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The credit of TDS to be given for the assessment year in which invoices are raised

In terms of Rule 37BA(3)(i) benefit of TDS is to be given for assessment year for which corresponding income is assessable, therefore, where the assessee raised invoice on ‘A’ in March 2011, the benefit of TDS had to be allowed in the assessment year 2011-12 even though the tax on invoice amount was deposited by ‘A’ in April 2011. So, in no case TDS credit can be given in other assessment years.

Assessee to reconcile income vis-à-vis TDS credit

Total freight collected by the assessee was Rs.30.53 crores and that the assessee paid freight to shipping companies at Rs.25.56 crores thus resulting in a balance of Rs.4.97 crores as gross income in its Profit and Loss Account, which was not disputed by the Assessing Officer.

The Assessing Officer did not allow full TDS credit of Rs.76,16,380/- to the assessee, as in the opinion of the Assessing Officer, since the assessee had not accounted for the entire gross receipts of Rs.30.53 crores it was not entitled to claim the full TDS credit of Rs.76,16,380/- and the Assessing Officer restricted the TDS credit to Rs.12,37,993/-

Even in various appeals TDS credit was not allowed as it is the responsibility of the assessee to reconcile TDS credit with income exposed to tax. The onus is on the assessee to make proper reconciliation of the differences between the receipts as per TDS certificates and that of as per Profit and Loss Account lay relevant evidence/material in support of its contentions/explanation.

No denial of TDS even in the absence of Form 16A (TDS certificates)

The Gujarat High Court in the case of Sumit Devendra Rajani v. Asstt. CIT [2014] 49 taxmann.com 31 (Gujarat), involving the assessment year 2010-11, held that “where the deductor having deducted TDS, issued Form No. 16A, credit of the same cannot be denied to the assessee-deductee solely on the ground that such credit does not appear on the ITD system of the department and/or the same does not match with the ITD system of the department.”

Any receipts do not become taxable just because TDS is deducted from it

Income and chargeability are two separate terms defined under the Act under 2(24) of the Act and Sec 4 of the Act respectively. Every transaction has to be tested separately as per the definition in the Act and then only the provisions of Chapter XVII- B of the Act can be applied.

If a Fixed Deposit is made by an assessee in the process of setting up a new project as security for opening an L/C for import of Plant and Machinery, then interest on such Fixed Deposit does not constitute income but is liable to be netted off against the cost of setting up of the project. In such cases, the interest on Fixed Deposit does not constitute income under the charging provisions of Section 4 of the Act. In such cases however the Revenue cannot claim the interest to be chargeable to tax under section 4 of the Act even if the Bank deducts tax on such interest income under section 194A of the Act by taking recourse to Sec. 198 of the Act.

Facts of the case:

S had engaged the services of the assessee for collection of the subscription amount against the commission and the assessee had remitted the entire gross amount received from the cable operators to S. The amount remitted by the assessee to S included the number of TDS deducted by the cable operators at the time of payment made by them to the assessee.

The assessee company filed its return of income for the assessment year 2010-2011 on 24.09.2010 declaring an income of Rs.13,62,81,800/-. The Assessing Officer while computing the assessment under section 143(3) of the Act, assessed the income at the same figure of Rs.13,62,81,800/- However, the Assessing Officer had not allowed the assessee’s claim of credit for TDS of Rs.2,46,80,256/- on the ground that the concerned income was not offered to tax in the return of income. The Assessing Officer in his order on noticing that the assessee had not included the subscription charges of Rs.86,34,97,146/- corresponding to the TDS amount of Rs.2,46,80,256/- in the Profit and Loss account, disallowed the credit for the corresponding TDS.

Arguments in favor of allowing TDS credit are as below:

• Since tax had already been deducted and paid to the Government at the time of making collections, it (the assessee) was entitled to get the credit of the same while receiving commission income.

• The amounts collected by the assessee were credited to the separate account ‘Subscription Charges’ and the said account was debited at the end of the Financial Year when the amounts were paid to S.

• As the subscription collected by the assessee from various cable operators was not the income of the assessee, the same was not shown in its Profit & Loss account.

• The fact of the situation was that the cable operators were deducting tax at source on the payments of subscription made to the assessee, whereas, the assessee was remitting the gross amount to S.

Aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) and finally to High Court.

Analysis of facts:

• To examine the same, the Bench called for Profit and Loss account and Ledger accounts to know, how the subscription received was accounted in the assessee’s books. The assessee’s counsel filed only financial statements and not filed ledger accounts of subscription received accounts.

• Hence, we are not in a position to express any opinion whether the assessee is having an element of income from subscription charges received from various parties.

• Therefore, if the entire subscription received by the assessee is transferred to S and the assessee is entitled only to commission on subscription income, then TDS credit may be allowed to assessee.

• The assessee was entitled to a fixed commission on the collection amount on behalf of S. The Agreement dated 14^th October 2002 were self-explanatory about the services provided by the assessee with regard to the collection of Subscription Charges on behalf of S for a fixed commission and that the Agreement was entered as early as on 14^th October,.2002 (i.e.) much prior to the Assessment Years 2009-10, 2010-11 and 2011-12.

• These collection charges had been credited to the account “Subscription Charges” as and when they were billed and this account had been debited at the end of the financial year when the same was paid back to S.

• The amounts in question had been routed through the accounts maintained by the assessee, which formed part of the Balance Sheet and in turn, formed part of the Profit and Loss Account and therefore did not partake the character of income or expenses or capital in the hands of the assessee.

Conclusion:

Thus, the assessee was entitled to receive a credit of the tax deducted at source under section 199 of the Act subject to production of TDS Certificates received from respective deductors.