A vendor billed my sister concern but put my PAN on the TDS certificate, so my 26AS shows receipts and TDS that are not mine. The tax has been paid by the sister concern. Can I claim the credit without offering that income?
On these facts, yes. The Delhi High Court refused to let s.199 be used as a technical bar where the corresponding income had been assessed in the sister concern's hands, that concern had claimed no credit and raised no objection, and the deduction was undisputed. The Court declined to require the assessee to first chase the vendor for a corrected certificate, holding that procedure is the handmaid of justice.
Decided by the High Court (S. Ravindra Bhat J and R.K. Gauba J) on 2015-01-16, reported as ITA 26/2015 (High Court of Delhi at New Delhi). It bears on section 199, section 143(1), section 37BA of the Income Tax Act 1961, in TDS Defaults, Refunds, Interest & Condonation and Assessment & Scrutiny matters.
This is the practical answer to the vendor-quoted-the-wrong-PAN problem, which is now extremely common and which CPC handles by simply disallowing the difference. The reach of it is narrow and you should say so: the Court was careful to note that Rule 37BA was not directly applicable on these facts and was cited only to show that credit does not always go to the deductee. What made the case work was that no one was claiming the same credit twice, the group had paid the tax on the income, and the Revenue had assessed that income. The Court also carried across the Andhra Pradesh line that the Revenue cannot retain tax deducted at source with credit available to nobody. Where the other entity HAS claimed the credit, or where the income has not been taxed anywhere, this case does not help.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The assessee erected, commissioned and installed towers on contract. For AY 2009-10 its return was processed under s.143(1). Form 26AS showed total receipts of Rs.19,08,20,903 and TDS of Rs.1,20,73,097, against declared receipts of Rs.6,20,99,368. The explanation was that a vendor had billed the assessee's sister company, Relcom Engineering Pvt. Ltd., for the work but had mistakenly quoted the assessee's PAN on the TDS certificate, so the credit landed in the assessee's PAN-based 26AS. The group had chosen to claim the refund in the assessee and pay the tax in REPL rather than pursue corrected certificates. The Assessing Officer allowed credit only against the declared receipts, holding that under s.199 credit goes to the person from whose income the deduction was made and that the assessee should have had the vendor correct its records. The CIT(A) allowed the full claim, noting the assessee had said categorically that REPL had not availed the benefit, and the Tribunal dismissed the Revenue's appeal.
The question of law was answered against the Revenue and the appeal dismissed. Having assessed REPL's income in respect of the TDS claim, the Revenue could not deny the assessee's claim on the technical ground that the income was not the assessee's, the two being sister concerns and REPL having raised no objection to the claim (paras 7 and 11).
The Court read s.199 in full and rejected the Revenue's reliance on the words 'on behalf of the person from whose income the deduction was made' as decisive, because the assessee had consistently said that REPL had not availed the credit and the Revenue had assessed REPL's income. It drew support from the Andhra Pradesh Division Bench in CIT v. Bhooratnam, where credit was allowed although the certificates stood in the name of a joint venture or a director, and where the Court had said that the Revenue cannot be allowed to retain tax deducted at source without credit being available to anybody. Rule 37BA was noticed as showing that credit is not in all circumstances given to the deductee, though the Court expressly clarified that the rule was not directly applicable on these facts. Finally, applying the dictum that procedure is the handmaid of justice, the Court held that requiring the assessee to first obtain a correction from the vendor would only prolong the refund process.
We must clarify that we are not oblivious of the fact that Rule 37BA is not directly applicable in the facts of this case. The reliance placed on Rule 37BA is merely to demonstrate that in not all circumstances is TDS credit given to the deductee.
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Handle my notice → Ask a CA on WhatsAppOn these facts, yes. The Delhi High Court refused to let s.199 be used as a technical bar where the corresponding income had been assessed in the sister concern's hands, that concern had claimed no credit and raised no objection, and the deduction was undisputed. The Court declined to require the assessee to first chase the vendor for a corrected certificate, holding that procedure is the handmaid of justice. This was decided by the High Court (S. Ravindra Bhat J and R.K. Gauba J) and bears on section 199, section 143(1), section 37BA of the Income Tax Act 1961. It is reported as ITA 26/2015 (High Court of Delhi at New Delhi). This is the practical answer to the vendor-quoted-the-wrong-PAN problem, which is now extremely common and which CPC handles by simply disallowing the difference. The reach of it is narrow and you should say so: the Court was careful to note that Rule 37BA was not directly applicable on these facts and was cited only to show that credit does not always go to the deductee. What made the case work was that no one was claiming the same credit twice, the group had paid the tax on the income, and the Revenue had assessed that income. The Court also carried across the Andhra Pradesh line that the Revenue cannot retain tax deducted at source with credit available to nobody. Where the other entity HAS claimed the credit, or where the income has not been taxed anywhere, this case does not help. If it applies to you, the first step is this: Establish that the corresponding income has been assessed in the other entity's hands and that the tax on it has been paid - this is the fact the whole decision rests on.
