Case Law Details
The brief facts of the case are that the assessee claimed credit for TDS of Rs.1,73,52,062/- for the AY 2006-07 and Rs.2,25,09,037/- in AY 2007- 08 which was not allowed by the AO on the ground that the income in respect of the said TDS was not shown by the assessee in view of the provisions of section 199 of the Act. The ld.CIT(A) also confirmed the same.
We find that the Visakhapatnam Bench in the case of Peddu Srinivasa Rao(supra) has held 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. 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 of property or of unit-holder or of the shareholder, as the case may be, and credit shall be given to him for the amount so deducted on the production of the certificate furnished under section 203 in the assessment made under this Act for the assessment year for which such income is assessable:
(3) The Board may, for the purposes of giving credit in respect of tax deducted or tax paid in terms of the provisions of this Chapter, make such rules as may be necessary, including the rules for the purposes of giving credit to a person other than those referred to in sub-section (1) and sub-section (2) and also the assessment year for which such credit may be given.
Section 199. (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 of the depositor or of the owner of property or of the unit-holder, or of the shareholder, as the case may be.
(2) Any sum referred to in sub-section (1A) of section 192 and paid to the Central Government shall be treated as the tax paid on behalf of the person in respect of whose income such payment of tax has been made.”
The ld. DR could not cite any contrary decision or any other good reason for which the aforesaid decision of the Co-ordinate Bench of the Tribunal should not be followed by us. Respectfully following the aforesaid order of the Tribunal, we set aside the orders of the lower authorities and direct the AO to allow credit for the TDS to the assessee. Thus, the ground of appeal of the assessee is allowed.
Quite right; even on the first blush, it is obvious that the issue has been decided in assessee’s favor,but without making a reference to and considering the implications of Rule 37BA framed by the Board in accordance with the powers given in sub-section (3) of section 199 itself. Going by the text of the reported ITAT order, the Revenue is not seen to have brought to the attention of the Bench this vital aspect.Had it done so, the decision could only have been to the contrary and different. As may be recalled, in fact,the very amended provision and the rule thereunder were brought on the statute only with a view to set at rest the obtaining controversies under the old section, one of which was as to in which year TDS credit was required to be allowed.
Incidentally, it is simply said that “The ld.CIT(A) also confirmed the same”. Thus, one is not clear whether both the AO and the CIT (A) took an adverse view with particular reference to and relying on the related Rule.In this context,worth a mention,it is recalled with nostalgia that in the good old days,in every order, be it in first or second appeal, for that matter even in court’s further judgment,at least a gist of the proceedings before the lower authorities, as a matter of healthy convention of a speaking order,used to be incorporated.
in the above judgement, reference of Sec 199 (1) is given however, sub section 3 of the same section empowers Board to make rules regarding allowability of tax credit. means to whom & in which year(s) credit should be given.
as per Rule 37BA (3)(i) credit for tax deducted at source & deposited to the CG, shall be given for the AY for which such income is assessable.
(ii) where tax has been deducted at source & paid to the CG & the income is assessable over a number of years, credit for tax deducted at source shall be allowed across those years in the same proportion in which the income is assessable to tax.
now what i interpret from the provisions of Sec 199 read with rule 37BA: if TDS was deducted from a payment out of which some portion is yet to be recognized as income, TDS pertaining to that portion can not be claimed as credit.
the above judgement contradicts with my understanding of the related provisions.
i request other members to share the rationale behind this judgement
Can the rule restrict in a manner that the act does not provide?
Pl. refer rule no. 37BA(3), AS PER IT CREDIT WILL BE GIVEN FOR THE ASSESSMENT YEAR FOR WHICH IT IS TAXABLE. SO IT APPEARS THAT RULE NOTIFIED UNDER SECTION 199 HAS NOT BEEN CONSIDERED…