2016 (4) TMI 1099

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....ot allowing credit of TDS of Rs. 1741463/-, deducted by our Bank on interest and deposited to the Income Tax Department and holding that the interest belongs to Police department and the provisions of section 199 are applicable." 2. Brief facts of the case are that the assessee company is an approved construction company engaged in the business of construction works of Government Department on actual plus system. The assessee was incorporated under the Indian Companies Act, 1956 on 20th June, 1996. Out of the total share of 20070 shares, 20000 shares are held by Rajasthan Housing Board. The Rajasthan Housing Board is a statutory body created through Rajasthan State Act No. 4 of 1970. Thus the assessee is a company of the Statutory Body of Rajasthan Housing Board (State of Rajasthan for the purposes of the Act). The object of the assessee is to construct houses for poor in accordance with the programme of Government of Rajasthan. The State Government has taken a decision to construction 10,000 houses for police personnel and for that purposes a loan of Rs. 451.52 crores was taken from HUDCO. The loan was disbursed to the Public Works Department, Rajasthan Road Development and Con....

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....rest income has been offered for tax by assessee in respect of credit of TDS of Rs. 445,02,798/-. Section 199 of the Act provides that any deduction made under chapter XVII-B and paid to Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made or the owner of the security. Rule 37BA of I.T. Rules 1962 read with section 199 provides that if the income on which tax has been deducted at source is assessable in the hand of a person other than the dedicatee credit for tax deducted at source shall be given to other person." 3. The assessee feeling aggrieved by the order passed by the AO, has challenged the order before ld. CIT (A). However, the ld. CIT (A) had also upheld the order passed by the AO with the following observations : " 2.3. I have considered the facts of the case; assessment order and appellant's written submission. Assessing Officer did not allow credit of TDS deducted on interest income not shown by the appellant by following the provisions of section 199 read with relevant rules that credit is to be given to the person in whose hand such income is taxable. Assessing Officer mentioned th....

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....wing facts :- 1. The State Government of Rajasthan planned to construct houses for the Police department. 2. For this purpose loan was obtained from HUDCO by the Govt. of Rajasthan. 3. Avas Vikas Limited was made Nodal Agency for receiving the loan on behalf of the Govt. as well as for repaying the loan later on. 4. The work of construction of houses was awarded to PWD, Rajasthan State Road Development and Construction Cooperation Limited and Avas Vikas Limited. 5. Till the construction was started, for intervening periods the firms receipts by Avas Vikas Limited from HUDCO were deposited in Bank of Rajasthan (Now ICICI Bank) by Avas Vikas Limited. 6. At all the stages the Government of Rajasthan was having over riding title over the funds lying with Avas Vikas Limited/Bank of Rajasthan. The Avas Vikas Limited was acting in fiduciary capacity. 7. The Bank of Rajasthan granted interest on these funds amounting to Rs. 2,18,15,365/- and deducted TDS of Rs. 45,02,798/-. 8. As the ownership of deposits was of the Govt. of Rajasthan by virtue of overriding the title, the interest earned on such deposits belongs to th....

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....x paid on behalf of the person in respect of whose income such payment of tax has been made. (3) The Board may, for the purposes of giving credit in respect of tax deducted or tax paid in terms of the provisions of this Chapter, make such rules as may be necessary, including the rules for the purposes of giving credit to a person other than those referred to in subsection (1) and sub-section (2) and also the assessment year for which such credit may be given." 7. The revenue relies on the phrase "shall be treated as a payment of tax on behalf of the person from whose income the deduction was made" to contend that the assessee's TDS claim cannot be based on the receipts of M/s REPL. However, the assessee fairly admitted throughout the proceedings for its TDS claim of Rs. 1,20,73,097/- that the benefit of such claim has not been availed by M/s. REPL. Therefore, the revenue, having assessed M/s REPL's income in respect to such TDS claim cannot now deny the assessee's claim on the mere technical ground that the income in respect of the said TDS claim was not that of the assessee, given that M/s Relcom (the assessee) and M/s REPL are sister concern....