Case Law Details
Recently, the Mumbai bench of the Income-tax Appellate Tribunal (the Tribunal) in the case of Lucent Technologies GRL LLC Vs DCIT (ITA No. 6353 /Mum/09) (Judgment date: 31 December 2010, Assessment Year: 2002- 03) held that the credit for tax withheld cannot be denied to the taxpayer on the basis of subsequent grant of tax refund to the tax deductor when all the obligations under the provisions of the Income-tax Act, 1961 (the Act) relating to tax deduction are duly complied with and TDS certificate has been issued in accordance with the provisions of the Act.
Facts of the case
• The taxpayer, a tax resident of USA, was in the business of supply of copyrighted software for telecommunication project. The taxpayer received consideration from Reliance Infocomm (deductor) for supply of software. The deductor made an application to the Assessing Officer (AO) requesting him to make remittance without tax deduction on the grounds that the payment was for copyrighted article and not copyright.
• However, the AO rejected taxpayer’s application against which the deductor filed an appeal to Commissioner of Income-tax (Appeals) [CIT(A)]. The deductor as per the AO’s direction withheld taxes while making payments to the taxpayer as per the provisions of Section 195 of the Act and deposited tax with the Government. The deductor also issued TDS certificates for the said amount withheld under Section 195 of the Act. Subsequently, the deductor was successful in its appeal for NIL tax deduction at source and the deductor was also granted full refund of taxes paid.
• The taxpayer, in its return of income filed for the year under consideration, claimed credit for the taxes so withheld on the basis of TDS certificates issued by the deductor. However, the AO held that since the tax has been refunded to the deductor, the TDS certificates are not valid and hence, no credit for TDS can be granted to the taxpayer.
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