2020 (10) TMI 452 - AT - Income Tax

Tribunal allows appeal for TDS credit, directs fresh verification by AO

The Tribunal allowed the appeal of the assessee for statistical purposes, directing the Assessing Officer to verify the TDS claims by the recipients and ... Credit for tax deducted at source - Section 199 of the Income-tax Act - Rule 37BA of the Income-tax Rules, 1962 - Verification of recipients' returns to prevent double credit - Unjust enrichment and prevention of double creditCredit for tax deducted at source - Section 199 of the Income-tax Act - Rule 37BA of the Income-tax Rules, 1962 - Verification of recipients' returns to prevent double credit - Whether the assessee is entitled to credit for TDS shown in Form 26AS though part of the credited commission was paid directly by the deductor to retailers, and the appropriate course of action where the department has not given that credit to any party. - HELD THAT: - The Tribunal held that sub section (1) of section 199 treats tax deducted at source as payment of tax on behalf of the person from whose income the deduction was made and that Rule 37BA(1) and (4) permit giving credit on the basis of information furnished by the deductor (e.g., ITS/ Form 26AS). The Tribunal observed that the Assessing Officer erred in restricting credit merely because the assessee did not offer the full commission amount in its books, since the statutory scheme does not confine TDS credit to amounts reflected in the deductee's profit and loss account. Following precedents that require credit to be allowed to the person in whose name the credit appears unless the same has been credited elsewhere, the Tribunal noted the risk of double credit and unjust enrichment if the same TDS is allowed twice. In view of this, and with the consent of parties, the Tribunal set aside the orders under challenge and remitted the matter to the Assessing Officer for limited verification: the AO is to examine whether the retailers (recipients) have claimed the TDS in their returns; if they have not, the assessee's claim for credit as per Form 26AS/ITS is to be allowed; if the credit has been allowed to the retailers, appropriate adjustment must be made to prevent double credit. [Paras 8, 9, 10, 11]Order of lower authorities set aside; issue restored to the file of the Assessing Officer for verification whether recipients have claimed the TDS and, if not claimed by them, the assessee's claim for credit is to be allowed.Final Conclusion: Appeal allowed for statistical purposes by remanding the issue to the Assessing Officer with directions to verify whether the retailers have claimed the TDS; if they have not, the assessee is entitled to the TDS credit reflected in Form 26AS/ITS, subject to avoidance of double credit. Issues Involved:1. Principles of natural justice and fairness in the dismissal of the appeal.2. Non-credit of TDS amounting to Rs. 12,88,214.3. Misinterpretation of Rule 37BA of the Income Tax Rules, 1962.4. Verification of TDS claims by recipients (retailers).Detailed Analysis:1. Principles of Natural Justice and Fairness:The assessee argued that the dismissal of the appeal by the CIT(A) was against the principles of natural justice, arbitrary, and erroneous. The assessee claimed that the decision was contrary to facts and legally untenable.2. Non-Credit of TDS Amounting to Rs. 12,88,214:The core issue revolved around the non-credit of TDS amounting to Rs. 12,88,214. The Assessing Officer (AO) allowed credit for TDS of only Rs. 4,04,840 out of the total TDS of Rs. 16,93,054 reflected in Form 26AS. The AO's decision was based on the fact that the assessee had credited only Rs. 40,48,009 to the profit and loss account, while the remaining commission of Rs. 1,28,82,141 was paid directly to retailers by Reliance Telecom Ltd (RTL). The AO relied on Rule 37BA(2) of the Income Tax Rules, 1962, to disallow the balance TDS amount.3. Misinterpretation of Rule 37BA of the Income Tax Rules, 1962:The assessee contended that the lower authorities misinterpreted Rule 37BA. The assessee argued that the denial of TDS credit was unjustified, arbitrary, and not in accordance with the law. The assessee cited the ITAT Delhi decision in the case of Sunita Devi vs. ACIT, which directed the AO to verify whether any credit of TDS had been allowed to the recipients (retailers). If not, the credit should be given to the assessee.4. Verification of TDS Claims by Recipients (Retailers):The assessee suggested that if there were doubts about double TDS claims, the issue should be referred back to the AO for verification. The Department's representative agreed that if necessary, the issue could be restored to the AO for verification. The ITAT Delhi case of Sunita Devi was cited, where the AO was directed to verify if TDS credit was allowed to the recipients, and if not, to allow it to the assessee.Conclusion:The Tribunal, after considering the rival submissions and materials on record, found merit in the assessee's contentions. It was noted that RTL directly paid commissions to retailers, and the recipients had not claimed TDS in their returns. Following the ITAT Delhi decision in Sunita Devi's case, the Tribunal directed the AO to verify whether the recipients claimed TDS in their returns. If not, the AO was instructed to allow the TDS credit to the assessee. The Tribunal set aside the orders of the lower authorities and restored the issue to the AO for fresh verification and adjudication as per law.Result:The appeal of the assessee was allowed for statistical purposes, with the direction to the AO to verify the TDS claims by the recipients and allow the credit to the assessee if the recipients had not claimed it. The order was pronounced on 08/10/2020.