TDS Credit shall be given for the Assessment year for which such Income is Assessable: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Ahmadabad Bench, has recently, in an appeal filed before it, held that TDS credit shall be given for the assessment year for which such income is assessable.

The aforesaid observation was made by the Ahmadabad ITAT, when an appeal was preferred before it byS.B. Patel JV Laxmi Construction, as against the order of the the Commissioner of Income Tax(Appeals), Vadodara, dated30/08/2022, arising in the matter of assessment order passed under s.143(3) of theIncome Tax Act, 1961, relevant to theAssessment Year 2016-17.

The only issue raised by the assessee in its appeal being thatthe CIT(A), has erred, in notgranting claim of TDS deducted from the advance received from the party, in theyear in which such advance was offered to tax, the brief facts of the case pertaining to the issue were that the assessee was a partnership firm, who was engaged in the business of Civil Road construction.

Theassessee had, in the year under consideration,executed awork contract ofRs.4,44,48,833/- which was offered to tax. However, the party had also given the assessee, an advance of Rs.3.50 crores, which was shown as liability in thebooks of accounts. The party had deducted TDS on the entire amounti.e., works executed of Rs.4,44,48,833/- and advance of Rs.3.50 croresaggregating to Rs.7,94,48,833/- only, and the amount of TDS of Rs. 7 lacs, wasattributable on the advance received by the assessee for Rs.3.50 crores.

However, theassessee, while filing the return of income, had taken the credit of TDS deducted onthe advance amount of payment, without offering the corresponding income of Rs.3.50crores in the return of income, due to which the AO did not allow the credit of TDS amount ofRs.7 lakhs.

Aggrieved by the same, the assessee preferred an appeal before the CIT-A, who rejected the claim of the assessee on  the ground that though the appellant claimed that the AO was not justified in making suchassessment, he had never put forth any reason for claiming so, and that even during  the appellantproceedings, the appellant never came forward with his explanation to the groundsmentioned by the appellant, despite being offered number of opportunities through hearingnotices issues by thisoffice. And, it is in this situation that the assessee has preferred the instant appeal before the Ahmadabad ITAT.

With the Shri MukundBakshi, the AR for the assessee although agreeing that the assessee was not eligible for theTDS credit of Rs.7 lakhs in the year under consideration as the advance receivedby it was not offered to tax, it was however submitted by him that the amount ofadvance has been offered to tax in the Financial Year 2016-17 corresponding toAY 2017-18 and therefore that the amount of TDS credit should be allowed in the AY2017-18.

However, Shri SanjayKumar, the Sr. D.R, on the other hand,vehemently supported the order of the authorities below.

Hearing the opposing contentions of either sides and perusing the materials available on record, the Ahmadabad ITAT observed:

“There is no dispute to the fact that the assessee hasshown advance of Rs.3.50 crores in the year in respect of which TDS wasdeducted by the corresponding party. Admittedly, the assessee is not eligible ofthe amount of TDS deducted on the amount of advance received by the assesseeas the corresponding income was not offered to tax. Up to this, there is no disputeraised by the assessee. The next controversy arises when the assessee can claimthe benefit of TDS i.e., the year in which it offers corresponding income in theincome tax return. As per the assessee, it has shown the advance money asincome in the Financial Year 2016-17corresponding to 2017-18.”

“In this regard, Inote that sub-rule (3) to the rule 37BA of Income Tax Rule r.w.s. 199 of the Actprovides that Credit for tax deducted at source and paid to the CentralGovernment, shall be given for the assessment year for which such income isassessable”, Waseem Ahmed, the Accountant Member of the ITAT Panel added.

Thus, allowing the assessee’s appeal, the theAhmadabad ITAT held:
“Accordingly, I am of the view that the assessee should be allowed thebenefit of TDS credit in the AY 2017-18 subject to the verification. Hence, theground of appeal of the assessee is allowed in the terms of the above direction.”

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to TaxscanAdFree. Follow us on Telegram for quick updates.