TDS Credit on Part Payment Allowed in Year of Deduction as Income was Taxed in Earlier Year

By | November 24, 2025
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TDS Credit on Part Payment Allowed in Year of Deduction as Income was Taxed in Earlier Year

Issue

Whether the assessee is entitled to claim credit for Tax Deducted at Source (TDS) in Assessment Year (AY) 2023-24 on a part payment received for a property sale, even though the entire capital gain from the sale was declared and taxed in an earlier year (AY 2019-20), or if the credit should be restricted because the corresponding income was not offered in the current year’s return.

Facts

  • Transaction: The assessee, an NRI, sold a property in FY 2018-19 (AY 2019-20) for a total consideration of Rs. 2.97 Crores.

  • Income Declaration: The entire capital gain on the full consideration was declared in the return for AY 2019-20, and taxes were paid. The assessment for that year was completed under Section 143(3).

  • Delayed Payment: A balance payment of Rs. 1 Crore was received from the buyer (Veera Developers) in AY 2023-24 (FY 2022-23).

  • TDS Deduction: On this payment of Rs. 1 Crore, the buyer deducted TDS of Rs. 23,92,000/- in AY 2023-24.

  • Te Dispute: The assessee claimed a refund of this TDS in the return for AY 2023-24. The Assessing Officer (CPC) denied the credit in the intimation u/s 143(1), likely because the corresponding income (Rs. 1 Crore) was not offered in the AY 2023-24 return (to avoid double taxation).

  • Assessee’s Plea: The assessee argued that since the tax on the income had already been paid in AY 2019-20, denying the credit for the TDS deducted later would amount to double taxation/unjust enrichment.

Decision

  • The ITAT Delhi Bench allowed the appeal in favor of the assessee.

  • Income Taxed Once: The Tribunal verified that the full sale consideration was indeed offered to tax in AY 2019-20. Since the income embedded in the Rs. 1 Crore receipt had already suffered tax, the assessee was not required to offer it again.

  • Credit Must Follow: The Tribunal held that once the income is assessed (even in a prior year), the credit for TDS deducted on that income must be allowed. Denying credit for tax actually deducted and paid to the government would be unjust.

  • Direction: The AO was directed to allow the full credit of Rs. 23,92,000/- in AY 2023-24.

Key Takeaways

  • Rule 37BA Interpretation: While Rule 37BA generally links credit to the year income is assessable, Tribunals interpret it to ensure that credit is not denied when the tax has been paid and income assessed, even if there is a timing mismatch due to delayed receipts.

  • Prevention of Double Jeopardy: Tax cannot be collected twice on the same income—once via self-assessment in the earlier year and again via denied TDS credit in the later year.

  • Verification: Successful claim depends on reconciling the receipt with the income declared in the past return (Form 26AS reconciliation).

