The Principal Commissioner Of Income Tax – v. M/S.kal Comm. Private Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRAS RESERVED ON : 19.04.2021 CORAM THE HON'BLE MR.JUSTICE M. DURAISWAMYANDTHE HON'BLE MRS.JUSTICE R.HEMALATHA Tax Case Appeal Nos.289 of 2016, 345 of 2016 and 348 of 2015 The Principal Commissioner of Income Tax – 4,121, Mahatma Gandhi Road,Chennai.... Appellant in TCA.No.289/2016 The Commissioner of Income Tax – 4,121, Mahatma Gandhi Road,Chennai. ... Appellant in TCA.No.345/2016 The Principal Commissioner of Income Tax – 2,121, Mahatma Gandhi Road,Chennai. ... Appellant in TCA.No.348/2015Vs. M/s.Kal Comm. Private Ltd.,No.73, MRC Nagar Main Road,Chennai – 600 028. ... Respondent in TCA.No.289/2016 M/s.Kal Comm. Private Ltd.,Murasoli Maran Towers,No.73, MRC Nagar Main Road,MRC Nagar, Chennai-600 028. ... Respondent in TCA.No.345/2016 M/s.Kal Comm. Private Ltd.,Murasoli Maran Towers,No.73, MRC Nagar Main Road,Chennai. ... Respondent in TCA.No.348/2015 T.C.A.No.289 of 2016 filed under Section 260A of the IncomeTax Act, 1961 against the order of the Income Tax AppellateTribunal, Madras "A" Bench, dated 28.08.2015 passed inI.T.A.No.126/Mds/2015 for the Assessment Year 2010-11. https://hcservices.ecourts.gov.in/hcservices/ Against the Order of the Commissioner of Income Tax(Appeals)-II, Chennai dated 08/10/2014 in ITA.No.619/13-14against the Order of the Deputy Commissioner of Income Tax,Company Circle – II (4), Chennai dated 21-03-2013 inPAN/GIR.No.AABCK 3906B for the Assessment Year 2010-2011. T.C.A.No.345 of 2016 filed under Section 260A of the IncomeTax Act, 1961 against the order of the Income Tax AppellateTribunal, Madras "B" Bench, dated 09.10.2015 passed inI.T.A.No.1029/Mds/2015 for the Assessment Year 2011-12. Against the order of the Commissioner of Income Tax(Appeals) – 8, Chennai dated 02.03.2015 in ITA.No.1860/13-14,against the Order of the Deputy commissioner of Income TaxCompany Circle – II (4), Chennai – 34 in PAN/GIR.No.AABCK 3906Bfor the Assessment Year 2011-2012. T.C.A.No.348 of 2015 filed under Section 260A of the IncomeTax Act, 1961 against the order of the Income Tax AppellateTribunal, Madras "C" Bench, dated 28.08.2014 passed inI.T.A.No.1985/Mds/2014 for the Assessment Year 2009-10. Against the order of the Commissioner of Income tax(Appeals)-11, Chennai dated 22.01.2014 in ITA.No.515/13-14against the Order of the Assistant Commissioner of Income Tax,Company Circle – II (4), Chennai dated 30.12.2011 inPAN/GIR.No.AABCK 3906B for the Assessment Year 2009-2010. For Appellant : Mr.Karthik Ranganathan(in all 3 TCAs) Senior Standing CounselFor Respondents : Mr.Sathish Parasaran,(in all 3 TCAs) Senior Counsel for Mrs.M.Sneha M.DURAISWAMY, J. T.C.A.No.348 of 2015 arises against the order passed inI.T.A.No.1985/Mds/2014 in respect of the Assessment Year 2009-10on the file of the Income Tax Appellate Tribunal, Madras “C”Bench. T.C.A.No.289 of 2016 arises against the order passed inI.T.A.No.126/Mds/2015 in respect of the Assessment Year 2010-11on the file of the Income Tax Appellate Tribunal, Madras “A”Bench. T.C.A.No.345 of 2016 arises against the order passed inI.T.A.No.1029/Mds/2015 in respect of the Assessment Year 2011-12on the file of the Income Tax Appellate Tribunal, Madras “B” https://hcservices.ecourts.gov.in/hcservices/ Bench. 2.All the three appeals have been filed by the Revenuechallenging the orders passed by the Income Tax AppellateTribunal. Since the issues involved in all these appeals arecommon, all the three appeals are disposed of by this commonjudgment. https://hcservices.ecourts.gov.in/hcservices/ Bench. 2.All the three appeals have been filed by the Revenuechallenging the orders passed by the Income Tax AppellateTribunal. Since the issues involved in all these appeals arecommon, all the three appeals are disposed of by this commonjudgment. 3.The brief case of the appellant–assessee is as follows:(i)For the Assessment Year 2009-10, the assessee filed itsreturn of income declaring an income of Rs.7,65,36,865/-. Thereturn was processed under Section 143(1) and selected forscrutiny. The Assessing Officer, while completing the assessmentunder Section 143(3) of the Act, assessed the income atRs.7,65,36,865/-. However, the Assessing Officer has not allowedthe assessee's claim of credit for TDS of Rs.1,02,58,243/- onthe ground that the concerned income was not offered to tax inthe return of income. (ii)For the Assessment Year 2010-11, the assessee filed itsreturn of income declaring an income of Rs.13,62,81,800/- andthe return was processed under Section 143(1) and selected forscrutiny. The Assessing Officer, while completing the assessmentunder Section 143(3) of the Act, assessed the income atRs.13,62,81,800/-. However, the Assessing Officer has notallowed the assessee's claim of credit for TDS ofRs.2,46,80,256/- on the ground that the concerned income was notoffered to tax in the return of income. (iii)For the Assessment Year 2011-12, the assessee filedits return of income declaring a total income ofRs.18,43,99,980/- and the Assessing Officer completed theassessment under Section 143(3) determining the total income atRs.18,54,99,980/-, by disallowing Rs.2,62,70,314/- of TDSclaimed by the assessee relating to the subscription chargescollected on behalf of M/s.Sun TV Network Limited and demandingtax of Rs.1,98,10,730/-. The Assessing Officer disallowed theassessee's claim of TDS on the ground that the concerned income(i.e.) Subscription Charges