Powergrid Rampur Sambhal Transmission Limited Vs ITO (ITAT Delhi)
TDS Credit Cannot Be Denied for Capitalised Interest: ITAT Allows Credit Despite Income Reduced from CWIP
The Delhi Bench ‘E’ of the ITAT, in Powergrid Rampur Sambhal Transmission Ltd. v. ITO (AY 2022-23), held that TDS credit cannot be denied merely because the corresponding income was not offered to tax in the Profit & Loss Account, where such income was capital in nature and reduced from Capital Work-in-Progress (CWIP).
The assessee, engaged in a transmission project under construction, had advanced funds to contractors and earned incidental interest, which was treated as a capital receipt intrinsically linked to the construction activity and accordingly reduced from CWIP. Although the entire TDS of ₹5.65 lakh was duly reflected in Form 26AS and disclosed in the return, CPC allowed only a nominal credit while processing the return under section 143(1), without issuing any prior intimation. Even rectification under section 154 failed, leading to partial relief before the CIT(A).
Allowing the assessee’s appeal, the Tribunal held that under section 199 read with Rule 37BA, once (i) TDS is duly deducted and reported by the deductor and (ii) the credit is claimed in the return, credit cannot be denied merely because the income is capitalised or adjusted against CWIP. Relying on Bokaro Steel Ltd. (SC) and consistent Tribunal precedents including the assessee’s group case (Power Grid Mithilanchal Transmission Ltd.) and Trikaal Mediinfotech, the ITAT reiterated that the Government cannot retain tax deducted at source when the underlying receipt is not chargeable as revenue income.
The Tribunal further observed that disallowance of TDS credit is not a permissible adjustment under section 143(1)(a) and that denial without prior intimation violated statutory safeguards. Accordingly, the impugned orders were set aside and the assessee was held entitled to full TDS credit, allowing the appeal in full
FULL TEXT OF THE ORDER OF ITAT DELHI
