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.