Credit of TDS Deducted by Clients before Actual Payment in earlier years can be Adjusted against Total Taxable Amount payable u/s 199 r/w Rule 37BA: ITAT [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) has held that Credit of TDS deducted by clients before actual payment in earlier years can be adjusted against the total taxable amount payable u/s 199 r/w Rule 37BA.

The appellant, Chirag M. Shah is an individual and Chartered Accountant by profession. The appellant filed an Income Tax Return declaring a total income of Rs. 14,31,540/- wherein tax payable worked is Rs. 2,67,246/-. The appellant is following the cash basis of the system of accounting and he offered the tax of the professional fees income on a receipt basis i.e., on a cash basis. The appellant’s client/deductor has made TDS in the earlier years. As the appellant is following the cash basis system of accounting through the TDS is being made in the earlier years the appellant claimed TDS credit in the current year where the professional fees were paid to receive.

The appellant claimed a refund of Rs. 29,488/-. The Computer Processing Centre (CPC), while proceeding with the refund application of the appellant, has given TDS credit of Rs. 62,721/- only and raised a tax demand of Rs. 2,46,857/-.

Aggrieved by the order of CPC appellant approached CIT (A), which directs the AO to give TDS credit for the deductions made in F.Y. 2013-14 only, and the rest has not acceded. The Appellant then filed a second appeal before the ITAT.

The Tribunal by relying on the decision of the Jurisdictional High Court in the case of Naresh Bhavani Shah (HUF) vs. CIT has observed that it is crystal clear that there are provisions under the IT Act; namely, section 199 of the IT Act, 1961 and Rule 37BA of the IT Rules, 1962 and the proper mechanism is also provided under the Act and Rules to give credit of the tax deducted at source in earlier years.

The Coram of Smt. Annapurna Gupta, Accountant Member, and Mr. T.R. Senthil Kumar, Judicial Member have held that “respectfully following the ratio of the Jurisdictional High Court judgment, the assessee is entitled to get credit on TDS of Rs.2,96,734/-. Hence, this ground of appeal raised by the assessee is allowed by setting aside the orders passed by lower authorities and directing the DCIT, and CPC to pass fresh orders giving proper opportunities to the assessee and in accordance with law within a period of 12 weeks from the date of receipt of this order”.

Mr. Mansih J Shah and Mr. Jimi Patel appeared for the appellant and Mr. Alpesh Parmar appeared for the revenue.

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