2024 (11) TMI 965 - AT - Income Tax

TDS credit restricted to receipts in return under Section 199 and Rule 37BA, credit allowed for previously taxed income

Space Developers Versus The ITO Ward-1 (1) (3) Ahmedabad

ITAT Ahmedabad upheld CIT(A)'s decision restricting TDS credit to Rs. 4,07,968 against claimed Rs. 5,24,600 under Section 143(1) intimation. The tribunal ... Denial of credit of TDS in the intimation made to the assessee u/s 143(1) - CIT(A) held that the CPC was correct in restricting the grant of TDS credit to the extent of that relating to the receipts reflected in the return of income filed in the impugned assessment year - HELD THAT:- Assessee before us was unable to point out any infirmity in the findings of the Ld.CIT(A), as stated above, both with regard to the interpretation of law on the grant of TDS credit in terms of provisions of Section 199 read with Rule 37BA of the Income Tax Rules, 1962, as also with respect to the fact of the TDS being deducted on a portion of income which had already been returned to tax in the preceding assessment years. As we see no reason to interfere with the order of the Ld.CIT(A) confirming the adjustment made by the CPC in the intimation made u/s.143(1) of the Act, restricting the grant of TDS credit to the tune of Rs. 4,07,968/- as against TDS credit of Rs. 5,24,600/- claimed by the assessee. But, at the same time, since the assessee has consistently pleaded both before the CPC and also the CIT(A) that the gross receipts on which TDS was deducted during the impugned assessment year amounting to Rs. 5,24,60,000/- included receipts which had already been returned to tax in the preceding two assessment years; i.e. AYs 2021-22 & 2022-23 as tabulated above, the AO is directed to give necessary credit of TDS to the income returned to tax in those years. In terms of the aforesaid directions given by us, the appeal of the assessee is dismissed. Issues:Denial of credit of tax deducted at source (TDS) in the intimation made to the assessee under section 143(1) of the Income Tax Act, 1961.Analysis:The appeal was filed against the order passed by the Ld.Commissioner of Income-Tax (Appeals) pertaining to Assessment Year 2023-2024. The key issue was the restriction of TDS credit claimed by the assessee, amounting to Rs. 5,24,600/-, to Rs. 4,07,968/- by the CPC. This restriction was based on the proportion of income returned to tax compared to the income on which TDS was deducted, as per Section 199 of the Income Tax Act, 1961 and Rule 37BA of the Income Tax Rules, 1962. The Ld.CIT(A) upheld this action.The grounds of appeal raised by the assessee challenged the restriction of TDS credit without justifiable reasons, the application of Rule 37BA and Section 199 of the Income-tax Act, and the failure to issue directions to grant TDS credit in respective assessment years. The Ld.CIT(A) dismissed ground no. 2 as general in nature and dismissed ground no. 1, stating that the TDS credit was rightly restricted by the CPC. The Ld.CIT(A) emphasized the necessity for the TDS credit to be allowed only on the income returned to tax in the impugned assessment year, as per the provisions of the Act and Rules.The Ld.CIT(A) interpreted Section 199 of the Act and Rule 37BA of the Rules, noting that TDS credit should only be granted for the portion of income returned to tax in the impugned assessment year. The Ld.Counsel for the assessee failed to identify any flaws in the Ld.CIT(A)'s findings. The order confirmed the adjustment made by the CPC in restricting the TDS credit to Rs. 4,07,968/-. However, the AO was directed to grant necessary credit of TDS to the income returned to tax in the preceding assessment years. Consequently, the appeal of the assessee was dismissed.In conclusion, the judgment clarified the application of Section 199 of the Income Tax Act, 1961 and Rule 37BA of the Income Tax Rules, 1962 in restricting TDS credit to the income returned to tax in the specific assessment year. The decision highlighted the importance of accurately aligning TDS credit with the corresponding income declared in the returns.