The assessee erected, commissioned and installed towers on contract. For AY 2009-10 its return was processed under s.143(1). Form 26AS showed total receipts of Rs.19,08,20,903 and TDS of Rs.1,20,73,097, against declared receipts of Rs.6,20,99,368. The explanation was that a vendor had billed the assessee's sister company, Relcom Engineering Pvt. Ltd., for the work but had mistakenly quoted the assessee's PAN on the TDS certificate, so the credit landed in the assessee's PAN-based 26AS. The group had chosen to claim the refund in the assessee and pay the tax in REPL rather than pursue corrected certificates. The Assessing Officer allowed credit only against the declared receipts, holding that under s.199 credit goes to the person from whose income the deduction was made and that the assessee should have had the vendor correct its records. The CIT(A) allowed the full claim, noting the assessee had said categorically that REPL had not availed the benefit, and the Tribunal dismissed the Revenue's appeal. The matter was decided on 2015-01-16 by the High Court (S. Ravindra Bhat J and R.K. Gauba J). On those facts the High Court held as follows. The question of law was answered against the Revenue and the appeal dismissed. Having assessed REPL's income in respect of the TDS claim, the Revenue could not deny the assessee's claim on the technical ground that the income was not the assessee's, the two being sister concerns and REPL having raised no objection to the claim (paras 7 and 11).
The Court read s.199 in full and rejected the Revenue's reliance on the words 'on behalf of the person from whose income the deduction was made' as decisive, because the assessee had consistently said that REPL had not availed the credit and the Revenue had assessed REPL's income. It drew support from the Andhra Pradesh Division Bench in CIT v. Bhooratnam, where credit was allowed although the certificates stood in the name of a joint venture or a director, and where the Court had said that the Revenue cannot be allowed to retain tax deducted at source without credit being available to anybody. Rule 37BA was noticed as showing that credit is not in all circumstances given to the deductee, though the Court expressly clarified that the rule was not directly applicable on these facts. Finally, applying the dictum that procedure is the handmaid of justice, the Court held that requiring the assessee to first obtain a correction from the vendor would only prolong the refund process. In the words reproduced by the source cited on this page: "We must clarify that we are not oblivious of the fact that Rule 37BA is not directly applicable in the facts of this case. The reliance placed on Rule 37BA is merely to demonstrate that in not all circumstances is TDS credit given to the deductee." The decision followed or applied CIT v. Bhooratnam (2013) 357 ITR 196 (AP) - relied on and quoted; Sardar Amarjit Singh Kalra v. Pramod Gupta (2003) 3 SCC 272 - applied for 'procedure is the handmaid of justice'.
It was decided by the High Court on 2015-01-16 and is reported as ITA 26/2015 (High Court of Delhi at New Delhi). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 199, section 143(1), section 37BA, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The question of law was answered against the Revenue and the appeal dismissed. Having assessed REPL's income in respect of the TDS claim, the Revenue could not deny the assessee's claim on the technical ground that the income was not the assessee's, the two being sister concerns and REPL having raised no objection to the claim (paras 7 and 11). It arises in TDS Defaults, Refunds, Interest & Condonation and Assessment & Scrutiny matters, on section 199, section 143(1), section 37BA of the Income Tax Act 1961, and was decided by S. Ravindra Bhat J and R.K. Gauba J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Get a written confirmation or no-objection from the other entity that it has not claimed and will not claim the same TDS credit, and put it before the officer. Reconcile the 26AS line by line against the returned receipts and show precisely which entries relate to the other entity - the Court worked with the difference between the total receipts and the receipts actually declared. Meet the officer's usual answer, that you should have had the deductor file a correction statement, by pointing to the delay that route causes; but where the deductor is willing, a correction statement is still the cleaner fix and should be attempted in parallel. Cite this alongside Bhooratnam for the proposition that the Revenue cannot keep the money with credit going to nobody.
Still good law. No later decision doubting it was located, but no citator check was run. The decision is fact-sensitive: it depends on the corresponding income having been assessed elsewhere in the group and on the absence of any competing claim to the same credit. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment reproduces s.199(1), (2) and (3) in full, and the text there matches the section as it now stands, so it is a safe source for the current wording of s.199. The extract from CIT v. Bhooratnam at para 8 is set out as a quotation within this judgment; the Andhra Pradesh judgment itself could not be retrieved (see NOTES-B35). The Court gives the Bhooratnam citation as (2013) 357 ITR 196 (AP); other reports give the page as 396 - the discrepancy is in the reports, not in anything decided. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The question of law was answered against the Revenue and the appeal dismissed. Having assessed REPL's income in respect of the TDS claim, the Revenue could not deny the assessee's claim on the technical ground that the income was not the assessee's, the two being sister concerns and REPL having raised no objection to the claim (paras 7 and 11).
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