Brief of the Case
The Hon’ble High Court held that Rule 37BA will not apply in this case as there is only minor procedural lapse and procedure is the handmaid of justice, and it cannot be used to hamper the cause of justice.
Facts of the Case
The assessee derived income from the business of erection, commissioning and installation of towers on contract basis. The AO noticed that as per Form 26AS statement, though the total receipts declared by the assessee was Rs. 6,20,99,368/- (as opposed to Rs. 19,08,20,903/-), the TDS claimed was Rs. 1,20,73,097/-. The assessee’s explanation for the discrepancy was that a vendor had billed its sister company, for the work but had mistakenly mentioned Assessee’s PAN in the TDS certificate, thus inadvertently crediting its TDS account in the 26AS statement, which is PAN based. The assessee had claimed credit of all TDS certificates. The assessee stated that the benefit of the TDS certificate mistakenly issued in its PAN name has not been availed by its sister concern. The AO rejected this claim relying on Section 199 of the Act and held that the TDS credit should be allowed to the person from whose income the deduction was made. Therefore, according to the AO, the assessee, instead of claiming the credit of the TDS which did not belong to it, should have approached the vendors for correction of their record.
Contention of the Revenue
The revenue in the present appeal has urged that the CIT(A) and the ITAT could not have allowed the entire TDS amount claimed by the assessee as the deduction was not made in respect of the assessee’s income and it was, instead, made in respect of its sister concern. In support of this contention, the revenue relies on the provisions of Section 199 of the Act. The revenue also contended that in the absence of the assessee offering the corresponding income, for taxation by declaring total income, the assessee’s TDS claim could not have been allowed. The defective TDS amount should be disallowed and the only legitimate claim is that of Rs. 27,01,000/- against the declared total receipts of Rs. 6,20,99,368/-. The revenue relies on the phrase “shall be treated as a payment of tax on behalf of the person from whose income the deduction was made” to contend that the assessee’s TDS claim cannot be based on the receipts of the sister concern.
Contention of the Assessee
The Assessee fairly admitted throughout the proceedings for its TDS claim of Rs. 1,20,73,097/- that the benefit of such claim has not been availed by its sister concern. Therefore, the revenue, having assessed its sister concern income in respect to such TDS claim cannot now deny the assessee’s claim on the mere technical ground that the income in respect of the said TDS claim was not that of the assessee, and the sister concern has not raised any objection with regard to the assessee’s TDS claim of Rs. 1,20,73,097/-.
Held by the CIT(A)
According to Ld. CIT(A), there was no technicality involved in the issue. It is clear that there is an apparent mistake on the part of the vendor who has billed sister concern for the assessee for the work, but has mistakenly mentioned the PAN of the Assessee in the TDS certificate. Since, the appellant has already paid the due taxes, it would be a travesty of justice to not allow the benefit of TDS to assessee. Therefore, the AO was directed to allow the benefit of TDS claim of the appellant as per the TDS certificates submitted by it.
Held by the ITAT
The Hon’ble Tribunal have upheld the decision of CIT(A) and dismissed the appeals of the Revenue.
Held by the Hon’ble High Court
The Hon’ble High Court while dismissing the Appeals filed by the Revenue held that the provisions of Rule 37BA which envisions grant of TDS credit to entities other than the deductee. Rule 37BA is not directly applicable in the facts of this case. The reliance placed on Rule 37BA is merely to demonstrate that in not all circumstances is TDS credit given to the deductee. The Hon’ble High Court relied on the Judgment of Sardar Amarjit Singh Kalra v. Pramod Gupta, (2003) 3 SCC 272 where it was held that procedure is the handmaid of justice, and it cannot be used to hamper the cause of justice.
The revenue’s contention that the assessee, instead of claiming the entire TDS amount, ought to have sought a correction of the vendor’s mistake, would unnecessarily prolong the entire process of seeking refund based on TDS credit.