Delhi HC Upholds Section 155(14) TDS Credit for Non-Residents

Case Details: Munchener Ruckversicherungs Gesellschaft Aktiengesellschaft in Munchen vs. Commissioner of Income-tax, Internation Taxation - [2025] 174 taxmann.com 19 (Delhi)

Judiciary and Counsel Details

• Yashwant Varma & Ravinder Dudeja, JJ.
• Ajay Vohra, Sr. Adv., Kaustabh Shukla, Aniket D. Agrawal, Samarth Chaudhari, Sanket Vasistha & Ms Samridhi Shrivastava, Advs. for the Petitioner.
• Puneet Rai, SSC, Ashvini Kumar & Rishabh Nangia, Standing Counsels, for the Respondent.

Facts of the Case

The assessee, a non-resident, earned income from an entity in India. Such entity deducted tax at source (TDS) from the payment. When the assessee filed its return of income, it claimed credit for TDS deducted. However, the same was denied because the assessee didn’t offer such income for tax and Form 26AS was not presented before the Assessing Officer (AO).

Aggrieved by the order, the assessee filed an application before the Commissioner of Income Tax (CIT) under Section 264. However, the CIT rejected the application. The assessee then filed a writ petition to the Delhi High Court.

High Court Held

The High Court held that the assessee consistently asserted that the income received from the entity would not be taxable in India under the Double Taxation Avoidance Agreement (DTAA). Also, the assessee’s return for the relevant year was processed under section 143(3) with no additions being suggested. The position taken by the assessee thus appears to have been duly accepted. The CIT also had not decided whether the income received by the assessee was liable to be taxed under the Act. Therefore, the assessee’s claim that the income was not taxable under the Act remained uncontested.

Section 155(14) of the Act prescribes that where tax credit has not been given on the ground of either a certificate not having been furnished or filed, but which is subsequently presented before the AO, the same would be sufficient for the assessment order to be amended.

Sub-section (14) neither contemplates nor mandates the original return being amended or revised. That provision takes care of contingencies where TDS is either subsequently credited or reflected in Form 26AS after a time lag. The assessee may face such a spectre on account of a variety of unforeseeable reasons.

However, that in itself can neither be viewed as fatal nor an irreversible event that would detract from the assessee’s right to claim the tax benefit which has been duly deducted. Since the tax which was deducted by the entity stood duly embedded in the Form 26AS, which the assessee produced, and the income earned from that entity had never been held to be subject to tax under the Act.

The refusal on the part of the CIT to refund that amount was rendered wholly illegal and arbitrary.