Appeal granted for TDS credit denial, assesses entitled to Rs.26,61,695 credit for AY 2016-17

The appeal involved the issue of non-grant of credit for tax deducted at source (TDS) amounting to Rs.26,61,695 for the assessment year 2016-17. The assessee's claim for TDS credit was initially rejected by the Centralized Processing Centre (CPC) and the Commissioner of Income-Tax (Appeals). However, considering that the income related to the TDS was taxable in the assessment year 2016-17 as per the assessee's accounting principle, and the TDS amount was not claimed in the subsequent year, the assessee was deemed entitled to the credit. The Assessing Officer was directed to grant the credit accordingly, resulting in the appeal being allowed.

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Issues:
Non-grant of credit of tax deducted at source amounting to Rs.26,61,695.

Analysis:
The appeal pertains to the assessment year 2016-17 and involves the issue of non-grant of credit for tax deducted at source (TDS) amounting to Rs.26,61,695. The assessee had claimed credit for TDS in the return of income filed for the said assessment year, but the claim was rejected by the Centralized Processing Centre (CPC) as it was not reflected in Form 26AS. The assessee's rectification application was also rejected, leading to an appeal before the Commissioner of Income-Tax (Appeals) which was dismissed.

The assessee contended that it follows an accrual basis for recognizing revenue and had raised an invoice on Reliance Industries in March 2016. Although the income was accounted for in the books for the assessment year 2016-17, the payment was released in the subsequent assessment year after TDS deduction. The assessee argued that as per Rule 37BA, TDS credit should be allowed in the year in which the corresponding income is taxable. The assessee relied on relevant case laws to support its claim.

On the other hand, the Departmental Representative argued that since the deductor had deducted tax in the subsequent assessment year and the TDS amount was reflected in Form 26AS for that year, the TDS credit could not be granted in the assessment year 2016-17.

After considering the submissions and perusing the record, it was observed that the income related to the TDS was taxable in the assessment year 2016-17 as per the accounting principle followed by the assessee. The TDS amount was reflected in Form 26AS for the subsequent assessment year, but the assessee had not claimed credit for it in that year. Therefore, the assessee was entitled to credit for the TDS amount of Rs.26,61,695 in the assessment year 2016-17. The Assessing Officer was directed to grant the credit after verifying that it had not been granted in the subsequent assessment year.

In conclusion, the appeal was allowed, and the order was pronounced on 10th November 2022.

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