ITAT Chennai: IT Section 155(14) Can’t Limit the TDS Credit If Income Shown in Return

The Chennai bench of the Income Tax Appellate Tribunal ( ITAT ) held that Section 155(14) of the Income Tax Act, 1961 could not limit the Tax Deduction at Source ( TDS ) credit if the income is correctly shown in the Income-tax Returns.

The ITAT bench noted that “once TDS is deducted and deposited with the Central government, the only mechanism with the assessee to claim the refund of the same would be through filing of Income Tax Return which is the correct way of claiming the TDS credit.”

The taxpayer is a non-resident company incorporated in the United States of America ( USA ). The taxpayers returned income of Rs.37.95 Crores and claimed a refund of Rs.3.51 Crores. It occurred that the taxpayer has made the contractual royalty income from M/s Dassault Systems India Pvt. Ltd. and offered the same to tax.

In the financial statements, the taxpayers furnished royalty income of Rs.37.86 Crores while according to Form 26AS, the payer entity paid an amount of Rs.69.83 Crores to the taxpayer post deducting tax at source for Rs.7.62 Crores.

The amount shown in Form 26AS shows the gross invoices raised via the taxpayer that are on the grounds of the amount notified via the deductor payer in its TDS returns, the taxpayer stated. The taxpayer raised some credit notes next to raising the invoices that were not shown in Form 26AS it does not have any TDS implications.

Mr. S.P. Chidambaram describing the taxpayer invoking the provisions of Section 155(14), limited TDS credit in proportion to the income shown via the taxpayer in the financial statements and rejected the TDS credit of balance amount.

Mr. Nandakumar representing the revenue furnished that the taxpayer can have prompted the deductor to furnish an amended TDS return and claim the excess TDS amount from the deductor.

However, once TDS is deducted and deposited with the Central government, the foremost process with the taxpayer to avail the refund of the refund shall be via the means of filing an ITR which is the proper way of claiming the TDS credit.

The bench of V. Durga Rao (Judicial member) and Manoj Kumar Agarwal (Accountant member) led the AO to allow full TDS credit to the taxpayer which is otherwise available under Form 26AS. As per that the plea of the taxpayer was permitted.