Appeal allowed for UK company on TDS credit disallowance by CIT(A) for 2017-18 & 2018-19

The Tribunal allowed the appeal of the assessee, a UK-based company, regarding the disallowance of TDS credit by the CIT(A) for the assessment years 2017-18 and 2018-19. The Tribunal directed the assessing officer to grant proportionate TDS credit for both years based on the income assessable, considering the provisions of the Income Tax Act and Rules.

---

---

Issues:
1. Disallowance of TDS credit by CIT(A) for assessment year 2017-18.
2. Interpretation of provisions under section 199 of the Income Tax Act and rule 37 BA of the Income Tax Rules 1962 regarding the grant of TDS credit.

Analysis:
1. The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) for not granting TDS credit of Rs. 1,14,17,141/- for the assessment year 2017-18. The assessee, a UK-based company, followed the Mercantile system of accounting and accounted for revenue from a service contract with Hindustan Aeronautics Limited. The issue arose when the TDS amount was not reflected in form 26AS for the assessment year 2017-18 but was included in the form for 2018-19. The CIT(A) directed the assessee to rectify the TDS statement with the deductor. The Tribunal, after considering the provisions of the Income Tax Act and Rules, held that TDS credit should be granted in proportion to the income assessable for the relevant assessment years. The assessing officer was directed to verify and grant proportionate credit for the years 2017-18 and 2018-19.

2. The Tribunal analyzed section 199(3) of the Income Tax Act and rule 37 BA(3) of the Income Tax Rules 1962. These provisions allow for the grant of TDS credit for the assessment year in which the income on which tax was deducted is assessable. It was noted that where income is assessable over multiple years, credit for TDS should be allowed across those years in proportion to the assessable income. In this case, the Tribunal found that the TDS deducted by Hindustan Aeronautics Limited in 2018-19 related to income assessable for both 2017-18 and 2018-19. Therefore, the Tribunal directed the assessing officer to grant proportionate TDS credit for both assessment years based on the income assessable.

Overall, the Tribunal allowed the appeal of the assessee and remanded the issue to the assessing officer to verify and grant proportionate TDS credit for the assessment years 2017-18 and 2018-19.

---