ITAT: TDS Credit Can Be Claimed in the Year Income Reported and Can’t Be Carried Forward to Subsequent Years

The case of DCIT Vs Cicon Engineers Private Limited (ITAT Bangalore) shows the intricate interplay between Tax Deducted at Source (TDS) credit and income reporting under the Income Tax Act, of 1961. The same blog shows a detailed analysis of the legal arguments and outcomes of the case.

Case Background: The revenues petition related to the allowance of TDS credit in the AY 2017-18 by the CIT(A). The dispute pivots around the treatment of TDS amounts concerning the reporting of income by the taxpayer.

Major Arguments Related to TDS Credit

Management of TDS on Sales from the Previous Year: The revenue argued the TDS credit allowance about the previous year’s sales, contending that TDS and income should align with the identical assessment year. The taxpayer argued that the Tax Deducted at Source (TDS) must be credited in the deduction year despite when the related income was reported in the earlier years. 

Analysis of Organising Advance: Additional facts of the issue engaged mobilization advance obtained at the time of the FY 2016-17 however accounted for as income in the next years. The revenue asked for the TDS credit allowance in the present assessment year for these advances.

Legal Interpretation for TDS Credit

i. Section 199 and Rule 37BA: Section 199(3) read with Rule 37BA(3) explains that TDS credit must correspond to the year in which the income is declared for taxation. The same must not consequence in waiting for TDS credit to a distinct assessment year if income is obtained in the current year.

Read Also: Brief Guide to I-T Cir. No. 4/2023 for TDS Deduction U/S 192

ii. Case Law Guideline and Concepts: Reference was created to precedent cases emphasizing the principle that TDS credit could not be delayed if income has been reported in an earlier assessment year.

Court’s Decision In the Case of Cicon Engineers Private Limited

i. Assessing Officer Remittance: The case was remitted to the Assessing Officer for new consideration concerning TDS credit alignment with reporting income.

ii. TDS Credit Requirements: The taxpayer shall be qualified for TDS credit for the AY 2017-18 when the specific conditions are satisfied, including no double claiming of TDS credit and providing the undertaking by the taxpayer.

Closure: As per the case it depicts the importance of aligning the TDS credit with the income reporting under the Income Tax Act. The TDS credit must be related to the year of the obtained income, the same must not result in the undue deferral or double availing the credits. The decision furnishes transparency on the lawful framework for the TDS credit and the reporting of the income.