Assessee wins TDS credit dispute as processing center failed to verify GST inclusion in section 194Q calculations

ITAT Delhi set aside the order regarding short allowance of TDS credit by CPC under section 143(1). The CPC had restricted TDS credit by computing it in ratios of turnover as per P&L versus turnover as per 26AS. The tribunal found that neither CPC nor the appellate authority verified whether the two buyers deducted TDS on purchase values inclusive of GST or whether GST was indicated separately in bills. The matter was restored to AO for proper verification and allowance of TDS credit after due opportunity, following CBDT Circular No.13 of 2021 regarding section 194Q guidelines.

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Issues:
Dispute over TDS credit allowance by CPC in the intimation under section 143(1) of the Income Tax Act.

Detailed Analysis:

Issue 1: TDS Credit Allowance Dispute
The appeal was against the Ld. Commissioner of Income Tax (Appeals)-2, Coimbatore's order regarding the TDS credit allowance by the CPC. The CPC reduced the TDS credit claim of the assessee by Rs. 31,33,777 based on turnover ratios from the Profit & Loss Account and 26AS. The assessee claimed Rs. 6,51,02,050 TDS credit, but CPC allowed only Rs. 6,19,68,273. The dispute arose due to the inclusion of GST in the turnover figures, resulting in higher turnover in 26AS. The Ld. Addl./JCIT(A)-2 upheld the CPC's decision, citing Rule-37BA(4) and the Chowringhee Sales Bureau Pvt. Ltd. case. The assessee argued that the TDS credit should be allowed in full, as per the correct turnover figures.

Issue 2: Legal Arguments
The assessee contended that the TDS credit disallowance was unjustified as the GST component was separately indicated in the bills, as confirmed by the deductors. Referring to CBDT Circular No.13 of 2021, the assessee argued that TDS should not include GST amounts. The Ld. DR supported the lower authorities' decisions, while the assessee highlighted discrepancies in the turnover figures and the TDS credit calculation.

Issue 3: Tribunal Decision
The ITAT Delhi set aside the Ld. Addl./JCIT(A)-2's order and remanded the matter to the AO for verification. The tribunal emphasized the need to determine if GST was separately indicated in the bills or if payments were made earlier than the credit. The tribunal directed proper verification as per the CBDT Circular and the law, allowing the TDS credit after due opportunity for the assessee to be heard. The appeal was allowed for statistical purposes.

In conclusion, the ITAT Delhi's judgment focused on the correct calculation of TDS credit by considering the GST component separately and verifying the payment details. The tribunal's decision highlighted the importance of following CBDT guidelines and ensuring proper verification before disallowing TDS credit.

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