Tribunal allows appeal on TDS credit & software sale taxability.

The Tribunal allowed the appeal of the assessee, directing the Assessing Officer to verify the TDS credit claim of Rs. 16,58,287 and consider the taxability of receipts from the sale of software in accordance with the Supreme Court decision. The Tribunal held that the denial of TDS credit was incorrect as the income was recognized in the relevant year, and the tax was deducted by customers in a subsequent year. The decision regarding the taxability of software sale receipts was based on a subsequent interpretation of law by the Supreme Court, leading to the allowance of the appeal.

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Issues involved:
1. Non-granting of TDS credit of Rs. 16,58,287/-.
2. Taxability of receipts from the sale of software.

Summary:

Issue 1: Non-granting of TDS credit of Rs. 16,58,287/-

The appeal by the assessee is directed against the order of the CIT(A), Delhi-42 dated 08.02.2022 pertaining to A.Y 2019-20. The primary issue is the non-granting of TDS credit amounting to Rs. 16,58,287/-. The assessee, a company incorporated in the USA and engaged in the sale of software, had offered the income to tax and claimed corresponding TDS credit in its return for the year under consideration. However, the Centralized Processing Centre (CPC) did not allow the TDS credit because the tax was deducted by the customers in the subsequent A.Y 2020-21, and thus the credit appeared in Form 26AS of A.Y 2021.

The CIT(A) upheld the denial of TDS credit. The assessee cited a co-ordinate bench decision in a similar group case where the Tribunal allowed the TDS credit under identical circumstances. The Tribunal, after considering the orders of the authorities below, noted that the assessee had raised the invoices and recognized the income in the year under consideration. The Tribunal directed the Assessing Officer to verify the claim and allow the TDS credit if the income was shown in the year under consideration.

Issue 2: Taxability of receipts from the sale of software

The additional ground raised by the assessee pertains to the taxability of receipts from the sale of software, claimed as not taxable in India based on the Supreme Court decision in Engineering Analysis Centre of Excellence Pvt Ltd Vs. CIT 432 ITR 471 [SC]. The Tribunal acknowledged that the decision was not available during the assessment proceedings or before the first appellate authority. The Department's representative opposed this claim, citing the Supreme Court decision in M/s Gurjagravures Private Limited, which held that non-claim of exemption by the assessee cannot be assumed to have been considered by the Income-tax Officer.

The Tribunal considered the rival submissions and noted that the Supreme Court decision in Engineering Analysis Centre of Excellence Pvt Ltd was a subsequent interpretation of law, which constitutes "a mistake apparent from the records" as per CBDT Circular No. 68 dated 17.11.71. The Tribunal directed the Assessing Officer to consider the assessee's claim in light of the Supreme Court decision and allowed the appeal.

In conclusion, the Tribunal allowed the appeal of the assessee, directing the Assessing Officer to verify the TDS credit claim and to consider the taxability of software sale receipts in light of the Supreme Court's decision.

The order is pronounced in the open court on 23.06.2023.

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