AO Ought To Grant TDS Credit In Compliance Of ITAT's Directions: Delhi High Court

The Delhi High Court has held that the Assessing Officer (AO) ought to grant TDS credit in compliance with the Income Tax Appellate Tribunal's (ITAT's) directions.

The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that the Tribunal had framed an unequivocal direction for the AO to verify and attend to the grievance of short credit of TDS, bearing in mind what stood reflected in Form 26AS and which amount was quantified at Rs. 2,03,36,66,125.

The petitioner/assessee had furnished a return of income declaring its total income. It had also claimed a refund in the sum of Rs. 3,65,970. The return was selected for scrutiny on an issue raised as to whether the revenue earned by the writ petitioner, including the consideration with respect to live feed, would constitute royalty and thus be taxable.

A draft assessment order came to be framed with the AO holding that the consideration received by the petitioner towards live feed was taxable as royalty under the Act. The petitioner filed objections before the Dispute Resolution Panel, which affirmed the view taken in the draft assessment order in terms of a direction dated September 5, 2018. A final assessment order came to be framed on October 8, 2018.

The petitioner assailed the view taken by the DRP before the Tribunal, contending that the consideration received for the rights relating to live feed would not be taxable as royalty at all. The department had failed to grant the entire TDS credit as reflected in Form 26AS.

The Tribunal answered the issue on merits in favor of the writ petitioner and proceeded further to frame directions for the AO to verify and grant the TDS credit as claimed by the writ petitioner.

The Tribunal had framed an unequivocal direction for the AO to verify and attend to the grievance of short credit of TDS, bearing in mind what stood reflected in Form 26AS and which amount was quantified at INR 2,03,36,66,125. The petitioner filed an application before the AO, which has come to be disposed of in terms of the order.

The department contended that since the petitioner did not claim the amount in its income tax return, TDS credit is liable to be denied. The TDS credit has been duly verified from the return of income that was submitted, and credit can only be granted to the extent as claimed. For purposes of refund, the petitioner was obliged to follow the procedure as laid out in Section 239 of the Income Tax Act, and since no claim had been raised within the period prescribed, the order does not merit interference.

The court held that the AO was called upon to give effect to a direction framed by the Tribunal. The stand as taken by the AO is clearly rendered unsustainable insofar as it restricts the claim of the petitioner to the disclosures made in the Return of Income.

The court, while allowing the petition, held that it would be wholly illegal and inequitable for the department to give short credit to the tax duly deducted and deposited based on the claim that may be made in a return of income.

Counsel For Petitioner: Porus Kaka

Counsel For Respondent: Puneet Rai

Case Title: ESS Singapore Branch Versus DCIT

Citation: 2024 LiveLaw (Del) 928

Case No.: W.P.(C) 6589/2024

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