2024 (1) TMI 994

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....e said contract by letter of acceptance dated 14.09.2016 issued by Ministry of Road Transport and Highways, Government of India through Road Construction Department, Government of Bihar (client). 3. The assessee filed a return of income for AY 2017-18 on 03.12.2017 declaring total income of Rs. 17,28,617/-. In the return of income the assessee claimed a refund of Rs. 2,97,26,630/- towards tax deduced by the client. The assessee subsequently filed a revised return on 15.01.2018 declaring a total income of Rs. 16,19,690. The return was processed under section 143(1) of the Act determining the refund of the assessee as Rs. 28,93,713/-. Subsequently, the case was selected for scrutiny and the AO accepted the income returned by the assessee in the revised return but the AO thereby did not grant credit for TDS of Rs. 2,76,47,272/- which the client has deducted on the mobilization advance extended to the assessee. The assessee submitted before the AO that the mobilization advance of Rs. 138,26,63,636/- is received from Ministry of Surface Transport on which tax has been deduced under section 194C of the Act and that the mobilization advance received is a capital receipt repayable which....

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..... cannot be allowed during the year as no corresponding income from the contract has been offered to tax. It is required to be allowed in subsequent years when mobilization advance gets converted into billings and income is offered to tax. 9. Subject to the above discussion, the credit for TDS amounting to Rs. 2,76 47,272 on the mobilization advance is not being allowed and only the credit for TDS of Rs. 25,81,508 on interest income is allowed to the assessee, as said interest income has been offered to tax." 4. Aggrieved, the assessee filed the appeal before the CIT(A). The CIT(A) directed the AO to verify the claim of the assessee that the mobilization advance is a capital receipt and allow the credit for TDS accordingly. 5. Aggrieved, the assessee is in appeal before the Tribunal. Before us, the Ld. Authorized Representative (AR) submitted that the mobilization advance is given by the Government of India as per the terms of the contract agreement with the client and that the said advance is given against the bank guarantee extended by the assessee. The ld. AR further submitted that the mobilization advance bears interest at the rate 10% that needs to be paid until....

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....t-bearing advance payment (the "Advance Payment"), equal in amount to 10 (ten) percent of the Contract Price, for mobilisation expenses and for acquisition of equipment. The Advance Payment shall be made in two instalments each equal to 5% (five percent) of the Contract Price. The advance payment would be deemed as an interest bearing advance at an interest rate of 10% per annum, to be compounded quarterly. The interest would be recovered along with the recovery of advance payment. 19.2.2. The Contractor may apply to the Authority for the first instalment of the Advance Payment at any time after the Appointed Date, along with an irrevocable and unconditional guarantee from a Bank for an amount equivalent to 110% (one hundred and ten per cent) of such instalment, substantially in the form provided at Annex-III of Schedule-G, to remain effective till the complete and full-repayment thereof." 9. We notice that the Ministry of Surface Transport and Road has deducted TDS on the mobilization advance of Rs. 138,23,63,636/- @ 2% which amounted to Rs. 2,76,47,272/-. The claim of the assessee is that the amount received as mobilization advance is in the nature of loan which is re....

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....age 73-74 para 11 of her order, concurred with the view of the AO. As per terms of various contract agreements under which Site Mobilisation Loan and the Machinery Mobilisation Loan / advances, mostly on interest ranging from @ 12% to 18% p.a., have been granted against bank guarantee. In the balance sheet, such contractee advance mobilisation loan is reflected as loan funds under the head Contractee advances as a liability. Such loan can never be the income of the assessee, neither in present or in future; deduction of such loan advance from running bills is only a practical and convenient way to recover the loan. Such mobilisation loan being a capital receipt, there was no legal obligation on the part of the contractee to deduct tax at source u/s 194C. If tax has been deducted at source, the credit for such TDS has to be allowed in the year of deduction itself. In ACIT v. Peddu Srinivas Rao ITA 324/Vizag/2009 mobilisation advance was received and on identical facts it was held that credit for such TDS should be given in the year of deduction of TDS itself. This decision was followed in Zelan Projects Pvt. Ltd. v. DCIT ITA 1361/Hyd/2013 fel::pB- IS-ee]. Similarly, in Arvind Murjan....

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....CIT(A)'s contention that the amount adjusted goes to reduced the income of the assessee and accordingly is in nature of income is not correct. Further this fact is identical to the facts in Patel Engineering (supra) where the coordinate bench has directed the AO to allow credit for the TDS deducted on the advance. Considering the above facts and the decisions of the Co-ordinate bench on the similar issue, we hold that the assessee should be allowed credit for the TDS claimed which is deducted from the mobilization advance. 13. In the result, the appeal of assessee is allowed. Order pronounced in the open court on 20-11-2023. ============= Document 1 Particulars Certified Billed Turnover (A)(Refer Note 1) Add Mobilisation advance received Less Mobilisation advance recovered from RA bills Add Mobilisation advance recovered from RA bills but not reported in Form 2645 Add Credit notes issued to chent not considered by client while reporting turnover Add GST amount wrongly reported as turnover by client Add/Less: Other reco tems considered by client while reporting turnover in Form 26AS Turnover reported by client in Form 26AS (B) TD....