were not offered to tax in thereturn of income. The Assessing Officer in his orders noticedthat the assessee has not included the TDS amounts in the Profitand Loss Account. (iv)Aggrieved over the assessment orders, the assesseepreferred appeals before the Commissioner of Income Tax(Appeals) and the CIT (Appeals), allowed the appeals byfollowing the assessee's own case in respect of the AssessmentYear 2006-07 in I.T.A.No.884/Mds/2011 dated 21.10.2013, whereinit has been held that the Subscription Charges collected by theassessee was not the income of the assessee. Further, theTribunal, in its order dated 21.10.2013, held that the Subscription Charges collected by the assessee was collected onbehalf of M/s.Sun TV Network Limited and was in turn remitted toM/s.Sun TV Network Limited. Further, the Tribunal held that theCable Operators are deducting TDS in the name of the assessee asit was paid to the assessee and therefore, the assessee isentitled to credit on the TDS made by the Cable Operators.Challenging the orders passed by the CIT(Appeals), the Revenuepreferred appeals before the Income Tax Appellate Tribunal andthe Tribunal also, following the earlier order passed by theTribunal in the assessee's own case for the Assessment Year2006-07 in I.T.A.No.884/Mds/2011 dated 21.10.2013, confirmed theorders of the CIT(Appeals). Aggrieved over the orders of theIncome Tax Appellate Tribunal, the Revenue has filed the aboveappeals. 4.The Tax Case Appeal in T.C.A.No.348 of 2015 was admittedon the following substantial question of law:“Whether on the facts and in the circumstances ofthe case,the Appellate Tribunal was right in holdingthat the assessee is eligible for TDS credit withoutoffering the corresponding income in its hand, which isagainst the provision to Section 199 of the Income TaxAct?” 4.The Tax Case Appeal in T.C.A.No.348 of 2015 was admittedon the following substantial question of law:“Whether on the facts and in the circumstances ofthe case,the Appellate Tribunal was right in holdingthat the assessee is eligible for TDS credit withoutoffering the corresponding income in its hand, which isagainst the provision to Section 199 of the Income TaxAct?” 5.The Tax Case Appeals in T.C.A.Nos.289 of 2016 and 345 of2016 were admitted on the following substantial questions of law:“1)Whether on the facts and in the circumstancesof the case,the Appellate Tribunal was right in holdingthat the assessee is eligible for TDS credit withoutoffering the corresponding income in its hand, which isagainst the provision to Section 199 of the Income TaxAct? 2)Whether on the facts and in the circumstances ofthe case, the Tribunal was right in directing theAssessing Officer to decide the issue by giving creditfor TDS deducted on payments which has not been offeredas assessee's receipt and this income after ignoringthe unambiguous provisions of Section 199(2) of theIncome Tax Act?” 6.Heard Mr.Karthik Ranganathan, learned Senior StandingCounsel appearing for the appellant–Revenue and Mr.SathishParasaran, learned Senior Counsel appearing for Mrs.M.Sneha,learned counsel for the respondent–assessee. 7.Mr.Karthik Ranganathan, learned senior standing counselappearing for the appellant–Revenue contended that the IncomeTax Appellate Tribunal ought not have followed the assessee'sown case in respect of the Assessment Year 2006-07 in I.T.A.No.884/Mds/2011 dated 21.10.2013 without considering theprovisions of Section 199 of the Income Tax Act and Rule 37BA ofthe Income Tax Rules. Further, the learned senior standingcounsel submitted that as per Section 199(2), any sum referredto in sub-section (1A) of Section 192 and paid to theCentral Government shall be treated as the tax paid on behalf ofthe person in respect of whose income such payment of tax hasbeen made. 8.It would be appropriate to extract the provisions ofSection 199 of the Income Tax Act, which reads as follows:“ Section 199. Credit for tax deducted. (1) Any deduction made in accordance with the foregoingprovisions of this Chapter and paid to the CentralGovernment shall be treated as a payment of tax onbehalf of the person from whose income the deductionwas made, or of the owner of the security, or of thedepositor or of the owner of property or of the unit-holder, or of the shareholder, as the case may be. (2) Any sum referred to in sub-section (1A) of section192 and paid to the Central Government shall be treatedas the tax paid on behalf of the person in respect ofwhose income such payment of tax has been made. (3) The Board may, for the purposes of giving credit inrespect of tax deducted or tax paid in terms of theprovisions of this Chapter, make such rules as may benecessary, including the rules for the purposes ofgiving credit to a person other than those referred toin sub-section (1) and sub-section (2) and also theAssessment Year for which such credit may be given.” 9.In support of his contentions, the learned seniorstanding counsel relied upon the following judgments: (i)[1987] 30 taxmann 265 (Mad.) [Commissioner of Income Tax Vs. Tanjore Permanent Bank Ltd.] wherein the Division Bench ofthis Court held as follows: “... (3) The Board may, for the purposes of giving credit inrespect of tax deducted or tax paid in terms of theprovisions of this Chapter, make such rules as may benecessary, including the rules for the purposes ofgiving credit to a person other than those referred toin sub-section (1) and sub-section (2) and also theAssessment Year for which such credit may be given.” 9.In support of his contentions, the learned seniorstanding counsel relied upon the following judgments: (i)[1987] 30 taxmann 265 (Mad.) [Commissioner of Income Tax Vs. Tanjore Permanent Bank Ltd.] wherein the Division Bench ofthis Court held as follows: “... 6.The following facts are not in dispute. Theassessee has advanced monies to its constituents forthe purpose of the State Electricity Board Bonds. Onthe instructions of the constituents the bonds havebeen purchased by the assessee with the amount advancedby it to the constituents. But the bonds had been takenin the name of the assessee-bank and kept in itspossession as a security for the loan advanced to itsconstituents for the purchase of the bonds. Though thebonds were in the name of the assessee, the interestincome from the bonds has not been returned by theassessee as part of its income in the relevantAssessment Year. This is presumably for the reason that the bank itself treated the bonds as security and theinterest income from the bonds as the income of theconstituents. Since the amounts had been advanced bythe assessee- bank to its constituents for the purchaseof the bonds, the bank had been collecting the intereston the loans given to its constituents. Therefore, theassessee, on the belief that the income from the bondsis the income of the constituents, has not returned theincome from the securities as part of its income.Though these facts were before the ITO at the time ofthe original assessment, he merely proceeded on thebasis of the tax deduction certificate and granted therelief to the assessee, without going into the questionas to whether the assessee is entitled in law to getcredit for the sum of Rs. 22,975. Normally, beforecredit is given for the sum of Rs. 22,975 which is thetax deduction at source on the interest earned on thebonds in question, the ITO should consider twomatters : (1) Whether the assessee is the owner of thebonds so as to claim the benefit of the tax credit, and(2) Whether the income in respect of which the tax hasbeen deducted at source had been offered for assessment? Without going into these two questions, the ITOappears to have blindly given tax credit for a sum ofRs. 22,975 on the basis of the tax deductioncertificate given by the Tamil Nadu State ElectricityBoard. Subsequently the ITO found that the allowance ofthe tax credit is a mistake and on that basis, heinitiated proceedings under section 154. The Tribunalhas taken the view that the question as to who is theowner of the security on the facts of this case, is adebatable issue and on the basis of such a debatableisssue, the ITO could not initiate rectificationproceedings. 7.We are not, however, inclined to accept the viewof the Tribunal in this case. Once it is admitted bythe assessee that the bonds had been purchased for thebenefit of its constituents by using the money advancedto them by the assessee but the bonds were taken in theassessee's name and kept in its possession as securityfor the payment of the monies advanced to itsconstituents, the legal inference which will normallyfollow from this admission is that the bank has got thecustody of the bonds only as a security for thepayments of the money advanced by it to itsconstituents. When the assessee says that it is incustody of the bonds of the constituents only as asecurity for the amounts advanced to them, theassessee-bank should be taken to be in possession ofthe bonds only as a creditor and not as their owner. Even according to the assessee the bonds had beenpurchased with the monies advanced by it to theconstituents. Therefore, with reference to the bondsthe bank is only a creditor of the constituents and nottheir true owner. It is no doubt true, the bonds havebeen taken in the name of the assessee-bank and thecertificate of deduction of tax was given in the nameof the assessee. But once the assessee admits that itis in possession of the bonds only as a security forthe amounts advanced to its constituents, the bankshould be taken to be an ostensible owner and the realor beneficial owner of the bonds is only itsconstituents. In this case, the Tribunal has placedemphasis on the facts that the bonds are in the name ofthe assessee and the certificates of deduction havebeen given in the name of the assessee. That will makethe assessee only an ostensible owner. When theassessee itself has admitted that the beneficial ownersof the bonds are the constituents, we do not see how adebatable issue arises as to the ownership of thebonds. Even according to the assessee, it is theostensible owner of the bonds and the real owners areits constituents. This is clear from the stand taken bythe assessee that the bonds were purchased with theconstituents' money, though they were purchased in thebank's name as security for the payment of the moniesadvanced to the constituents by the bank. According tous no debatable issue arises on the admitted facts andthe facts admitted by the assessee and found by theITO. It was never the assessee's case that it is thebeneficial owner of the bonds purchased. It had thecustody of that bonds bought only as a security forrepayment of the advances made by it to itsconstituents. As already stated, once a loan isadvanced by the assessee to the constituents and thatamount has been utilised for the purchase of the bonds,the assessee can never claim to be the beneficial ownerof the bonds. The fact that the assessee did not offerfor assessment the interest income received from thebonds will itself indicate that the assessee proceededon the basis that the beneficial ownership of the bondswas with the constituents and that as such the Incomereceived therefrom Is the income of the constituents.If really the assessee has offered the interest incomefrom the bonds for assessment and claimed benefit oftax credit in relation to that income in respect ofwhich tax was deducted, it is possible to say that theassessee is claiming tax credit on behalf of theconstituents to pass on the benefit to the constituentsor as one having a charge on the bonds. But in this case without offering the interest income from thebonds for assessment the assessee merely claims thebenefit of tax credit. It is well established that atax credit can be given only in cases where the tax ispaid on the income in respect of which deduction hasbeen made at source. ... case without offering the interest income from thebonds for assessment the assessee merely claims thebenefit of tax credit. It is well established that atax credit can be given only in cases where the tax ispaid on the income in respect of which deduction hasbeen made at source. ... 10.The learned counsel for the assessee wouldcontend that in a case as this where the income fromthe securities has not been offered for assessment, theonly way open to the ITO is to call upon the assesseeto offer the income from the securities for aassessment but he cannot withdraw the benefit of thetax credit already given. We are not in a position toaccept the contention of the learned counsel for theassessee. It is no doubt true, the ITO can, byinitiating proceedings under section 147 of the Act,reopen the assessment and include the income from thesecurities as income of the assessee treating theassessee as the owner of the securities based on thefact that the certificates stand in the name of theassessee-bank and ignoring the assessee's contentionthat it has got only a charge on the securities for theamount advanced to the constituents. But that will nottake away the jurisdiction of the ITO to initiateproceedings under section 154 to rectify a mistakeapparent from the record, the mistake being that he hasgiven the benefit of tax credit in a case where theincome in respect of which tax has been deducted atsource has not been offered for assessment. That isclearly a mistake on the part of the ITO. Even if themistake is treating the assessee as the owner of thesecurities cannot be treated as a mistake as accordingto the Tribunal it is a debatable issue, still givingtax credit in a case where the related income has notbeen offered for assessment is a mistake and that canbe taken as the basis by the ITO for initiatingproceedings under section 154.” (ii)[2017] 84 taxmann.com 53 (Gujarat) ]Naresh Bhavani Shah(HUF) Vs. Commissioner of Income Tax] wherein a Division Benchof Gujarat High Court held as follows: “... 8. It can thus be seen that the Act containsdetailed provision for collecting tax at source,depositing such tax with the government revenue andissuance of certificates to the deductee of such tax sodeducted. The anxiety of the department, therefore, toensure the credit of tax deducted at source is given tothe rightful person in consonance with the certificate of TDS can easily be appreciated when large number ofsuch transactions in any accounting year are likely totake place. The most dependable identification of thedeductee would be his PAN which would be a uniqueidentification number so far as an individual or anentity is concerned. The anxiety of the departmenttherefore to ensure proper matching of the PAN in theTDS certificate as compared to the PAN of the assesseewho claims the benefit of such tax deducted at source,therefore, cannot be lightly brushed aside. The shortquestion is, In a genuine case like the case on hand,is the person remedyless? 9.It is in this context, the provision of Section199 would come into play. As per sub-section (1) ofSection 199 any deduction of tax at source would betreated as payment of tax on behalf of the person fromwhose income the deduction was made or the owner of thesecurity or of the depositor or of the owner of theproperty or unit holder or the share holder as the casemay be. Sub-section (3) of Section 199 however permitsa deviation authorizing the power to make rules inrespect of giving credit of tax deducted at source orthe year during which the credit of such tax deductedat source should be granted. In exercise of suchpowers, Rule 37BA of the Income Tax Rules 1962 has beenframed, relevant portion of which reads as under: 9.It is in this context, the provision of Section199 would come into play. As per sub-section (1) ofSection 199 any deduction of tax at source would betreated as payment of tax on behalf of the person fromwhose income the deduction was made or the owner of thesecurity or of the depositor or of the owner of theproperty or unit holder or the share holder as the casemay be. Sub-section (3) of Section 199 however permitsa deviation authorizing the power to make rules inrespect of giving credit of tax deducted at source orthe year during which the credit of such tax deductedat source should be granted. In exercise of suchpowers, Rule 37BA of the Income Tax Rules 1962 has beenframed, relevant portion of which reads as under: "37BA. (1) Credit for tax deducted at source andpaid to the Central Government in accordance with theprovisions of Chapter XVII, shall be given to theperson to whom payment has been made or credit hasbeen given (hereinafter referred to as deductee) onthe basis of information relating to deduction of taxfurnished by the deductor to the income-tax authorityor the person authorized by such authority. (2)(i) If the income on which tax has been deducted atsource is assessable in the hands of a person otherthan the deductee, credit for tax deducted at sourceshall be given to the other person in cases where--- (a) the income of the deductee is included in thetotal income of another person under the provisionsof section 60, section 61, section 64, section 93or section 94; (b) the income of a deductee being an associationof persons or a trust is assessable in the hands ofmembers of the association of persons, or in thehands of trustees as the case may be; (c) the income from an asset held in the name of adeductee, being a partner of a firm or akarta of a Hindu undivided family, is assessable as the income of the firm, or Hindu undividedfamily, as the case may be; (d) the income from a property, deposit, security,unit or share held in the name of a deductee isowned jointly by the deductee and other persons andthe income is assessable in their hands in the sameproportion as their ownership of the asset: Provided that the deductee files a declarationwith the deductor and the deductor reports the taxdeduction in the name of the other person in theinformation relating to deduction of tax referredto in sub-rule (1). (ii) The declaration filed by the deductee under clause(i) shall contain the name, address, permanentaccount number of the person to whom credit is tobe given, payment or credit in relation to whichcredit is to be given and reasons for givingcredit to such person. (iii) The deductor shall issue the certificate fordeduction of tax at source in the name of the personin whose name credit is shown in the informationrelating to deduction of tax referred to in sub-rule(1) and shall keep the declaration in his safecustody." (ii) The declaration filed by the deductee under clause(i) shall contain the name, address, permanentaccount number of the person to whom credit is tobe given, payment or credit in relation to whichcredit is to be given and reasons for givingcredit to such person. (iii) The deductor shall issue the certificate fordeduction of tax at source in the name of the personin whose name credit is shown in the informationrelating to deduction of tax referred to in sub-rule(1) and shall keep the declaration in his safecustody." 10.It can thus be seen that under sub-rule 2 ofRule 37BA where whole or part of the income on whichtax has been deducted at source is assessable in thehands of a person other than the deductee, credit couldbe given to such other person and not to the deducteeprovided the three conditions contained therein aresatisfied. These conditions in brief are that thedeductee files a declaration with the deductor in thisrespect, such declaration would contain the details ofthe person entitled to the credit and the reasons forgiving such credit and lastly the deductor issuescertificate for deducting tax at source in the name ofsuch a person. In the present case, the petitionercould have applied to RBI in terms of sub- rule 2 ofRule 37BA and completed the procedure envisagedtherein. However, one can gather that there is nodearth of power with the department to grant credit oftax deducted at source in such a genuine case. We arenot suggesting that the requirements of sub-rule 2 arenot to be followed before such benefit can be granted.Invariably in all cases such procedure would have to becompleted before a person can rightfully claim creditof tax deducted at source where the TDS certificateshows the name and PAN of some other person.” (iii)[2012] 19 taxmann.com 157 (Ker.) [Commissioner ofIncome Tax Vs. Smt.Pushpa Vijoy] wherein a Division Bench ofKerala High Court held as follows: “...8.After hearing both sides and on going throughthe order of the Tribunal, what we notice is thatthough the Tribunal has referred to Section 199 of theIncome Tax Act, they have not considered the scope ofthe provisions in detail. Section 199 of the Income TaxAct has undergone various changes and for reference, weextract hereunder the section as it stood during therelevant Assessment Years, i.e., 1997-1998 to 2000-2001, to which these appeals relate. "199. Credit for tax deducted - Any deduction made inaccordance with the provisions of sections 192 to194, section 194A, section 194B, section 194BB,section 194C, section 194D, section 194E, section194EE, section 194F, section 194G, section 194H,section 194-I, section 194J, section 194K, section195, section 196A, section 196B, section 196C andsection 196D and paid to the Central Government shallbe treated as a payment of tax on behalf of theperson from whose income the deduction was made, orof the owner of the security, or depositor or ownerof property or of unitholder or of the shareholder,as the case may be, and credit shall be given to himfor the amount so deducted on the production of thecertificate furnished under section 203 in theassessment made under this Act for the AssessmentYear for which such income is assessable. Provided that- (i) in a case where such person or owner ordepositor or unitholder or shareholder is aperson, whose income is included under theprovisions of section 60, section 61, section 64,section 93 or section 94 in the total income ofanother person, the payment shall be deemed tohave been made on behalf of, and the credit shallbe given to, such other person; (i) in a case where such person or owner ordepositor or unitholder or shareholder is aperson, whose income is included under theprovisions of section 60, section 61, section 64,section 93 or section 94 in the total income ofanother person, the payment shall be deemed tohave been made on behalf of, and the credit shallbe given to, such other person; (ii) in any other case, where the dividend on anyshare is assessable as the income of a personother than the shareholder, the payment shall bedeemed to have been made on behalf of and thecredit shall be given to, such other person insuch circumstances as may be prescribed. [Emphasissupplied] What is clear from the above provision is that theassessee is entitled to credit of tax paid in theassessment in which the income is assessed. In otherwords, the assessee should claim credit of tax based on TDS certificate in the year in which the assesseereturns the income from which deduction is made for thepurpose of assessment. Even after the amendment of thesection through the introduction of sub-section (3) ofSection 199 of the Income Tax Act, the Central Boardwas authorised to make rules for giving credit for taxdeducted at source. As required under that section,Rule 37BA was framed by the Income Tax (6th Amendment)Rules, 2009 wherein it is specifically provided sub-rule 3(i) as follows:- (3)(i) Credit for tax deducted at source and paidto the Central Government shall be given for theAssessment Year for which such income is assessable. 9.As already stated, the Tribunal however withoutreferring to the statutory provisions and the Rulesheld that the respondents-assessees are entitled tocredit of tax in the Assessment Year following the yearin which the tax is recovered and remitted by the Banksbased on TDS certificates issued by the Banks. TheTribunal has also made reference to Section 143(1) ofthe Income Tax Act wherein the assessee is entitled tocredit of tax paid directly or indirectly includingpayments made by payers who recovered tax and remittedthe same under the provisions of Chapter XVII of theIncome Tax Act. However, Section 143(1) of the IncomeTax Act is subject to Section 199 of the Act whichspecifically provides that tax has to be credited basedon TDS certificate only in the assessment in which theincome from which deduction is made is assessed to tax.So much so, Section 143(1)(c) will be subject to sub-sections (1) and (3) of Section 199 read with Rule 37BAof the Income Tax Rules and when taken together theeffect is that the assessees can retain the TDScertificates and claim credit in the assessment for theAssessment Year in which assessee returns the income onwhich deduction of tax is made for assessment. ... 11.The question to be considered is whether theassessing officer was justified in refusing to givecredit for tax payments based on TDS certificatesissued by the Bank for the reason that income is notreturned for assessment by the assessees in theAssessment Year following the year in which tax isrecovered and paid by the Banks. We do not think thereis any justification for assessees' claim becauseSection 199 of the Income Tax Act makes it clear thatthe assessee is entitled to credit based on TDScertificate only in the Assessment Year in which incomefrom which tax is deducted is assessed. Therefore, whenthe statute makes it mandatory that credit of tax based ... 11.The question to be considered is whether theassessing officer was justified in refusing to givecredit for tax payments based on TDS certificatesissued by the Bank for the reason that income is notreturned for assessment by the assessees in theAssessment Year following the year in which tax isrecovered and paid by the Banks. We do not think thereis any justification for assessees' claim becauseSection 199 of the Income Tax Act makes it clear thatthe assessee is entitled to credit based on TDScertificate only in the Assessment Year in which incomefrom which tax is deducted is assessed. Therefore, whenthe statute makes it mandatory that credit of tax based on TDS certificate is available only in the AssessmentYear in which the income from which tax deducted atsource is assessed, we do not know how the Tribunal canover-rule the statutory provisions and allow the claim.In our view, going by the practical difficulty toretain TDS certificates for several years until theinterest is returned for assessment on cash basis,prudent assessees should return income on which tax isrecovered and remitted by the payer in the AssessmentYear following the year in which such income is subjectto deduction of tax and remittance by the payer. Theassessees who do not do it should follow Section 199and Rule 37BA, retain the TDS certificates and claimcredit in the Assessment Year in which such income isreturned for assessment. 12.The finding of the Tribunal that there is noprovision in the Income Tax Act or Rules to defercredit of tax in assessments based on TDS certificatesobtained is really incorrect because sub-sections (1)and (3) of Section 199 read with Rule 37BA of theIncome Tax Rules specifically authorise the assessee toretain TDS certificates and to produce it and claimcredit in the year in which income on which recovery oftax made is returned for assessment. As of now, the Actdoes not provide that assessees should return theincome for assessment in the Assessment Year followingthe previous year in which tax is recovered at sourceand TDS certificate is issued by the payer and if soprovided assessment and credit of tax will go togetherwhich will avoid botheration for the assessees as wellas for the Departmental Officers. In our view, theprovisions contained in sub-sections (1) and (3) ofSection 199 read with Rule 37BA of the Income Tax Rulesserve a purpose because if income is not assessable inthe Assessment Year and at the same time assessees areentitled to credit of tax recovered and remitted inrespect of such income, the Department will becompelled to refund the entire tax amount every yearand along with it if refund is not made within threemonths from filing of return, mandatory interest willalso payable, as provided under Section 243(1) of theIncome Tax Act which will defeat the purpose of TDSprovisions in the Act. Therefore, we do not find anyjustification for the Tribunal to allow credit of taxbased on TDS certificates without correspondingassessment of income in the Assessment Years concernedwhich is against the statutory provision. We also donot find any merit in the contention of therespondents-assessees that the amount covered by TDScertificates itself should be treated as income of the previous year relevant for the Assessment Yearconcerned and the tax amount should be assessed asincome by simultaneously giving credit for the fullamount of tax remitted by the payer. In these cases,the entire interest credited should be assessed onmaturity of the deposit and on payment by the bank, asthe assessees are admittedly following cash system ofaccounting. However, in our view, if Section 145(1) isamended for assessment of income on which TDS is madein the Assessment Year following the year in whichdeduction is made irrespective of the system ofaccounting followed by the assessee, the same willavoid problems for the assessees and the Department. Based on the findings above, we allow theDepartmental appeals by reversing the orders of theTribunal and that of the first appellate authority andby restoring the assessments denying credit of tax inthe assessments for which corresponding income is notassessed. However, since we are allowing theDepartmental Appeals, we leave it open to therespondents-assessees to claim credit based on the verysame TDS certificates against the interest incomeassessed in the year in which such income is assessed.” (iv)[2016] 67 taxmann.com 224 (Andhra Pradesh) [ICRCL-KBL(JV) Vs. Assistant Commissioner of Income Tax, Circle-7(1),Hyderabad] wherein a Division Bench of the Andhra Pradesh HighCourt held as follows: “... 27.On being asked how the Revenue could retain theamount representing the tax deducted at source from thepetitioners bills, and not pay it either to thepetitioner or to the sub-contractor, Sri T. VinodKumar, learned Senior Standing Counsel for Income Tax,would submit that, as the income is assessable in thehands of the sub-contractor, it is they, and not thepetitioner, who can claim credit and, whenever any suchclaim is made, the Department would give them creditfor the TDS, and refund the amount in accordance withRule 37BA of the Rules. It is, however, not in disputethat the sub-contractor has not made any claim forbeing given credit for the tax deducted at source bythe Government from the bills of the petitioner herein.It is not as if there were conflicting claims by thepetitioner-JV on the one hand, and its constituent sub-contractor on the other, both seeking credit for thetax deducted at source by the Government, necessitatingretention of these amounts by the Revenue tillresolution of the conflicting claims. As held by theDivision Bench of this Court, in Bhooratnam and Co. (supra), the Revenue cannot be allowed to retain theamounts representing the tax deducted at source withoutcredit being given to anybody. If credit of tax is notallowed to the petitioner-assessee, and thesubcontractor has not made any claim for refund, itwould result in credit of the TDS not being taken byanybody and this, as has been rightly pointed out bythe Division Bench in Bhooratnam and Co. (supra), isnot the spirit and the intention of the law. 28.To the limited extent the assessing authoritydenied credit to the petitioner, for the tax deductedat source from their bills by the Government, theimpugned assessment orders/rectification orders are setaside. The assessing authority shall determine thequantum of credit for TDS which the petitioners areentitled to in terms of this order, and refund theamount so computed to the petitioners herein inaccordance with law. The entire exercise, culminatingin final orders being passed, shall be completed withina period of three month from the date of receipt of acopy of this order. It is made clear that this ordershall not preclude the assessing authority, if he sochooses, from reopening the assessments, and in passingorders thereafter in accordance with Sections 147 and148 of the Act. 29.All the writ petitions are disposed ofaccordingly. The miscellaneous petitions pending, ifany, shall also stand disposed of. There shall be noorder as to costs.” 