• Notification Date: 27-01-2023
• Notification No: N/A

No Credit on TDS Deducted on Receipt of Amount of Advance if Corresponding Income Not Been Offered to Tax

The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has held that the credit will not be allowable on Tax Deduction at Source (TDS) deducted on receipt of amount of advance if the corresponding income had not been offered to tax.  

The assessee in the present case, S.B. Patel JV Laxmi Construction, was a partnership firm engaged in the business of Civil Road construction had executed work contract in the year under consideration which was offered to tax. the party had also given the advance of Rs.3.50 crores to the assessee which was shown as liability in the books of accounts and the party had deducted TDS on the entire amount and advance of Rs.3.50 crores aggregating some amount only. The amount of TDS of Rs. 7 lac was attributable on the advance received by the assessee for Rs.3.50 crores. 

The assessee while filing the return of income had taken the credit of TDS deducted on the advance amount of payment without offering corresponding income of Rs.3.50 crores in the return of income. Thus, the AO did not allow credit of TDS amount of Rs.7 lakhs. Mukund Bakshi, on behalf of the assessee, submitted that the amount of advance had been offered to tax in the Financial Year 2016-17 corresponding to AY 2017-18, and therefore the amount of TDS credit should be allowed in the AY 2017-18.  

The Ahmedabad Bench of Waseem Ahmed (Accountant Member) allowed the appeal observing that “controversy arises when the assessee can claim the benefit of TDS i.e., the year in which it offers corresponding income in the income tax return. As per the assessee, it has shown the advance money as A.Y. 2016-17 4 income in the Financial Year 2016-17 corresponding to 2017-18. In this regard, I note that sub-rule (3) to the rule 37BA of Income Tax Rule r.w.s. 199 of the Act provides that Credit for tax deducted at source and paid to the Central Government, shall be given for the assessment year for which such income is assessable.”