IN THE ITAT DELHI BENCH ‘D’
Yogesh Gandhi
v.
ACIT, Circle, International Taxation*
Yogesh Kumar U.S., Judicial Member
and Rifaur Rahman, Accountant Member
IT Appeal No. 2671 (Del) of 2025
[Assessment year 2023-24]
NOVEMBER  12, 2025
Rishabh Ostwal, Adv. and Deepak Ostwal, CA for the Appellant. Vikram Singh Sharma, Sr. DR for the Respondent.
ORDER
S. Rifaur Rahman, Accountant Member. – The assessee has filed appeal against the order of the Learned Commissioner of Income-tax (Appeals), Delhi – 42 [“Ld. CIT(A)”, for short] dated 11.03.2025 for the Assessment Year 2023-24.
2. Brief facts of the case are, assessee is an NRI and also having income from rent and interest during the year under consideration. The assessee had sold a property during FY 2018-19 at Rs.2,97,50,000/- and declared his income in its return of income for AY 2019-20. During the FY 2018-19, the assessee has received a sum of Rs.1,97,50,000/- including TDS and declared capital gain in AY 2019-20 for the total consideration declared of Rs.2,97,50,000/- in his return of income and also paid due taxes in that year. The assessment for the AY 2019-20 was also completed and the said income was assessed by the AO. The TDS of Rs.47,24,200/- was claimed in AY 2019-20 and the above tax was deducted on the amount of Rs.1,97,50,000/- as received and paid by the buyer. The balance amount of Rs.1,00,00,000/- was received by the assessee in the AY 2022-23 and TDS of Rs.23,92,000/- was taken into consideration by the assessee in FY 2022-23 on receipt basis. The other TDS of Rs.7,33,653/- including the TDS deducted on sale of property of Rs.23,92,000/- was claimed by the assessee while filing the return of income for AY 2023-24. The assessee had claimed the entire credit of TDS of Rs.31,25,654/- on such receipts as refund in the return of income. The assessee claimed TDS of Rs.31,25,654/- whereas the CPC has restricted the TDS claim of Rs.8,69,608/- while completing the assessment under section 143(1) of the Act.
3. Aggrieved assessee filed an appeal before the ld. CIT(A), Delhi 42 and assessee filed detailed submissions before the ld. CIT (A) which was logically reproduced by the ld. CIT (A) at pages 3 to 8 of the impugned order. After considering the detailed submissions of the assessee and also confirming from the builder M/s. Veera Developers Pvt. Ltd. in which it was confirmed the payment of Rs.1 crore including TDS of Rs.23.92 lakhs, ld. CIT (A) dismissed the grounds raised by the assessee by observing as under :-
“7.3 It is apparent that the appellant has earned income from house property and income from other sources during the financial year 2022-23. The appellant has received a balance sum of Rs. One crore as part of the sale consideration with respect to the sale of immovable property in AY 2019-20 and the TDS has been deducted by the buyer on assessee’s part amounting to Rs.23,92,000/-. It is reiterated that the reply submitted by the assessee is not satisfactory as although the assessee has filed computation of income, form 26AS, copy of sale deed, copy of development agreement, copy of confirmation from Veera Developers Pvt. Ltd with regard to the balance payment of Rs.1,00,00,000/- including TDS amount of Rs.23,92,000/- received on 01.12.2022 but a very basic and important evidence in the case of the assessee that is return of income filed by the assessee for AY 2023-24 as well as AY 2019-20 have not been filed. In the absence of both the returns of income the contention of the assessee is not verifiable. This basic fact should have been appreciated by the assessee that in absence of ITR for both the years the argument put forth by him is not tenable.”
4. Aggrieved, assessee is in appeal before us raising following grounds of appeal :-
“1. On the facts and in the circumstances of the case, CIT (A) erred in upholding the impugned Ex-Parte order passed u/s 143(1) by the DDIT CPC, Bengaluru, (AO) without appreciating the facts that the Appellant have placed all the facts and written submissions before CIT (A)-42 without raising any query or disagreement during the personal hearing.
2. On the facts and in the circumstances of the case, CIT (A) erred in upholding the impugned ex-Parte order passed u/s 143(1), by the respondent, without appreciating the fact that :-
A. The AO cannot deny the credit of TDS of Rs. 22,12,000/- out of Total TDS of Rs 23,92,000/- deducted from the payment of Rs. 1.00 Crore by the buyer of the property, during the year under consideration (i.e. AY 2023-24) on payment basis, which was sold in the FY 2018-19 (relevant to AY 201920), whereas the appellant had already paid Income Tax, in AY 2019-20 on accrual basis on the total sale consideration of Rs.2,97,50,000/- which had already been accepted by the Income Tax Department and an order u/s 143(3) for the AY 2019-20 had already been passed and placed before CIT(A)- 42.
