TDS credit must be allowed in the assessment year when corresponding income is assessable, per section 199(3) r.w. Rule 37BA(3)(i), irrespective of deductor's accounting year or Form 26AS reflection.

ORDER

PER RAVISH SOOD, JM:

The present appeal filed by the assessee company is directed against the order passed by the Addl/Joint Commissioner of Income Tax (Appeals)-1, Nashik, dated 05/08/2025, which in turn arises from the order passed by the Assessing Officer (for short, “AO”) under section 154 of the Income Tax Act, 1961 (for short, “the Act”), dated 17/10/2022 for the Assessment Year (AY) 2020-21. The assessee company has assailed the impugned order of the CIT(A) on the following grounds of appeal:

1. That on the facts and in the circumstances of the case and in law, the Learned CIT(A) erred in confirming the denial of TDS credit of 28,12,189/- pertaining to services rendered and income offered by the appellant in A.Y. 2020-21.

2. The Appellant has offered income in AY 2020-21 (FY 2019-20) and claimed TDS on the same in AY 2020-21 itself as per provisions of Sec 199 read with Rule 37BA sub-rule (3).

3. The deductor seems to have claimed expense in the subsequent year ie, AY 2021-22 & deducted tax in the subsequent year. The appellant has not claimed TDS credit in the subsequent year as it was already availed in previous year. Hence the difference.

4. That the Learned CIT(A) failed to appreciate that the appellant had raised invoice for bottling services on 31.03.2020, duly offered the same income to tax in A.Y. 2020-21 as per the mercantile system of accounting, and therefore was entitled to TDS credit in the same year, in terms of Section 199 read with Rule 37BA(3) of the Income-tax Rules, 1962.

5. That the Learned CIT(A) erred in holding that TDS credit could not be allowed merely because the deductor accounted for the expenditure and deducted tax in the subsequent year, ignoring the settled principle that TDS credit is to be given in the year in which the related income is assessable.

6. That the Learned CIT(A) erred in not appreciating that denial of TDS credit in the year of taxability of income results in double taxation and is contrary to the scheme of Chapter XVII-B of the Act.

7. That the Learned CIT(A) ought to have directed the grant of due TDS credit in A.Y. 2020-21 and erred in upholding the action of CPC Bengaluru in restricting the credit to amounts reflected in Farm 26AS, without examining the substantive entitlement of the assessee.

8. The appellant may add, alter, amend or withdraw any of the above grounds at the time of hearing.”

2. Succinctly stated, the assessee company, which is engaged in the business of manufacturing of IMFL, had filed its return of income for AY 2020-21 on 29/12/2020, declaring an income of Rs. 1,66,47,890/-. The return of income filed by the assessee company was processed by the AO/CPC, Bangaluru, vide its order under section 143(1) of the Act, wherein based on a mismatch in the tax deducted at source (TDS) as claimed by the assessee company as against that disclosed in its Form- 26AS, an additional demand of Rs.13,15,270/- was raised.

3. The assessee company filed an application under section 154 of the Act, dated 29/12/2020, which, however, was rejected by the AO/CPC, Bangalore vide his order, dated 12/04/2022.

4. The assessee company aggrieved with the order passed by the AO/CPC, Bangalore, under section 154 of the Act, dated 12/04/2022, has carried the matter in appeal before the CIT(A), but without success.

5. The assessee company, aggrieved with the order of the CIT(A) has carried the matter in appeal before us.

6. Shri Preetham Mahankali, CA, Learned Authorised Representative (for short, “Ld. AR”) for the assessee, at the threshold of hearing of the appeal, submitted that both the lower authorities have erred in raising/sustaining the additional demand of Rs. 13,51,270/- in the hands of