AO failed to account for the total TDS that had been deducted and deposited, which impacted the computation of the refund due as per the original Return of Income

In a recent ruling, the Delhi High Court directed the Assessing Officer ( AO ) to grant Tax Deducted at Source ( TDS ) credit in compliance with the Income Tax Appellate Tribunal’s ( ITAT ) directions, after the Assessing Officer ( AO ) failed to account for the total TDS that had been deducted and deposited, which impacted the computation of the refund due as per the original return of income.  The petitioner, Ess Singapore Branch challenged the order dated April 8, 2024, issued by the Assessing Officer (AO). The AO had limited the Tax Deducted at Source (TDS) benefit to INR 24, 46,62,305, as reported in the Return of Income. Consequently, the AO framed an order for a refund of INR 4, 92,208, including interest under Section 244A of the Income Tax Act, 1961. Get a Copy of Income Tax Rules, Click here The petitioner expressed dissatisfaction with this action, arguing that the AO failed to account for the total TDS deducted and deposited, thereby miscalculating the refund based on the original Return of Income. For the purpose of resolving this writ petition, the court considered key facts, including the petitioner’s Return of Income for Assessment Year 2014-15, which declared a total income of INR 90, 35, 46,340 and claimed a refund of INR 3,65,970. The return was selected for scrutiny to determine whether revenue, including that from live feed consideration, constituted royalty and was thus taxable. On December 31, 2017, a draft assessment order was issued, categorizing the income from live feed as taxable royalty. The petitioner, dissatisfied with this classification, appealed to the Dispute Resolution Panel (DRP), which upheld the draft order on September 5, 2018. A final assessment order was subsequently issued on October 8, 2018. Challenging the DRP’s decision, the petitioner appealed to the tribunal, arguing that income from live feed rights should not be taxed as royalty and that the respondents had failed to grant full TDS credit as reflected in Form 26AS. The tribunal, in its judgment on February 21, 2023, ruled in favor of the petitioner, directing the AO to verify and grant the TDS credit claimed by the petitioner. The tribunal explicitly instructed the AO to address the petitioner’s complaint regarding short TDS credit, considering the amount reflected in Form 26AS, which was INR 2,03,36,66,125. Following this directive, the petitioner filed an application before the AO, which led to the issuance of the contested order. In response, the respondents filed a counter affidavit, acknowledging the amounts in Form 26AS but arguing that since the petitioner did not claim INR 2,03,40,32,090 in its income tax return, the TDS credit should be denied. They further contended that TDS credit was verified based on the submitted Return of Income and could only be granted to the extent claimed therein. The respondents also maintained that the petitioner was required to follow the procedure under Section 239 of the Income Tax Act for refund purposes and that the impugned order was justified, given no claim was raised within the prescribed period. Get a Copy of Income Tax Rules, Click here The bench, considering the undisputed facts, found the AO’s stance unsustainable, particularly as it limited the petitioner’s claim to the disclosures made in the Return of Income. The bench concluded that it would be illegal and inequitable for the respondents to grant short credit for the TDS deducted and deposited based on the return’s claims. The court noted that the issue of treating live feed rights as royalty and related disputes had been resolved up to the High Court in ITA 812/2023. The division bench, comprising Justice Yashwanth Varma and Justice Ravinder Dudeja, allowed the writ petition and quashed the impugned order dated April 8, 2024. The court issued a writ commanding the respondents to acknowledge the TDS credit as reflected in Form 26AS, amounting to INR 2,27,83,28,430, and to recomputed the total refund at INR 2,03,40,32,090.