B. The AO is wrong in denying the credit of the TDS on the payment received in. the AY 2023-24 where the full income tax was paid on the accrual basis in the AY 2019-20 and the Buyer deducted the tax at source (TDS) of Rs 47,24,200/- on Rs. 1,97,50,000/- in AY 2019-20 on actual payment basis and 23,92,000/- in the AY 2023-24 on the payment of Rs.1.00 Crore.
C. The Respondent is wrong in law and on facts of the case ignoring section 5(2), Explanation 2 of the Income Tax Act 1961 and applying section 199.
D. The Respondent is wrong in allowing credit of TDS on proportionate basis under Rule 37BA disregarding the fact that the income has never been apportioned in any way by assessee.
3. On the facts and in the circumstances of the case, the CIT(A) erred in law and on facts in dismissing the appeal of the assessee on the ground that the Income Tax Returns for AY 2019-20 and AY 2023-24 were not submitted before CIT(A)-42 for verification of the appellant’s claim.
4. The CIT(A) failed to consider this corroborative evidence, which was readily available for verification, leading to an erroneous dismissal of the appeal without proper examination of the material on record. The dismissal, therefore, is unjustified.
5. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.
PRAYER
The Appellant most respectfully prays that this Hon’ble Tribunal may be pleased to:
1. Set aside the order of the Commissioner of Income Tax (Appeals)-42, confirming the ex-parte intimation under section 143(1) passed by the ADIT, CPC, Bengaluru; and
2. Direct the Respondent to allow full credit of Tax Deducted at Source (TDS) amounting to Rs.23,92,000/- pertaining to the payment of Rs.1.00 crore received during AY 2023-24, which is part of the sale consideration already offered and taxed in AY 2019-20, in accordance with the principles of income recognition and TDS credit under Section 5(2), Explanation 2 under the Income Tax Act, 1961, and
3. Grant such other relief or reliefs as this Hon’ble Tribunal may deem fit and proper in facts and circumstances of the case.”
5. At the time of hearing, ld. AR off the assessee brought to our notice the relevant facts on record and also filed paper book in which assessee has filed computation of income for AY 2019-20, copy of return of income for AY 2019-20, copy of Form 26AS for AY 2019-20, computation of income for AY 2023-24, return of income filed for AY 2023-24 and copy of Form 26AS for AY 2023-24. He also brought to our notice that in AY 2019-20, the assessee has declared the full value of consideration of Rs.2,97,50,000/- and offered to tax the above said income and claimed only the TDS actually deducted by the buyer during the AY 2019-20. Further he brought to our notice page 114 of the paper book wherein Veera Developers had paid Rs.1,00,00,000 during the AY 2023-24 and also deducted TDS of Rs.23,92,000/-. The assessee has also brought to our notice Development Agreement and confirmation of developer i.e. Veera Developers and prayed that during the impugned assessment year, assessee has only claimed the TDS deducted by the developer on part payment. Since the assessor has already declared the relevant income, the AO cannot deny the same.
6. On the other hand, ld. DR of the Revenue relied on the findings of the lower authorities.
7. Considered the rival submissions and material placed on record. We observe that assessee has sold the property and declared long term capital gain by declaring the full value in AY 2019-20 and assessee has paid the due tax after taking credit only to the extent of tax deducted at source by the purchaser which assessee has brought to our notice at page 68 of the paper book which is Form 26AS in which the developer had paid only Rs.1,97,50,000/- and deducted the TDS of Rs.47,24,200/- and assessee also claimed only to that extent in their return of income. Since the assessee has received part payment/ settlement during the AY 2023-24, the purchaser has deducted TDS and paid the net amount to the assessee and the same is reflected at Form 26 AS for the AY 2023-24. On verification of both the Form 26AS for AY 2019-20 and AY 2023-24, it matches sale consideration declared by the assessee in AY 2019-20. Therefore an income can be taxed only once. The assessee has declared full value of sale consideration in AY 2019-20 and offered the tax. Therefore, the deduction of TDS at the time of part settlement has to be allowed to the assessee. We observe that ld. CIT (A) has dismissed the grounds raised by the assessee by observing that the assessee has not filed return of income for AY 2019-20 and AY 2023-24 before him and it is not verifiable. In our view, ld. CIT (A) has not rightly decided the issue after appreciating the facts made by the assessee filed before him. Let that be as it may, as discussed above, assessee is eligible to claim the TDS in AY 2023-24 and we are inclined to allow the grounds raised by the assessee.
8. In the result, the appeal filed by the assessee is allowed.