Contractor's TDS credit allowed proportionate to percentage completion method revenue recognition, not strictly per Form 26AS

ITAT Hyderabad held that when assessee follows percentage completion method for revenue recognition, TDS credit should be allowed proportionate to income recognized in relevant assessment year, not strictly per Form 26AS. The tribunal found merit in assessee's submission that contractor deducts TDS on amounts paid/credited while contractee recognizes revenue based on work completion percentage. Matter remanded to AO for verification of details furnished by assessee regarding proportionate TDS claims and carry forward of excess credits to subsequent years.

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Issues:
Appeals against assessment orders, mismatch of TDS in Form 26AS and return of income, recognition of revenue using percentage completion method, allowance of TDS credit, jurisdiction of Assessing Officer.

Analysis:
The appeals were filed against separate but identical orders pertaining to assessment years 2021-22 and 2022-23. The appellant, following the percentage completion method, recognized income from a long-term contract with NCC-Matrix Consortium. The Assessing Officer did not consider TDS credits of Rs. 54,42,398/- and Rs. 35,24,781/- for the respective years as they were not reflected in Form 26AS. The CIT (A) upheld the assessment order, stating the lack of relevant details in Form 26AS to allow TDS credit claimed by the assessee.

The appellant argued that the mismatch in TDS was due to the accounting method, where income recognition did not align with contractor payments. The CIT (A) rejected the explanation and upheld the assessment. The Tribunal noted that the percentage completion method may cause discrepancies between revenue recognition and TDS credits in Form 26AS. As per Section 199(2) of the IT Act, credit for TDS should be allowed for the year in which income is assessable, irrespective of Form 26AS. The Tribunal found merit in the appellant's claim and directed the Assessing Officer to verify the TDS credit claim with supporting evidence.

In conclusion, the Tribunal allowed the appeals for statistical purposes, setting aside the CIT (A) orders and remanding the issue to the Assessing Officer for further examination. The decision emphasized the need to consider the percentage completion method for revenue recognition and the allowance of TDS credit based on the income offered for the relevant assessment years.

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