AI Drafter 
TaxTMI 
TaxTMI 
2023 (2) TMI 1069
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.... with Rule 37BA. (2) The appellant craves, to leave, to amend and/or to alter any ground or add a new ground which may be necessary." Assessment Year 2018-19 "(1) The ld. CIT(A) has erred in law and facts in directing the AO to grant TDS credit of Rs.4,41,49,426/- while ignoring the provisions of section 199 read with Rule 37BA. (2) The appellant craves, to leave, to amend and/or to alter any ground or add a new ground which may be necessary." 5. The brief facts of the case are that the assessee company filed its return of income on 29th Sep, 2017 declaring total income at Rs. Nil and claiming refund of Rs. 3,08,68,845/- on account of tax deducted at source for the year under consideration. The break up of income offered to tax and corresponding TDS as shown claimed in the return of income is given below:- Particulars Amount Tax Deducted at Source Remarks Interest Income 1,60,88,446/- 16,08,845/- Capitalised in books of accounts Advance against Funded work 146,30,00,000/- 2,92,60,000/- Shown under the head "other liabilities" in balance sheet (schedule-12) 1,47,90,88,446/- 3,08,68,845/- ....
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....sclosed as capital work in progress in the Balance Sheet (Note 26 of Balance Sheet), the assessee capitalised the interest income with the decision in the cases of CIT vs. Bokaro Steel Limited 236 ITR 315 (SC) and Indian Panipat Power Consortium Ltd. 181 taxman 149 (Delhi High Court). The assessee submitted that the income earned by the assessee is inextricably linked with the setting up of the power project and hence such income has been reduced from capital work in progress. Therefore, once the income received has been deducted from the cost of CWIP, it means that the assessee has indirectly offered the interest income to tax by way of reduction in cost of project, the net result would be claiming lower cost of work in progress at the time of recognizing income in the books of accounts. Hence, credit of tax deducted at source cannot be denied on the ground that related income has not been offered to tax during the year under consideration. 6.1 Regarding TDS of Rs. 2,92,60,000/- deducted on advance against funded work receipt, the assessee submitted that it received advance from Government of Kerala against the funded works of the project under development as per the "Concessio....
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....d Works of the Project under the development as per the concession agreement which includes Breakwater Site Development and fish lending berth etc. Out of total value of funded works of Rs. 1,46,30,00,000/-, the appellant received certain amount during the year under consideration on which tax at source of Rs. 2,92,60,000/- was deducted. Since the project was under development, the grant has been classified as "Advance against funded works" and shown under the head "Other Liabilities" in Schedule 12 of the Balance Sheet. The appellant has claimed that such receipts are also in nature of capital receipts and will not form part of income in Profit & Loss account hence appellant is entitled to claim of TDS in year under consideration. 5.3 On perusal of details, it is observed that before processing return of income, AO, CPC has issued defective notice to appellant on the ground that income corresponding to TDS credit claimed in return of income is not shown in return of income and after considering appellant's explanation as mentioned in written submission (supra), A.O. CPC has treated return of income filed by appellant as valid return of income and processed such return....
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....said certificate the assessee becomes entitled for the credit of TDS even if the assessee has not directly offered the said income for tax as the assessee considered the same was not liable to tax. When the assessee has earned interest on deposit mandatory for acquisition and installation of machinery then the interest was earned by the assessee and is directly incidental to the acquisition in respect of machinery and therefore the same has been rightly reduced from the cost of the machinery. In this way the assessee has indirectly disclosed income and has offered for assessment. Even if the income earned by the assessee has not been offered for tax being not liable for tax, the assessee is entitled for credit of TDS made in respect of that income. Accordingly, the assessee is entitled for credit of TDS relating to interest income." Reliance is also placed on ratio of decision of Hon'ble Mumbai ITAT in the case of ArvindMurjani Brands (P.) Ltd vs ITO [2012] 21 taxmann.com 131 wherein it is held as under: "Section 199 of the Income-tax Act, 1961 - Deduction of tax at source - Credit for tax deducted - Assessment year 2007-08 - Whether in case where amount on wh....
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....y, such interest income has been indirectly offered to tax during the year under consideration. So far as the advance from Kerala Government is concerned, the assessee submitted that it is in the nature of subsidy and is only a reimbursement of cost incurred by the assessee. The assessee submitted that even as on date, the project is under consideration. The counsel of the assessee further submitted that in the regular assessment for assessment year 2018-19, the assessee has been allowed TDS credit by the Department itself. Accordingly, there is no infirmity in the order of ld. CIT(A), who on appreciation of relevant material has correctly concluded that assessee is entitled to credit of TDS deducted in respect of interest income and advance received from Kerala Government during the year under consideration. 9. We have heard the rival contention and perused the material on record. 9.1 In the case of Arvind Murjani Brands (P.) Ltd. v. ITO [2012] 137 ITD 173/21 taxmann.com 131 (Mum.), ITAT held that where amount on which tax was deducted at source is not at all chargeable to tax, command of section 199 will have to be harmoniously and pragmatically read as providing for allowi....
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....ased.The Assessee claimed credit of all TDS certificates, including that related to REPL stating that benefit of TDS certificates mistakenly issued in its PAN name had not been availed by REPL.The Assessing Officer rejected assessee's claim holding that TDS credit should be allowed to person from whose income deduction was made.The Delhi High Court held that the Revenue having assessed REPL's income in respect of such TDS claim could not deny assessee's claim on mere technical ground that income in respect of said TDS claim was not that of assessee, given that assessee and REPL were sister concerns and REPL had not raised any objection with regard to assessee's TDS claim. 9.5 In the case of IVRCL-KBL (JV) v. ACIT [2016] 67 taxmann.com 224 (Andhra Pradesh), Assessee was a joint-venture executing civil contract works - It was awarded contracts by Irrigation Department of State Government. Subsequently, those contracts were given by assessee on sub-contract basis to one of its constituents without any margin.The Assessee filed its return claiming refund of tax deducted at source from its bills by State Government. The Assessing Officer opined that since no real work....
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....essment year for which such income is assessable" has been omitted. Meaning thereby, that the legislature was quite conscious about the facts and hardships faced by some assessees, while making the amendments in section 199 and in amended provisions nothing has been stated about the year in which the credit of TDS is to be claimed. As per amended provisions of section 199, in sub-section 1, it has been stated that any deductions made in accordance with the foregoing provisions of this chapter and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made. Therefore, as per the amended provisions, once the TDS was deducted, a credit of the same to be given to the assessees, irrespective of the year to which it relates. The pre-amended and the amended provisions of section 199 are extracted hereunder: "Section 199: Credit for tax deducted - (1) Any deduction made in accordance with the foregoing provisions of this Chapter and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made, or of the owner of the security, or depositor or owner....