TDS benefit given in AY of assessable income, despite deductor’s later reporting: ITAT

Case Details: Anup Rajendra Tapadia v. Deputy Commissioner of Income-tax - [2023] 147 taxmann.com 167 (Pune-Trib.)

Judiciary and Counsel Details

• • S.S. Godara, Judicial Member & G.D. Padmahshali, Accountant Member
  • C.H. Naniwadekar for the Appellant.
  • Suhas Kulkarni for the Respondent.

Facts of the Case

Assessee, an individual, received rental income which was offered to tax in the year in which the income accrued. However, while depositing the tax amount to the credit of the Central Government, the tenant of assessee inadvertently reported to the subsequent year. Assessee filed its return of income by disclosing the rental income and claiming TDS credit deposited by the tenant.

The Centralized Processing Centre (CPC) processed the return under section 143(1) and denied TDS credit on account of a mismatch of the year of reporting of TDS by the tenant deductor.

Aggrieved by the order, assessee preferred an application to National Faceless Appeal Centre (NFAC) but with no success, an appeal was filed to the Pune Tribunal.

ITAT Held

The Tribunal held that section 199 along with rule 37BA makes it clear that the credit for tax deducted and paid to the credit of the Central Government is allowed to the assessee for the assessment year in which the income is assessed. TDS Credit cannot be postponed to a different assessment year based on the reporting by the deductor.

In the instant case, it was proposed by the department officials that the TDS Credit will be deferred to the year in which such credit will be reflected in 26AS. Since the income is reported in the prior year, giving credit in the year in which it will be reflected in 26AS will defeat the letter and spirit of section 199 and rule 37BA.

Therefore, considering the denial of the TDS credit as an apparent error that deserves to be reversed, the assessee’s appeal was allowed and TDS Credit was allowed in the year of offering rental income for taxation purposes.

List of Cases Reviewed

• • Mahesh Software Systems (P.) Ltd. v. Asstt. CIT [2019] 112 taxmann.com 354/75 ITR(T) 100/[2020] 181 ITD 524 (Pune – Trib.) (para 7) followed.

List of Cases Referred to

• • Mahesh Software Systems (P.) Ltd. v. Asstt. CIT [2019] 112 taxmann.com 354/75 ITR(T) 100/[2020] 181 ITD 524 (Pune – Trib.) (para 7).