Assessee entitled to TDS credit on mobilization advance despite revenue rejection following Patel Engineering precedent

ITAT Mumbai held that the assessee was entitled to TDS credit on mobilization advance despite revenue authorities' rejection. The tribunal found that if authorities maintained the assessee had not commenced business and revenue recognition was rejected, then TDS deduction by the payer was incorrect. Following precedent in Patel Engineering case, mobilization advance was not considered income and TDS credit should be allowed in the year of deduction. The tribunal rejected the revenue's mechanical approach requiring separate applications for wrong TDS deduction, citing SC decisions in Shelly Products and Suzuki Parasrampuria cases. The AO was directed to grant TDS credit.

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Issues Involved:
1. Unbilled revenue.
2. Setting up/Commencement of business.
3. Pro rata expenses of Mr. I. Bannerjee.
4. Expenditure towards technical consultancy charges.
5. Non-grant of TDS credit on mobilization advance.
6. Head of Income for Interest income.
7. Interest under sections 234B, 234C, and 234D.

Detailed Analysis:

Unbilled Revenue:
The appellant contended that the Commissioner (Appeals) erred in holding that the appellant received only the mobilization advance and no work was undertaken during the relevant assessment year, thus ignoring the unbilled revenue recognized in the books of accounts. However, the appellant did not press this ground during the hearing, and it was dismissed as not pressed.

Setting up/Commencement of Business:
The appellant challenged the Commissioner (Appeals) for holding that the business was set up on 12th March 2010 and for directing the AO to allow only pro rata expenses for Mr. I. Bannerjee. Additionally, the appellant contested the disallowance of Rs. 1,16,72,900 towards technical consultancy charges under section 37(1). These grounds were also not pressed by the appellant and thus were dismissed.

Non-grant of TDS Credit on Mobilization Advance:
This was the primary issue contested by the appellant. The AO had observed that the appellant claimed TDS of Rs. 2,13,56,569 deducted by KMRCL on mobilization advance of Rs. 93,79,58,000, but no regular billing was done, and only unbilled revenue was credited to the P&L account. The AO withdrew the TDS credit, stating it was in violation of section 199 and Rule 37BA. The Commissioner (Appeals) upheld this decision, noting that the mobilization advance was shown as 'Other Liabilities' and not as income.

The appellant argued that the mobilization advance was a short-term loan, not income, and requested TDS credit in subsequent years proportionate to the mobilization advance recovered. The Tribunal referred to the ITAT decision in ACIT vs. M/s. Patel Engineering Ltd., which held that mobilization advance is not income and TDS credit should be given in the year of deduction. The Tribunal found the authorities' orders contradictory and directed the AO to grant the TDS credit, citing the ITAT decision and the Hon'ble Apex Court's ruling in CIT vs. Shelly Products.

Head of Income for Interest Income:
The appellant contested the AO's assessment of interest received on mobilization advance as "Income from Other Sources" instead of "Business Income." This ground was not pressed during the hearing and was dismissed.

Interest under Sections 234B, 234C, and 234D:
The appellant objected to the interest levied under sections 234B, 234C, and 234D. However, these grounds were not pressed during the hearing and were dismissed.

Conclusion:
The appeal was partly allowed, with the Tribunal directing the AO to grant the TDS credit for the mobilization advance, following the precedent set by the ITAT in the case of Patel Engineering Ltd. and the Hon'ble Apex Court's decision. The other grounds were dismissed as not pressed.

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