TaxTMI 
TaxTMI 
2015 (9) TMI 435
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....he holding company, cited above, to the assessee herein. At the time of reimbursement, the holding company has deducted Tax at source from the amount so reimbursed @ 2%. 4. Since the assessee company claimed that it has made payment pay channel charges for CAS areas only as representative of its holding company, it accounted for the payment as well as the reimbursements as a Balance Sheet item (Debtors account), i.e., it did not route the payments and reimbursements through the profit and loss account. However, the assessee company claimed credit of "TDS amount" deducted by the holding company. Since the assessee claimed that the reimbursements received by it was not part of its income, the AO refused to allow credit for TDS amount, i.e., the assessee should have offered the income relating to the tax deducted at source for taxation in order to claim credit for TDS amount. 5. In the appellate proceedings, the ld. CIT(A) allowed the credit of TDS and hence the Revenue has filed this appeal before the Tribunal. 6. I heard the rival contentions and perused the record. I notice that the ld. CIT(A) has given a clear finding that whatever amount was paid by the assessee on behal....
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....de or credit has been given (hereinafter referred to as deductee) on the basis of information relating to deduction of tax furnished by the deductor to the income-tax authority or the person authorised by such authority. (2) (i) Where under any provisions of the Act, the whole or any part of the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for the whole or any part of the tax deducted at source, as the case may be, shall be given to the other person and not to the deductee : Provided that the deductee files a declaration with the deductor and the deductor reports the tax deduction in the name of the other person in the information relating to deduction of tax referred to in sub-rule (1). (ii) The declaration filed by the deductee under clause (i ) shall contain the name, address, permanent account number of the person to whom credit is to be given, payment or credit in relation to which credit is to be given and reasons for giving credit to such person. (iii) The deductor shall issue the certificate for deduction of tax at source in the name of the person in whose name credit is shown in the infor....
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.... cannot be ignored that every item of TDS carries with it an obligation of trust and accountability to return the amount and/or give credit for the amount so deducted depending upon the tax liability of the recipient to be determined in the course of his assessment. ....................... Being a case of direct tax, there is also no question of unjust enrichment being claimed so as to take the credit of tax without an obligation to return the same to the assessee. The payer does not pay the amount of TDS as his own liability and he only acts as the agent of the Government or as trustee to collect the TDS for the Government, free of cost. If no credit is to be given to the payer and/or to the payee, the Government would have no authority to treat the same as tax and article 265 does not empower the Government to make any levy or collection of tax not authorized by law. (paras 7 to 9)". 2.7 Thus, it is quite clear that credit will have to be given to the person to whom the payment has been made once the tax has been deposited in the government treasury, regardless of whether the income is taxable or exempt. 2.8 The AO is also incorrect in holding that the assessee has not offe....
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.... of tax deducted at source needs to be adjusted against some tax liability of the payee and in case there is no such liability, it has to be refunded to payee because of the very mandate of section 199 as per which such amount is treated as payment of tax on behalf of the person from whose income the deduction was made, that is the payee..... The AO has unequivocally held that the amount is not chargeable to tax in the hands of the assessee. The finding of the AO is not that such receipt is liable to tax in the hands of the assessee in a later or an earlier year. Rather it is that the amount received by the assessee is not at all chargeable to tax either in the current year or in an earlier or a later year. If the AO had held that the amount received by the assessee as chargeable to tax in a later or an earlier year, then of course, the assessee could not have validly claimed the credit for tax deducted at source against its income for the current year. As the amount on which tax was deducted at source is not at all chargeable to tax, then the command of section 199 will have to be harmoniously and pragmatically read as providing for allowing credit for the tax deducted at sourc....