TaxTMI 
TaxTMI 
2022 (8) TMI 353
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....und No. 9 and 10 of ITA No. 1815/Mum/2018, observing as under: "7. Having regard to the rival submissions, and having perused the material on record, we are satisfied that ground nos. 9 and 10 have remained to be disposed of and the impugned order needs to be recalled accordingly. We order so. The Registry is directed to refix the matter for the limited purposes of disposing of these two grounds of appeal." 3. In other Miscellaneous Applications listed in table above also, the Tribunal has recalled the orders for adjudication of ground No. 9 & 10 of respective appeals, giving similar finding. 4. In all these appeals, identical grounds have been raised in relation to claim for TDS credit, therefore for brevity we are reproducing the ground No. 9 & 10 raised in assessment year 201415, as under: "9. On the facts and in the circumstances of the case and in law, Hon'ble CIT(A)/Ld. AO on facts and in law has erred in not granting credit for tax deducted at source (TDS), including credit for which the appellant court not furnish certificates but the payments were received net of taxes. 10. On the facts and in the circumstances of the case and in law, Hon'ble CIT(A)/Ld. AO on facts....
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.... dated 04/12/2020 for assessment year 2014-15 are that the assessee "DZ Bank of India (representative office)" filed return of income on 25/09/2014 treating the India representative office as a taxable entity, disclosing NIL taxable income. The Assessing Officer noticed that during the relevant previous year "the DZ Bank AG", provided foreign currency loans to Indian companies in the nature of external commercial borrowings (ECB). The Assessing Officer further noted that huge sums of the TDS was made on the interest paid/payable by the Indian customer to the assessee. Before the Assessing Officer, the assessee explained that TDS on interest payable by the Indian borrowers is born by them and that as per section 115A(5) of the Income Tax Act, 1961 (in short 'the Act'), a foreign company is exempt from furnishing return of income in India, when it only earns interest income from foreign currency loans provided to Indian companies and the appropriate taxes have been deducted at source from the same. The Assessing Officer was of the view that the "DZ Bank India representative office" was a permanent establishment (PE) of the head office "DZ Bank AG" and the interest income and other in....
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.... well. We, therefore, uphold the plea of the assessee against taxability of interest income of Rs 29,41,57,201 and commitment fees etc of Rs 1,98,14,938, in the hands of the assessee bank, additionally under article 7 of the Indo German tax treaty also. That finding is, however, without prejudice to the taxability of the interest income under article 11 of the Indo German tax treaty. We make it clear that the income in question could only be taxed under article 11, and not additionally under article 7 also, but the income is taxable nevertheless, subject to the exemptions set out in and under the scheme of article 11, on gross basis. 31. Given our line of reasoning, as above, it is wholly academic issue as to whether or not the assessee had a permanent establishment in India, because PE or no PE, the debt claim in question could not be said to be effectively connected to the alleged PE, and, therefore, neither the exclusion article 11(5) could have been triggered, nor the taxability under article 7 could not have come into play. It is not even Assessing Officer's case that the debt claims in question are effectively connected with the PE, but at best that there is "a real rel....
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....this liability of Rs.15 which means his expense cost would be Rs.100+ 15 =Rs.115 and corresponding amount would be income in the hand of the assessee. The assessee would be entitled for credit of tax deduction at source of Rs.15 as per the provision of Act and Incometax Rules, 1962 (in short 'the Rules'). The assessee has filed a copy of extract of loan agreement between the 'M/s Mundra Port and Special Economic Zone Ltd' and the 'DZ Bank AG' before us, relevant part of which is reproduced as under: "12.2 Tax gross-up (a) All payments to be made by the Borrower to the Lender under the Finance Documents shall be made free and clear of and without any Tax Deduction unless the Borrower is required to make a Tax Deduction, in which case the sum payable by the Borrower (in respect of which such Tax Deduction is required to be made) shall be increased to the extent necessary to ensure that the Lender receives a sum net of any deduction or withholding equal to the sum which it would have received had no such Tax Deduction been made or required to be made. (b) The Borrower shall promptly upon becoming aware that it must make a Tax Deduction (or that there is any change in the rate or....
