Lucent Technologies GRL LLC v DCIT (9 taxmann.com 182) (Mumbai ITAT)
• The assessee – a tax payer of the USA, was in the business of supply of copyrighted software for telecommunication projects. It received consideration from R for the supply of software.
• R made an application to the AO to make remittance without TDS since the payment was for copyrighted article and not a copyright.
• This request was declined. R deducted tax as per the directions of the AO and deposited it with the govt. R issued a TDS certificate to the assessee.
• R was successful in appeal for NIL TDS and was granted full refund of taxes paid
• The assessee claimed credit for the said tax deducted by R in its return of income. The AO held that since the tax had been refunded to R, the TDS certificate was not valid and the assessee would not get credit for the tax.
Issue: Can the lawful implications of a valid TDS certificate can be declined if R has been refunded the taxes deposited with the govt?
• The Tribunal held that all the requirements for grant of TDS had been complied with. The fairness of the procedures was not questioned by the AO
• The refund to the deductor is not prescribed under the law, but appears to be an administrative exercise. Approval from the assessee was not taken before granting refund to R. This cannot curtail the rights of the assessee
• Since the taxes have been deducted from the payment made to the assessee and it is also in receipt of TDS certificate, the credit for TDS cannot be declined on the basis of an administrative action of refund which is neither envisaged by the provisions of the ITA nor in the control of the assessee.
• Tribunal directed the AO to grant credit to the assessee on the basis of original TDS certificates produced and in accordance with the provisions of the ITA uninfluenced by any refunds subsequently granted to R
• The Tribunal observed that the above directions should not be construed to affect the remedies that the tax department may pursue qua the tax deductor