Sep 242021




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Sep 132021

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 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.


Sep 102021


  • The assessee company was engaged in providing software development services and outsourcing services. It was also availing management services from its parent company, namely, CSC, USA.


  • In lieu of the management services obtained, the assessee paid to certain amount CSC, USA, after deducting tax at source at the rate of 20 percent on the premise that the payment made to the parent company was in the nature of royalty and fees for technical services.


  • As the non-resident parent company did not have any Permanent Account Number (PAN), the Assessing Officer opined that the tax should have been deducted at source at a higher rate in terms of the provisions of section 206AA.


  • The Commissioner (Appeals) partly accepted the assessee’s contention by holding that the assessee should have deducted tax at source at the rate of 20 percent. He, however, held that, in addition, surcharge and education cess should have also been levied.


  • The assessee filed an instant appeal raising two issues. The first issue was that the rate of tax withholding should be 15 percent and, second, no surcharge and education cess should have been levied.


Analysis of facts:

The person responsible for paying to the non-resident is required to deduct tax at source (section 195); issue certificate for tax deducted to the deductee (section 203); and the credit for tax deducted at source is given to the deductee by treating it as a payment of tax by the deductor on behalf of the deductee (section 199). It clearly emerges that once a deduction of tax at source has been made on behalf of the deductee (payee), the deductor (payer) becomes functus officio and, cannot, under any circumstance, claim a refund of the tax deducted at source. The deduction of tax at source is always a payment of tax by the deductor on behalf of the deductee and it is only the deductee, who is entitled to the credit of tax deducted by the deductor on his behalf for which a certificate is issued to him.

No statutory provision permits the deductor to claim a refund of the excess tax deducted at the source.

There is a vital distinction between two situations viz., one, in which the amount of income is put to tax at a high rate; and two in which the deduction of tax is made from it at a higher rate.

Obviously, the first situation is a cause of concern as no amount of tax more than what is rightfully due to the exchequer, can be recovered.

On the other hand, the second situation simply encompasses a payment of tax on behalf of the deductee without impacting his tax liability in any manner. If such a deduction has voluntarily been made at a higher rate, the deductee, at the time of filing his return, is always entitled to claim the benefit of TDS and the resultant refund, if any due to him.


The ITAT Delhi Bench in the case of Computer Sciences Corporation India (P.) Ltd. v. ITO [2017] 77 306 (Delhi – Trib.) held that once the tax has been deducted at source and certificate of such deduction is issued to the deductee, only the deductee can claim the benefit of deduction of tax at source and in no circumstances the deductor can claim any refund out of the excess amount of tax deducted at source on behalf of the deductee.

Sep 072021

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 14th 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 14th 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.



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.

Sep 042021

Case 1 – Diversion of income by overriding title:

Facts of the case: the assessee is an individual, engaged in retail business and earned income from franchisee/commission from M/s. Arvind mills. The assessee filed a return of income on 29.9.2009 declaring a total income of Rs. 1,19,89,080/-. The scrutiny assessment of the case was completed on 23rd December 2011. The detail of commission income offered to assessment is given below:

Particular of income Actual income received Income credited to P&L
Commission from M/s. Arvind mill Rs. 2,61,18,048/- Rs. 1,53,18,478/-
Amount of commission transferred to the stepson of the assessee

(in compliance to the direction of the High Court given in a dispute)

Less: Rs. 1,07,99,570/-
TDS credit allowed   Rs. 17,35,607/-
TDS claim rejected invoking section 199   Rs. 12,23,608/-

Analysis of facts:

Section 199 and rules made there under not applicable: subsection 2 and 3 of the section are not applicable to the facts of the case in hand. Further, sub Rule (2) and (3) of Rule 37BA of the Income-tax Rules are also not applicable to the facts of the case in hand, as the income of the assessee is not falling under any of the clauses of sub Rule (2) and the issue of credit in multiple years is also not involved in the case in hand.


TDS credit shall be given to the person from whose income deduction was made: The first limb of section 199(1) refers to the tax deducted and paid to the Central Government. The second limb of the subsection refers to allowing credit of the tax so deducted and paid to the central government, in the hands of the person from whose income, the tax has been deducted. So, a plain and literal interpretation of subsection (1) of section 199 leads to the result that the credit of the tax deducted has to be given in the hands of the deductee i.e. the person from whose income the deduction was made. Thus, said subsection nowhere says that credit of TDS should be restricted only to the amount of income or receipt offered in the return of income or in the Profit and Loss Account.


TDS credit shall be allowed based on the information provided by the deductor (Rule 37BA(1)): Further, sub-rule (1) of Rule 37BA of the Rules also emphasize allowing the credit in the hands of the deductor on the basis of the information related to deduction of tax furnished by the deductor


Neither party should be made unjust enriched at the cost of the other: the credit of the Rs. 12,23,608/- is allowable in the hands of the assessee, in view of the clear provisions of subsection(1) of section 199 of the Act and Rules made thereunder. However, we direct the assessing officer to verify whether any credit of the TDS of Rs. 12,23,608/- has been allowed by the Income-tax Department in the hands of Shri Kapil Ahluwalia or not. If it has been not allowed, then the credit of this amount should be given in the hands of the assessee.

Case 2: TDS deducted on payment of mobilization advance

Where TDS was deducted from mobilization advance paid to the assessee who was an erection contractor, credit of same was to be allowed, even if no income was assessable to tax as the contract was not fully executed in the relevant year.

Sep 012021

Due dates for the Month of September 2021
– TDS Payment for August.
– Return of authorities deducting tax at source – GSTR 7 for August.
– Details of supplies effected through e-commerce operator and the amount of tax collected – GSTR 8 for August.
– Details of outward supplies of taxable goods and/or services effected – GSTR 1 for August.
– Return for Input Service Distributor – GSTR 6 for August.
Providend Fund
– PF Payment for August.
– ESIC Payment for August.
– Monthly return on the basis of finalization of details of outward supplies and inward supplies along with the payment of the amount of tax – GSTR 3B for August.
– Return for Non-Resident foreign taxable person – GSTR 5 for August.
– GSTR 3B for August if turnover below Rs. 5 Crore for Gujrat, Madhya Pradesh, Chattisgarh, Maharashtra, Telangana. Andhra Pradesh, Karnataka, Goa, Kerala, Tamil Nadu, Puducherry, Dadra & Nagar Haveli.
– GSTR 3B for August if turnover below Rs. 5 Crore for the Rest of India.
– Details of Inward Supplies to be furnished by a person having UIN and claiming refund – GSR 11 for August
– Monthly Return for Tax Liability of Rs. 100,000 & above.
– Due date for filing Tax Audit report.
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