Transitional TDS Credit under GST preserved through purposive interpretation of Section 140 and denial notice quashed.

Section 140 of the Tamil Nadu Goods and Services Tax Act, 2017 was construed to permit transition of pre-GST tax deducted at source credit into the GST regime where the credit had been reflected in the earlier returns. The Court applied a purposive interpretation of the transitional provisions and the existing tax law to preserve credit already embedded in the pre-GST system, rather than allowing the transition scheme to defeat it. Relying on the earlier view on the same issue, the Court held that the petitioner was entitled to carry forward the TDS credit and quashed the show cause notice that had denied such benefit.

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Issues: Whether the petitioner was entitled to transfer and utilise tax deducted at source from the pre-GST regime as transitional input tax credit under Section 140 of the Tamil Nadu Goods and Services Tax Act, 2017, and whether the show cause notice denying such transfer was sustainable.

Analysis: The petitioner's claim was that amounts deducted and reflected in the pre-GST returns formed part of the credit capable of transition into the GST regime. The Court relied on the earlier view that Section 140, read in the context of the existing law and the transition provisions, entitled assessees to carry forward such credit. It also accepted the reasoning that a purposive construction was required so that the transitional scheme did not defeat credit already embedded in the earlier tax regime. The respondents did not dispute the legal position laid down in the earlier decision.

Conclusion: The petitioner was entitled to transition the TDS credit under Section 140 of the Tamil Nadu Goods and Services Tax Act, 2017, and the impugned show cause notice denying such benefit was quashed.

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