In ITA No. 598/DEL/2022 -ITAT- BAE Systems Information & Electronic Systems Integration Inc.’s right to claim TDS credit upheld despite deduction in subsequent assessment years: ITAT (Delhi)
Members N.K. Billaiya (Accountant) & Challa Nagendra Prasad (Judicial) [23-06-2023]

Read Order: BAE Systems Information & Electronic Systems Integration Inc v. The A.D.I.T. Intt. Taxation Circle -1(1)(2) New Delhi

Chahat Varma

New Delhi, June 26, 2023: The Delhi bench of the Income Tax Appellate Tribunal has ruled that even though the deductor may have deducted tax in subsequent assessment years, the crucial fact was that the assessee [BAE Systems Information & Electronic Systems Integration Inc.] had shown income and therefore had the right to claim the credit of Tax Deducted at Source (TDS).

The assessee, a company incorporated in the United States of America engaged in the sale of software, had offered income for taxation and claimed credit for TDS in its return of income for the relevant year. However, the Centralized Processing Centre (CPC) did not allow the credit of TDS. The sole reason for denying the credit of TDS was that the CPC cannot grant credit for TDS appearing in Form 26AS of earlier or subsequent assessment years unless the return has been correctly filed and the TDS has been accurately shown. The issue was taken up with the Commissioner of Income Tax (Appeals) [CIT(A)], who also did not allow the credit of TDS.

The two-member bench of N.K. Billaiya (Accountant) and Challa Nagendra Prasad (Judicial) referred to the order of the Co-ordinate bench in assessee’s group case, wherein the Tribunal had observed, “On a careful consideration of the matter in the light of the provisions under section 199 (3) of the Act and also rule 37 BA (3) of the Rules, we are of the considered opinion that in this case where the tax has been deducted at source and paid to the Central government by the Hindustan Aeronautics Limited in the assessment year 2018-19 and such TDS relates to the income assessable over the assessment years 2017-18 and 2018-19, the credit has to be given in the proportion in which the income is assessable to tax for the assessment years 2017-18 and 2018-19 respectively.”

Consequently, the bench directed the Assessing Officer to verify the claim made by the assessee and instructed them to allow the credit of TDS if it was shown in the year under consideration.