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....annually or in Form 16A in case deduction of tax under any other section quarterly. 8.6 As per section 203AA, prescribed Income Tax Authority shall deliver to every person from whose income tax has been deducted a statement in the prescribed form specifying amount of tax deducted or paid within prescribed time limit. As per Rule 31AB framed thereunder, the Director General of Income-Tax (Systems) shall deliver to every person whose tax has been deducted a statement referred to in section 203AA in the Form 26AS by the 31st July following the financial year during which taxes were deducted or paid. 8.7 Thus, from above it is evident that each deductor will issue Form 16/16A to every payee individually whereas the Income Tax Department will deliver the consolidated statement of tax deducted by various payees online in the Form 26AS. 8.8 Prior to introduction of Form 26AS, the credit of TDS was used to be given on the basis of TDS certificate produced by the assessee. The Ld. counsel of the assessee has referred to the decision of the Hon'ble Bombay High Court in the case of Yashpal Shani reported in 293 ITR 539(Bom). In said case, a question was raised as to where a company deducts....
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....rce, such person shall be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and provides for levy of fine. Thus, the Act provides for complete machinery to recover tax deducted at source from the person who has deducted it. 18. At this stage, we may also note that every person deducting tax at source is required to issue a certificate under Section 203 of the Act specifying the amount of tax deducted, the rate at which the tax has been deducted and such other particulars as may be prescribed. Section 199 of the Act provides that any tax deducted at source under the provisions of Chapter XVII and paid to the Central Government shall be treated as payment of tax on behalf of the person from whose income the deduction was made and the credit shall be given to him for the amount so deducted on production of the TDS certificate issued under Section 203 of the Act. Section 205 of the Act provides that where tax is deductible at the source under Chapter XVII of the Act, the assessee shall not be called upon to pay the tax himself to the extent to which tax has been deducted. 19. Section 205 of the Act as it s....
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....f the tax deducted at source in the relevant assessment year. If the TDS certificate is not issued, then under Section 199 of the Act, the assessee from whose income, tax has been deducted at source will not be entitled to take credit of the said amount. In that event, on account of the non availability of the credit, the assessee would be liable to pay tax once again even though the tax was deducted at source. Thus, it would be a case of double taxation which is not permissible in law. To avoid such anomaly, Section 205 has been enacted, to the effect that, once the tax is deducted at source by the employer-company, then, the person from whose income, the tax has been deducted at source shall not be called to pay the said tax again. From the language of Section of 205 of the Act, it is clear that the bar operates as soon as it is established that the tax has been deducted at source and it is wholly irrelevant as to whether the tax deducted at source is paid to the credit of Central Government or not and whether TDS certificate in Form No. 16 has been issued or not. Also the mere fact that the employer may not issue TDS certificate to the employee does not mean that the liability o....
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....ant of TDS certificate, the fact that the tax has been deducted at source from salary income of the petitioner would be sufficient to hold that as per Section 205 of the Act, the revenue cannot recover the TDS amount with interest from the petitioner once again. 25. In the result, the petition succeeds. As the respondent No. 6 had deducted the tax at source from the salary income of the petitioner the revenue could not have recovered the said amount with interest from the petitioner in view of the bar contained in Section 205 of the Act. Accordingly, the revenue is directed to refund to the petitioner within 8 weeks from today the amount of Rs. 17,89,587/- with interest @ 6% from the date of recovery till the date of payment. Though the credit of the tax deducted at source is not available to the petitioner, since the said liability is not recoverable from the petitioner, the revenue is directed to earmark the said TDS liability as "not recoverable" from the petitioner." 8.10 Thus in the above case, the Hon'ble court directed the Assessing Officer to allow credit of the TDS which was deducted by the payer of the income, irrespective whether the same was deposited in government a....