TDS credit must be claimed with corresponding income in same assessment year under Section 199(3) and Rule 37BA(3)

ITAT Bangalore ruled on TDS credit allowance disputes for assessment years 2015-16 and 2016-17. For 2015-16, the tribunal held that TDS credit and corresponding income must be claimed together in the same assessment year when income accrues to the assessee. The matter was remitted to AO for fresh consideration. For 2016-17, citing Section 199(3) and Rule 37BA(3), the tribunal allowed TDS credit in the year income was reported, provided the assessee hadn't claimed credit elsewhere and furnished an undertaking against double claims. The CIT(A) order was set aside and restored to AO for granting credit per tribunal's observations.

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Issues:
1. Allowance of TDS credit for sales of F.Y. 2015-16 in A.Y. 2017-18.
2. Allowance of TDS credit for mobilization advance received in F.Y. 2016-17 in A.Y. 2017-18.

Analysis:

Issue 1 - TDS Credit for Sales of F.Y. 2015-16:
The appeal by the revenue challenges the allowance of TDS credit of Rs. 49,71,083 for sales of F.Y. 2015-16 in A.Y. 2017-18. The dispute arises from a mismatch in turnover reported and turnover in Form No. 26AS due to sales considered in a different financial year. The Revenue contends that TDS credit should align with the year in which income was offered for taxation. The relevant provisions of Rule 37BA(3)(ii) regarding credit for TDS across multiple years are examined. The Assessee argues that TDS was deducted when payment was made, even though income was previously reported. The CIT(A) directed the AO to allow the TDS credit after verifying the income offered for taxes in previous years. The Tribunal remitted the issue to the AO for fresh consideration, emphasizing that TDS credit should correspond with the income offered for taxation.

Issue 2 - TDS Credit for Mobilization Advance of F.Y. 2016-17:
The second dispute concerns the allowance of TDS credit for mobilization advance received in F.Y. 2016-17 in A.Y. 2017-18. The AO restricted the TDS credit of Rs. 37,37,514 as the income from the advance was not offered in the current year. The Assessee argued that the advance was adjusted against subsequent bills and income was reported proportionately. The NFAC directed the AO to verify the consistency of the Assessee's approach and allowed the TDS credit subject to verification. The Tribunal held that TDS credit should align with the year in which the income was reported, emphasizing the need for factual verification to prevent double claims. Referring to a similar case, the Tribunal directed the AO to grant TDS credit in A.Y. 2017-18 based on the income reported for that year.

In conclusion, the Tribunal partly allowed the revenue's appeal for statistical purposes, emphasizing the importance of aligning TDS credit with the year in which corresponding income was offered for taxation. The judgments in similar cases were referenced to support the decision.

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