Once TDS is deducted credit of the same is allowed irrespective of the year to which it relates

Brief facts of the case are that the assessee is a company, involved in the business of executing civil contracts with various Government and non-Governmental entities. During the FY.2016-17, the assessee received Rs.6,28,98,875/- on 18/03/2017, which they declared in their return of income on accrual basis and paid the taxes thereon. The Government department, however, failed to remit the TDS, though deducted, within thirty days. Due to delay in the deposit, the TDS credit appeared in the FY.2017-18, corresponding to the AY.2018-19 in Form 26-AS. For the AY.2018-19, the assessee filed the return of income on 27/09/2018 declaring an income of Rs.1,78,06,380/- and claimed credit of the TDS relatable to the receipt of Rs.6,28,98,875/- received on 18/03/2017. The reason for this is that the State Government deposited the deducted TDS amount with delay on 31/07/2017. Such a claim for credit for TDS of Rs.12,57,976/- was denied during the scrutiny by applying Rule 37BA(3)(i) of the Income Tax Rules (“the Rules”) on the ground that there was no corresponding income during the AY.2018-19.

Assessee is aggrieved by the said denial of TDS and preferred an appeal challenging the said action. The assessee pleaded that the assessee declared income during the AY.2017-18 on accrual basis, and TDS wasdeducted when the amount was paid to the assessee by the State Government, but due to the delay on the part of the State Government department in deposit of the TDS, such a credit appeared during the FY.2017-18 corresponding to the AY.2018-19 and, therefore, under the amended Section 199 of the Act, the assessee is entitled to benefit of the TDS credit in the AY.2018-19.

Aggrieved assessee preferred an appeal before the tribunal. ITAT placed reliance on the decisions reported in Zelan Projects (P) Ltd Vs. DCIT, ITA No.1361 (Hyd) of 2013 [2015] 63 taxmann.com 334 (Hyderabad-Trib.) and ACIT Vs. Peddu Srinivasa Rao, ITA No.324/Vizag/2009, dt.03/03/2011 and held that the refund of TDS though in fact was effected during the AY.2017-18 cannot be denied to the assessee when it was appearing in Form-26AS in the AY.2018-19 and claimed by the assessee and therefore, allowed the claim of the assessee in respect of the TDS amount of Rs.12,57,976/- during the AY.2018-19. the case of ACIT Vs. Peddu Srinivasa Rao (supra), a Co-ordinate Bench of this Tribunal observed as under:

“8. We have carefully perused the provisions of section 199 of the Act and according to the pre-amended provisions of section 199, the credit of deduction made in accordance with the relevant provisions of this chapter and paid to the Central Government, shall be given for the amount so deducted on the production of the certificate furnished u/s 203 for the assessment made under this Act for the assessment year for which such income is assessable. But in the amended provisions the words “for the assessment 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. …….”

To Read Judgment Download PDF Given Below: