Assessee entitled to TDS credit refund on advance from HPCL despite no corresponding income offered

ITAT Mumbai allowed the assessee's appeal regarding TDS credit claim. Despite the DR's contention that no corresponding income was offered to tax, the tribunal held that the assessee was entitled to claim refund on TDS deducted from advance received from HPCL. The AO was directed to allow credit of brought-forward TDS, subject to verification that HPCL had not claimed refund through revised TDS return. The decision was based on CBDT circulars relating to TDS refund grants.

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Issues: Grant of short credit of TDS

Analysis:
The appeal was filed against the order of the Additional/Joint Commissioner of Income-tax for the assessment year 2021-22. The primary issue raised in the appeal was regarding the grant of short credit of Tax Deducted at Source (TDS) to the assessee. The appellant contended that the credit of TDS granted was lower than the amount claimed in the return of income and reflected in Form 26AS, resulting in a shortfall of Rs. 22,63,023. The appellant sought direction for the full credit of TDS as claimed.

Facts and Background:
The assessee, a joint venture engaged in construction contracts, declared income of Rs. 54,89,480 during the relevant year and claimed TDS credit amounting to Rs. 29,98,646. However, the Central Processing Centre (CPC) granted credit of only Rs. 10,35,704. The dispute arose from the TDS related to advance money received from Hindustan Petroleum Corporation Limited (HPCL) for a bio-ethanol plant project in Punjab. TDS of Rs. 97,25,900 was deducted by HPCL, out of which a portion was claimed in the previous assessment year, leaving a balance to be claimed in the current year.

Arguments and Observations:
The Additional Commissioner dismissed the appeal, citing Rule 37BA and the need for a revised TDS return from the deducting party. However, the Tribunal disagreed and allowed the appeal. The Tribunal noted that since the contract was terminated, and the money refunded, the assessee was entitled to claim the balance TDS credit. The appellant's reliance on CBDT circulars and judicial precedents supported the claim for TDS refund. Notably, the Tribunal referenced circulars related to rental income and procedures for claiming refunds under Section 195. Judicial decisions were also cited to emphasize the right to credit for TDS on non-taxable amounts.

Conclusion:
After considering the arguments, circulars, and judicial pronouncements, the Tribunal held in favor of the assessee. It directed the Assessing Officer to verify if HPCL had claimed a refund of the TDS and allowed the credit of brought-forward TDS as claimed by the assessee. The appeal was allowed, emphasizing the entitlement of the assessee to claim a refund on TDS deducted by HPCL.

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