Tax Department cannot Swallow Tax paid by Assessee and Deny Credit of Tax Deducted: ITAT [Read Order]

The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) has held that the tax department could not swallow the tax paid by the assessee and deny the credit of tax deducted.

In the return of income filed, the assessee-Sanjeev Rajendra Pandit claimed credit of tax deducted at source (TDS) which included credit in respect of rental income from the property Navbharat Chambers and TDS in respect of dividend income disbursed by M/s Tata Steel Ltd. In the processing order, the Assessing Officer restricted the TDS credit in respect of TDS on rental Income from the property at NavBharat Chambers as against credit claimed in the return of income.

The Assessing Officer also did not allow credit of the TDS in respect of dividend income offered to Tax under the head of income from other sources.

Milin Dattani, on behalf of the assessee submitted that, though tax in respect of the mentioned part of rental income had been deducted and deposited in the subsequent assessment year the assessee following the accrual system had declared the corresponding income in the year under consideration.

He further contended that the credit of TDS should be allowed to the assessee against the income declared under the year under consideration.

Aditya M. Rai appeared for the revenue. 

The Division Bench of Aby T Varkey (Judicial Member) And Om Prakash Kant (Accountant Member) allowed the appeal and set aside the impugned order and held that The Department could not swallow tax paid by the assessee and deny credit of tax deducted, which pertained to the assessee.

“In the instant case, the assessee has offered the income following the accrual system. As far as rental income is concerned, if tax has been deducted and deposited in subsequent years, the assessee should be allowed a credit of the same in the year under consideration of tax which has been deducted subsequently. However, the assessee could not be allowed the benefit of the interest on a refund which arises if any on account of credit of tax deducted and deposited in the subsequent years”, the Bench further observed.

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