The Chennai bench of the Income Tax Appellate Tribunal ( ITAT ) has ruled that the Section 155(14) of the Income Tax Act, 1961 cannot restrict the Tax Deduction at Source ( TDS ) credit if the income is properly disclosed in the Income tax Returns ( ITR ).
The ITAT bench observed that “once TDS is deducted and deposited with the Central government, the only mechanism with the assessee to claim the refund of the same would be through filing of Income Tax Return which is the correct way of claiming the TDS credit.”
The assessee is a non-resident company incorporated in the United States of America ( USA ). The assessee returned income of Rs.37.95 Crores and claimed refund of Rs.3.51 Crores. It transpired that the assessee earned contractual royalty income from M/s Dassault Systems India Pvt. Ltd. and offered the same to tax.
However, in the financial statements, the assessee offered royalty income of Rs.37.86 Crores whereas as per Form 26AS, the payer entity paid an amount of Rs.69.83 Crores to the assessee after deducting tax at source for Rs.7.62 Crores.
The assessee explained that the amount reflected in Form 26AS represents gross invoices raised by the assessee which, in turn, are based on the amounts reported by the deductor payer in its TDS returns. However, the assessee has raised a few credit notes subsequent to raising of invoices which were not reflected in Form 26AS since the same would not have any TDS implications.
Mr. S.P. Chidambaram representing the assessee invoking the provisions of Section 155(14), restricted TDS credit in proportion to the income reflected by the assessee in the financial statements and denied the TDS credit of balance amount.
Mr. Nandakumar representing the revenue has submitted that the assessee could have insisted the deductor to file revise TDS return and claim the excess TDS amount from the deductor. However, once TDS was deducted and deposited with the Central government, the only mechanism with the assessee to claim the refund of the same would be through filing of Income Tax Return which is the correct way of claiming the TDS credit.
The bench of V. Durga Rao (Judicial member) and Manoj Kumar Agarwal (Accountant member) directed the AO to allow full TDS credit to the assessee which is otherwise available as per Form 26AS. Accordingly the appeal of the assessee was allowed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
