ACIT Vs. M/s Rahee Jhajharia E to E JV (ITAT Kolkata)
As per Section 199(3) of Income Tax Act, 1961 read with Rule 37BA(3)(i) and (ii) of Income Tax Rules, 1962 TDS can be granted only in the year in which the income/receipt on which such tax deducted at source is assessable to tax.
This appeal by the Revenue and the Cross objection by the assessee are directed against the order of the Learned Commissioner of Income Tax (Appeals)-9, Kolkata [ in short the ld CITA] dated 24.05.2017 which was passed against the order passed by the ACIT, Circle- 31, Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short “the Act”) dated 02.02.2016 for the Assessment Year 2013-14.
2. The assessee is an AOP and is a joint venture of M/s Rahee Infratech Ltd. and M/s Jhajharia Nirman Private Ltd., both having 50% profit sharing ratio. During the impugned financial year, the assessee JV was engaged in the business of construction of road bed, Bridge, supply of Truck/ Rails, Track installation, Signaling and Telecom and Overhead Electrification and associated equipment. The issue before us is whether the Ld. CIT(A) was right in allowing credit of TDS of Rs. 12,96,167/- deducted from the payment of mobilization advance by M/s Moser Baer Construction Pvt. Ltd. Admittedly, the mobilization advance was not offered to tax during the impugned assessment year. The Assessing officer held that as per provision of Section 199 of the Act, credited of TDS made on mobilization advance cannot be allowed in the current year. The Ld. CIT(A) allowed the appeal of the assessee by applying the judgment of the Hon’ble Karnataka High Court in the case of CIT Central vs. Elsamex TWS-SNC(JV) had held that the mobilization advance was not an income as it was granted against the bank guarantee and was interest bearing. Since, the TDS was deducted on an amount that was not taxable, it is not the fault of the assessee and hence, the assessee is entitled to credit of Rs. 12,96,197/-. Aggrieved the revenue is in appeal before us on the following ground:
1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(Appeals) has erred in allowing the credit of TDs of Rs. 12,96,167/- deducted towards Mobilization Advance recovered by M/s Moser Baer Construction Pvt. Ltd.
3. The assessee filed cross objection. The effective ground read as follows:
2. For that at least Credit for TDS of Rs. 3,86,300/- (2% of 1,93,14,989/-) recovered Mobilization Advances by Moser Baer Construction Pvt. Ltd. be directed to be allowed in assessment year 2013-14 & balance of Rs. 9,09,867/- (12,96,167/- – 3,86,300/-) be directed to be allowed in assessment year 2014-15.
4. After hearing rival submissions, I held as follows:
Section 199(3) read as follows:
“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.”
Rule 37BA(3)(i) and (ii) of Income Tax Rules, 1962 read as follows:
(i) Credit for tax deducted at source and paid to the Central Government, shall be given for the assessment year for which such income is asses sable.
(ii) Where tax has been deducted at source and paid to the Central Government and the income is asses-sable 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 asses sable to tax.
5. The Act and Rules referred above are clear that credit of TDS can be granted only in the year in which the income/receipt on which such tax deducted at source is asses sable to tax. Thus, in my view the order of Ld. CIT(A) is against the provision of the Act. Hence, the same is reversed and the appeal of the revenue is allowed.
6. Coming to the cross objection the claim of the assessee is in accordance with Section 199 read with Rule 37BA(3) of the Act. The assessing officer directed to grant credit as per law to the assessee in the year which mobilization receipt is offered to tax as income.
7. In the result, the appeal of the Revenue is allowed and the Cross objection of the assessee is disposed off as above.
Order pronounced in the Court on 21.12.2017