INCOME TAX ACT, 1961

Section 199

Tax deduction at source - Tax credit - Invoices raised at the fag end of relevant asst. yr. - Year of allowability of tax credit--Concerned year in which sales receipts corresponding to TDS credit were account for or succeeding year in which tax was actually reduced

AO gave short credit of TDS of Rs. 45 lakhs while processing return of income of assessee under section 143(1). Assessee's case was that short/deficit TDS credit had emerged in respect of certain invoices which were raised by the assessee on its client, at the fag end of year under consideration viz. financial year 2014-15 : As assessee Name of the Party Particulars of invoice Amount (Rs,) TDS Amount (Rs.) BG Exploration & Production India Ltd Meal & Accommodation For Feb-15 14,79,850 29,597 Charter Hire for Mar-15 22,23,30,150 44,46,603 Meal & Accommodation For Mar-15 12,96,000 25,920 Reimbursement of expenses for BG Induction programme 16,83,4000 33,668 Rignet Mobilization Commission for December 2014 3,10,350 6,207 Total 22,70,99,750 45,41,995 followed the 'mercantile system' of accounting, therefore, it had accounted for those invoices as part of its sales/receipts, as soon as those were raised on client. assessee was duly entitled for TDS credit as per specific provisions of section 199. On the contrary, AO declined claim of credit to the assessee, for the reason, that as per post amended provisions of section 199 credit for tax deducted at source (TDS) and paid to Central Government had to be given to assessee in the year of deduction of tax at source, i.e., the succeeding year.Held: The point of time at which benefit of TDS is to be given, is governed by sub-rule (3) of rule 37BA, which unequivocally provides through clause (i) that 'credit for tax deducted at source and paid to the Central Government, would be given for the assessment year for which related income is assessable'. Accordingly, view taken by AO that credit for TDS was to be allowed to assessee in the immediately succeeding year, i.e., assessment year 2016-17, despite absence of assessable income in the said year could not be sustained. Matter was remanded to AO with a direction to allow the short/deficit credit of TDS of Rs. 45 lakhs to assessee in the year under consideration, i.e., assessment year 2015-16 after verifying claim of assessee that sales/receipts corresponding to TDS credit of Rs. 45 lakhs were accounted for by it during the year under consideration, viz., assessment year 2015-16.

REFERRED : Mahesh Software Systems Pvt. Ltd. v. Asstt. CIT [ITA No. 1288/Pun/2017, dt. 20-9-2019 for A.Y 2011-12] : 2019 TaxPub(DT) 6986 (Pune-Trib).

FAVOUR : In assessee's favour (by way of remnand.

A.Y. : 2015-16

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