The below judgement was pronounced by Delhi Bench of ITAT on 31.03.2022 in case of M/s. Kema India Private
Limited Vs. ITO Ward-14(3), New Delhi ITA No.1616/Del/2020 for AY 2015-16.
Brief Facts of the case:
The appellant is a Private Limited Company engaged in the business of energy supply, environment and quality assurance wherein it acts as consultants and technical advisors.
The return for the assessment year 2015-16 was taken up for scrutiny through CASS and statutory notice u/s 143(2) and subsequent notice u/s 142(1) were issued to the assessee and the ld. AO had made various additions including the disputed addition of Rs. 1,80,69,098/- on the basis that it was observed that in Form no. 26AS of the assessee that there is a credit of Rs. 1,80,69,098/- from M/s. Coastal Gujarat Power Limited and on same amount TDS @ 10% has been deducted u/s 194J of the Act by M/s. Coastal Gujarat Power Limited and assessee has claimed the refund of Rs. 18,06,970/- on this deducted amount but on perusal of P & L Account of the assessee it was observed that the assessee had not taken this amount as revenue receipt or revenue from operations.
The Ld. AO observed that the assessee has been maintaining the books of accounts on mercantile basis. When the assessee received the payment, the amount received was the income of the year during which such amount was received.
Ld. Counsel submitted that it is a settled proposition of law that the credit of TDS can be claimed only on receipt of TDS certificate in the light of provisions of Section 199 of the Act read with Rule 37 BA of the Income Tax Rules. In this context, he relied the judgment Hon’ble Punjab & Haryana High Court in the case of Commissioner of Income Tax vs. Abbott Agency Ludhiana (2014) 224 taxmann 350. He relied judgment of ITAT Delhi Bench in case of Escorts Limited vs. DCIT Circle 11(1) reported in 15 SOT 368 to contend that the
revenue cannot refuse to give credit merely by contending that the income had not been disclosed in return filed by assessee.
Ld. Counsel relied judgment of Delhi ITAT in case of DCIT, Circle 4 (1) vs. M/s. Lloyd Insulation India Ltd. ITA no. 2400/Del/2011 to contend that the nexus between TDS and the corresponding income element is only notional / conceptual. Ld. Counsel submitted that income corresponding to the TDS claim made by the appellant has already been offered to tax in earlier years. So, the appellant cannot be denied the credit of TDS made on such income.
These provisions i.e. section 199 read with rule 37BA establish that the amount of tax deducted at source by the payer is treated as payment of tax on behalf of the payee and the credit for such tax deducted and paid is allowed for the assessment year for which such sum is assessable. The ld. F.A.A. has allowed ground no. 3 of the appellant while directing Ld. AO to verify the fact if appellant had offered revenue to tax in the earlier years and based upon same consider the deletion but at the same time disallowed the credit for the TDS for the reason that no income has been offered for tax during the year under consideration.
ITAT Observation and Judgement:
The Bench is of considered view that the provisions of Section 199 of the Act and Rule 37BA of the IT Rules do not in any way require that it is only on offering income assessable to tax in that year, the credit for TDS can be allowed. Meaning thereby that, even if the income offered is NIL, then also credit of TDS can be given as the claim of credit is not in the form of an adjustment or a deduction from taxable income but TDS being one of the modes of payment of tax, give rise to a claim of refund which can very well be raised in a case where there is no assessable income in the corresponding year.
It is coming up from record that appellant offered a total revenue of Rs 4,47,11,66 in AY 2012-13 and 2013-14, which stand accepted by the revenue. In these two FYs Rs 2,66,76,599 were reflected in the Form 26AS and in present FY no income was reflected as per P&L Account but Rs 1,80,69,097 was mentioned in the form 26AS. Thus, there was discrepancy of Rs 34,030/- in total revenue offered to tax by the appellant and that reflected in Form 26AS. This difference has been sustained by the Ld. FAA while being justified in directing the Ld. AO to verify the Revenue offered to Tax in earlier years and on satisfaction, the same is to be allowed. Ld. AR has submitted before this Bench, that findings of Ld. FAA in regard to this difference of Rs 34,030/-, is not disputed.
Thus, in the present case where the assessee has claimed to have offered the revenues for tax in previous years and the Ld. F.A.A. has directed Ld. AO to verify the same and Revenue does not dispute the fact that in present assessment year, in the form no. 26AS of the appellant, Rs. 18,06,910/- TDS was made by M/s. Coastal Gujarat Power Ltd., the assessee is entitled to its credit by way of refund, in spite of not offering any income for tax, arising from P & L Account, in present assessment year. Ld. FAA erred in making the credit dependent on offering of taxable income only. Thus, the ground no. 1 and 2 arising out of disallowing the credit of TDS amounting to Rs. 18,06,910/- deserve merit.
As a consequence of above discussion, the appeal of the assessee is allowed.
To download the full Order CLICK ME.