TDS credit in Form 26AS: can the named taxpayer claim s.199 credit when related concern reported income? Allowed

The dominant issue was whether TDS credit under s.199 can be granted to a person in whose name the TDS appears in Form 26AS, even though the corresponding income was offered to tax by a related concern. Relying on a consistent line of authorities, including the HC ruling in Relcom, the Tribunal held that credit follows the person to whom the tax has been deducted and in whose account it is reflected, subject to preventing double credit. The AO was directed to allow the TDS credit after verifying that the related concern has not claimed the same credit; the appeal was allowed.

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1. ISSUES PRESENTED AND CONSIDERED

1. Whether credit of TDS reflected in the assessee's Form 26AS can be allowed where the corresponding income on which such TDS was deducted is stated to have been declared and offered to tax in the hands of a sister concern, and not in the assessee's return for the relevant assessment year.

2. Whether, on the facts, the Assessing Officer is required to grant TDS credit to the assessee, subject to verification that the sister concern has not claimed the same TDS credit in its own hands.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Allowability of TDS credit to the assessee when corresponding income is offered by a sister concern

Legal framework: The Court examined the requirement under section 199 of the Income-tax Act, 1961 concerning credit for tax deducted at source, in the context of the assessee's claim of TDS credit as appearing in Form 26AS and the objection that corresponding income was not offered in the assessee's hands in the relevant year.

Interpretation and reasoning: The Court found that TDS of Rs. 3,41,286/- was reflected in the assessee's Form 26AS and that the assessee produced a confirmation stating that the corresponding income (on which TDS was deducted) had been declared in the hands of its sister concern. The Court treated the decisive question as whether TDS credit must necessarily be denied merely because the corresponding income is offered to tax by a sister concern, despite the TDS being reflected against the assessee. The Court relied upon and applied the principle emerging from the Delhi High Court's decision discussed in the order, which supports granting TDS credit in such circumstances to avoid a situation where tax deducted at source is retained without credit being effectively available, and where denial would rest on a "mere technical ground," particularly when the related entity has not availed the credit.

Conclusion: The Court held that the assessee is entitled to credit of the TDS mentioned in Form 26AS issued to it, even though the corresponding income was stated to have been offered by the sister concern, subject to the condition that double credit is not allowed.

Issue 2: Verification condition to prevent double claim of the same TDS credit

Interpretation and reasoning: While allowing the assessee's claim in principle, the Court considered it necessary to safeguard against duplication of credit. Since the assessee's case proceeded on the footing that the sister concern had offered the corresponding income, the Court directed that TDS credit should be granted to the assessee only after verifying that the sister concern has not claimed the corresponding TDS credit in its own hands.

Conclusion: The Court directed the Assessing Officer to allow the TDS credit to the assessee after verification that the sister concern has not claimed the same TDS credit, and accordingly allowed the assessee's grounds and appeal.

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