Assessee To Furnish Necessary Documentary Evidence In Absence Of TDS Certificate To Claim TDS Credit: ITAT

The two-member bench of Rahul Choudhary (Judicial Member) and Om Prakash Kant (Accountant Member) has restored the issue of granting credit for tax deducted at source to the file of the Assessing Officer for verification as to whether the assessee has shown interest income corresponding to the TDS in the profit and loss account and whether the tax has been deducted at source by the payer of the income.

The appellant/assessee submitted that credit may be allowed in respect of TDS, including the items where the assessee could not furnish the TDS certificates, but the income was received net of taxes. The Indian borrowers have paid the interest income after deducting tax at source in accordance with Article 11 of the Double Taxation Avoidance Agreement between India and Germany (DTAA). The amount of income assessed in the hand of the assessee represents the grossed up amount as the arrangement was that tax was to be borne by the Indian borrowers. The entire liability to pay tax was discharged by the deduction of tax at source. Once the appellant has been assessed on a grossed up basis and it has received only the net amount from the Indian borrowers, i.e., after deduction of tax at source, in view of section 205, the assessee cannot be called upon to pay the tax, notwithstanding whether the payer of income or deductor of tax has deposited the tax into a government account. The loan agreement was made between one of the borrowers, namely M/s Mundra Port and Special Economic Zone Ltd., and the assessee, " DZ Bank."

The department contended that the assessee has not submitted any evidence that tax was deducted by the payer of income. The issue may be restored back to the file of the Assessing Officer for allowing TDS credit to the assessee in accordance with the law after verification of whether the payer of the income has deducted the tax at source or not.

The tribunal held that the onus is on the assessee to substantiate its claim of tax deducted at source by way of necessary documentary evidence.

The ITAT has noted that the assessee has neither furnished any details of the amount of TDS in respect of interest income, which it has shown if any in its profit and loss account, nor furnished any evidence to support the deduction of tax at source by the payer of income. The assessee has not furnished any certified copies of the ledger account of the assessee in the books of the borrower parties so as to reflect the amount credited in the account of the assessee.

The ITAT observed that the Assessing Officer is at liberty to verify or make necessary inquiries from the borrower of loans as to what amount has been deducted by them in respect of the interest paid or credited to the assessee.

Case Title: DZ Bank Versus DCIT

Citation: ITA No. 1812/MUM/2018

Dated: 04.08.2022

Counsel For Appellant: AR P.J. Pardiwala/Jeet Kamdar

Counsel For Respondent: Sr. DR Somendu Kumar Dash

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