2015 (6) TMI 66 - AT - Income Tax

TDS credit allowed in year of deduction, even if income not recognized. AO's decision upheld.

The Tribunal allowed the appeal, confirming that TDS credit should be given in the year of deduction, even if the income is not recognized in that year. ... Withdrawal of credit allowed for tax deducted at source - amount received by the assessee towards mobilisation advance during the year under consideration - Revision u/s 263 - Held that:- Once the TDS was deducted and paid to the Central Government, a credit of the same should be given to the assessees in order to avoid all sorts of complications in the year of deduction of the TDS. Therefore, we find no infirmity in the order of the Commissioner of Income-tax (Appeals) who has rightly directed the Assessing Officer to allow the credit of the TDS in the impugned assessment year. Accordingly, the order of the Commissioner of Income-tax (Appeals) is confirmed.' It is manifest from the relevant portion of the Tribunal's order as reproduced above that the issue involved in the present case is squarely covered in favour of the assessee by the co-ordinate Bench's order on merit whereby, similar issue involving identical facts has been decided by the Tribunal in favour of the assessee after taking into consideration all the relevant aspects of the matter including the provisions of section 199 as applicable to the assessment year 2006-07. The learned Departmental representative has also not been able to dispute this position clearly evident from the order of the Tribunal, a copy of which is placed on record before us. Moreover, the order passed by the Tribunal in the case of P. Srinivasa Rao (2011 (3) TMI 1495 - ITAT VISAKHAPATNAM) deciding a similar issue on merit in favour of the assessee clearly shows that the view taken by the Assessing Officer while allowing credit for the TDS made from mobilisation advance was a possible view and the learned Commissioner of Income-tax, in our opinion, was not justified in substituting his own view for such possible view taken by the Assessing Officer by his impugned order passed under section 263 as the same is not permissible under the provisions of section 263 as held in the case of Malabar Industrial Co. Ltd. v. CIT [2000 (2) TMI 10 - SUPREME Court]. We, therefore, set aside the impugned order of the learned Commissioner of Income-tax passed under section 263 and allow the appeal of the assesse - Decided in favour of assesse. Issues Involved:1. Whether the credit for tax deducted at source (TDS) from the mobilisation advance should be allowed in the year the advance is received or in the year it is recognized as income.2. Whether the order passed by the Assessing Officer (AO) allowing TDS credit was erroneous and prejudicial to the interests of the Revenue.Detailed Analysis:Issue 1: Credit for TDS from Mobilisation AdvanceThe assessee, a company engaged in procuring erection contracts for thermal power stations, received a mobilisation advance of Rs. 14.49 crores from Lanco Amarkantak Power P. Ltd. (LAPPL) for setting up a 300 MW thermal power station. This advance was shown as a liability in the balance sheet, and the expenditure paid to sub-contractors was shown as work-in-progress. The assessee did not recognize any income from this project for the year under consideration, arguing that the contract was not fully executed, and no bill was raised. The AO, however, estimated the income at Rs. 1.29 crores by applying an 8% net profit rate to the total expenditure and brought this amount to tax.Upon appeal, the Commissioner of Income-tax (CIT) deleted the addition made by the AO, holding that no income could be estimated from the mobilisation advance. Consequently, the AO allowed TDS credit for the mobilisation advance in the order passed under section 143(3).Issue 2: Erroneous and Prejudicial Order by AOThe CIT, upon examining the AO's order, found it erroneous and prejudicial to the interests of the Revenue. The CIT noted that as per section 199, credit for TDS should be given only for income assessable in the relevant assessment year. Since the mobilisation advance was not chargeable to tax for the year under consideration, allowing TDS credit was in violation of section 199. The CIT issued a notice under section 263 and subsequently set aside the AO's order, directing the withdrawal of the TDS credit.Tribunal's Decision:The Tribunal examined the arguments and relevant materials. The assessee's counsel argued that the issue of TDS credit for mobilisation advance was covered in favor of the assessee by a decision of the co-ordinate Bench in Asst. CIT v. Peddi Srinivasa Rao. The Tribunal in that case had held that TDS credit should be given in the year of deduction to avoid complications, irrespective of the year to which it relates.The Tribunal agreed with this view, noting that the amended provisions of section 199 do not specify the year in which TDS credit should be claimed. The Tribunal also cited consistent views from other cases, such as Progressive Constructions Ltd. and Toyo Engineering India Ltd., where TDS credit was allowed in the year of receipt. The Tribunal concluded that the AO's view of allowing TDS credit was a possible view and that the CIT was not justified in substituting his own view under section 263.Conclusion:The Tribunal set aside the CIT's order under section 263 and allowed the assessee's appeal, confirming that TDS credit should be given in the year of deduction, even if the income is not recognized in that year. The Tribunal emphasized that the AO's decision was a possible view and not erroneous or prejudicial to the interests of the Revenue.Result:The appeal of the assessee was allowed, and the order pronounced in the open court on January 12, 2015.