Even if the deductor erroneously reported the income in the following AY, the TDS benefit will be paid in the AY in which it is assessable: ITAT

Even if the deductor erroneously reported the income in the following AY, the TDS benefit will be paid in the AY in which it is assessable: ITAT
Anup Deputy Commissioner of Income-Tax – Rajendra Tapadia
An individual who was the assessee received rental income that was subject to tax when it was accrued. However, the tenant of the assessee inadvertently reported to the next year when depositing the tax payment to the credit of the Central Government. The rental revenue was disclosed in the assessee’s return of income along with a claim for the tenant’s TDS credit.

The Centralized Processing Centre (CPC) assessed the return in accordance with section 143(1) and refused TDS credit due to an inconsistency in the year that the tenant deductor reported TDS.

Outraged by the decision, the assessee filed an appeal with the Pune Tribunal after submitting an application to the National Faceless Appeal Centre (NFAC) without result.

The Tribunal determined that Section 199 and Rule 37BA clearly provide that the Assessee is entitled to a credit for taxes deducted and paid to the Central Government’s credit for the assessment year in which the income is assessed. The deductor’s reporting cannot be used to postpone TDS Credit to a subsequent assessment year.

In this instance, department authorities suggested postponing the TDS Credit to the year in which such credit will be shown in 26AS. Giving credit in the year in which the income would be shown in 26AS would be contrary to the letter and spirit of section 199 and regulation 37BA because the income was reported in the prior year.

Thus, the assessee’s appeal was granted, and TDS Credit was permitted in the year of offering rental income for taxation purposes, considering the denial of the TDS credit to be an evident error that merits being rectified.