contract entered into between them and the 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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