10.The learned senior standing counsel appearing for theappellant – Revenue also relied upon the provisions of Rule 37BA(2)(i) of the Income Tax Rules and submitted that the whole orany part of the income on which tax has been deducted at sourceis assessable in the hands of a person other than the deductee,credit for the whole or any part of the tax deducted at source,as the case may be, shall be given to the other person and notto the deductee, provided that the deductee files a declarationwith the deductor and the deductor reports the tax deduction inthe name of the other person in the information relating todeduction of tax. 11.Countering the submissions made by the learned seniorstanding counsel appearing for the appellant–Revenue, Mr.SathishParasaran, learned senior counsel appearing for the respondent–assessee submitted that the provisions of Rule 37BA (2)(i) wasamended on 01.11.2011 and the new provisions came into effectonly with effect from 01.11.2011 and therefore, the saidprovision is not applicable to the case of the respondent–assessee for the reason that the subject matter of the above https://hcservices.ecourts.gov.in/hcservices/ appeals are pertaining to the Assessment Years 2009-10, 2010-11and 2011-12. The learned senior counsel further submittedthat the judgments relied upon by the learned senior standingcounsel for the appellant – Revenue are not applicable to thefacts and circumstances of the present appeals. The learnedsenior counsel further submitted that the respondent – assesseewas only a collection agent of M/s.Sun TV Network Limited,collecting the Subscription Charges and the invoices, which hadbeen raised in the name of the respondent – assessee on thesubscription income from the pay channels during the relevantyear and remitted to M/s.Sun TV Network Limited, had beenaccounted. The learned senior counsel further submitted that thesubscription charges were collected by the assessee only onbehalf of M/s.Sun TV Network Limited. In support of hiscontentions, the learned senior counsel relied upon the judgmentreported in [2013] 357 ITR 396 (Andhra Pradesh) [CIT Vs.Bhooratnam & Co.], wherein a Division Bench of the AndhraPradesh High Court held as follows: “...16. This amendment has done away with thespecified four clauses in the pre-amended Rule 37BAwhich restricted the benefit of the rule only in fourspecified situations. It has thus widened the scope ofthe rule 37 BA thereby enabling the credit of taxes tothe actual payee in whose hands the income isassessable and not restricting this benefit only to thespecified four situations.17.In our view, the CIT (Appeals) and the Tribunalhave rightly held that the assessee is entitled to thecredit of the TDS mentioned in the TDS certificatesissued by the contractor, whether the said certificateis issued in the name of the Joint Venture or in thename of a Director of the assessee company. They haveconsidered the terms of the agreement dated 12-03-2003among the parties to the joint venture and held thatcredit for TDS certificates cannot be denied to theassessee while assessing the contract receiptsmentioned in the said certificates as income of theassessee. The income shown in the TDS certificates haseither to be taxed in the hands of the joint venture orin the hands of the individual co-joint venturer. Asthe joint venture has not filed return of income andclaimed credit for TDS certificates and the TDScertificates have not been doubted, credit has to begranted to the TDS mentioned therein for the assessee.18.Rule 37BA is a procedural provision dealingwith the manner of giving credit for tax deducted atsource for the purposes of section 199. It thereforeapplies to pending proceedings. As observed in State ofMadras v. Lateef Hamid & Co. AIR 1972 SC 1781, where a new procedure is prescribed by law, it governs allpending cases. new procedure is prescribed by law, it governs allpending cases. 19.In Tikaram & Sons v. Commissioner of Sales TaxAIR 1968 SC 1286 it was held that alterations in theform of procedure are always retrospective, unlessthere is some good reason or other why they should notbe. The amendment to Rule 37 BA mentioned above whichhas been introduced by the Income Tax (8th amendment)Rules,2011 notified vide Notification No. 57/2011 dated24-10-2011, being procedural in nature, would haveretrospective effect and has to be given effect to. 20.The Revenue cannot be allowed to retain taxdeducted at source without credit being available toanybody. If credit of tax is not allowed to theassessee, and the joint venture has not filed a returnof income, then credit of the TDS cannot be taken byanybody. This is not the spirit and intention of law. 21.Therefore, in our view, the Assessing Officererred in denying the benefit of the TDS mentioned inthe TDS certificates filed by the assessees on theground that the TDS certificate is issued in the nameof the joint venture ora Director and not the assessee.22.In this view of the matter both the appeals aredismissed as they are without any merit. There is noquestion of law much less any substantial question oflaw to be considered in these appeals. No costs.” 12.On a careful consideration of the materials available onrecord, the submissions made by the learned counsel on eitherside and the judgments relied upon by the learned counsel oneither side, it could be seen that the Assessing Officerdisallowed the assessee's claim on credit of TDS on the groundthat the Subscription Charges were not offered to tax in thereturn of income. However, the respondent–assessee contendedthat it is only a collection agent for M/s.Sun TV NetworkLimited and that the corresponding subscription income derivedfrom pay channels stood accounted/offered as income in the handsof M/s.Sun TV Network Limited. The Assessing Officer held thatthe TDS credit relevant to subscription charges coul