The Delhi Bench of the Income Tax Appellate Tribunal has clarified a critical principle in TDS credit entitlement: when income is assessed in the hands of an assessee, TDS credit cannot be denied merely because the credit appears under the PAN of an associate concern, provided there is no double claim. This decision reinforces the substance-over-form doctrine in direct tax administration.
Background & Facts
The Dispute
The appellant, Deloitte Haskins & Sells, a firm of Chartered Accountants, filed its income tax return for Assessment Year 2024-25 on 28.10.2024, declaring total income of Rs. 31,31,96,110 and claiming TDS credit of Rs. 11,64,29,068. The Centralized Processing Centre (CPC), Bangalore, processed the return under Section 143(1) of the Income Tax Act, 1961, and allowed only Rs. 11,62,312 as TDS credit, rejecting the balance on the ground that the remaining TDS amounts did not appear against the appellant’s Permanent Account Number (PAN) in Form 26AS.
Key Facts
- The appellant is engaged in the profession of chartered accountancy.
- The disputed TDS credits relate to payments received by the appellant from clients, where tax was deducted at source by the payers.
- The TDS amounts in dispute are reflected in Form 26AS under the PAN of two associate entities: DHS LLP (PAN: AACFD4815A), not under the appellant’s PAN (AABFD2095B).
- The appellant has not claimed any TDS credit for these amounts in any prior or subsequent assessment year.
- The income corresponding to the disputed TDS credits has been fully offered to tax and assessed in the hands of the appellant.
- The TDS credits in question are categorized as follows:
- Rs. 1,03,512 (A.Y. 2021-22)
- Rs. 1,20,904 (A.Y. 2022-23)
- Rs. 4,19,832 (A.Y. 2023-24)
- Rs. 8,000 (A.Y. 2025-26)
- Rs. 2,26,636 (A.Y. 2023-24, DHS LLP)
- Rs. 1,26,202 (A.Y. 2024-25, DHS LLP)
- Rs. 1,57,226 (TDS on post-deduction payments)
- Total disputed credit: Rs. 11,62,312
Procedural History
- 28.10.2024: Assessee filed return for A.Y. 2024-25 claiming TDS credit of Rs. 11,64,29,068.
- 27.05.2025: CPC processed return under Section 143(1) and allowed only Rs. 11,62,312 as TDS credit.
- 14.08.2025: Commissioner of Income Tax (Appeals) [CIT(A)] passed order allowing appeal for statistical purposes only, directing the Assessing Officer to verify turnover offered to tax against TDS credit available in Form 26AS, and conditioning TDS credit on the deductor revising the TDS return to reflect credit on the assessee’s PAN.
- 23.04.2026: Appeal filed before the Income Tax Appellate Tribunal, Delhi Bench 'B'.
The Parties' Positions
For the Appellant: The TDS credits, though reflected in the PAN of DHS LLP, relate to income earned and taxed in the hands of the appellant. The appellant has not claimed these credits elsewhere. The condition imposed by the CIT(A) requiring revision of TDS returns by third-party deductors is beyond the assessee’s control and contrary to Section 199 and Rule 37BA of the Income Tax Rules.
For the Revenue: The CIT(A)’s direction is procedurally correct. TDS credit can only be allowed if it appears against the assessee’s PAN in Form 26AS. The burden of ensuring correct reflection lies with the assessee to facilitate verification.
Relief Sought
The appellant seeks deletion of the condition requiring revision of TDS returns by deductors and direct allowance of TDS credit of Rs. 11,62,312 based on substance of income taxation, irrespective of the PAN under which TDS is reflected in Form 26AS.
The Legal Issue
Can the Assessing Officer deny TDS credit to an assessee under Section 199 of the Income Tax Act, 1961, read with Rule 37BA, merely because the TDS credit appears in Form 26AS under the PAN of an associate concern, when the corresponding income has been offered to and assessed in the hands of the assessee, and no double benefit has been claimed?
Arguments Presented
For the Appellant
The appellant relied on the decision of the Chennai Bench of the ITAT in ITA Nos. 2467, 2526, 2527, 2656, 2657, 2668 & 2684/Chny/2025, dated 31.12.2025, which held that TDS credit cannot be denied on the technical ground that the credit is reflected in the PAN of a sister concern, provided the income is assessed in the assessee’s hands and the associate has not availed the benefit. The appellant argued that Section 199 entitles a person to credit for tax deducted at source on income chargeable to tax in their hands, irrespective of the PAN under which the TDS is recorded. Rule 37BA reinforces that credit is available if the tax has been deducted and the income is taxable in the assessee’s hands.
For the Respondent
The Revenue contended that Form 26AS is the sole authoritative source for TDS credit under the Act. Any discrepancy between the PAN of the deductor and the assessee renders the credit ineligible unless rectified by the deductor. The CIT(A)’s direction to seek revision of TDS returns was a reasonable procedural safeguard against misuse and double claiming.
The Court's Analysis
The Tribunal examined the legislative intent behind Section 199 and Rule 37BA, which are designed to ensure that the person on whose income tax has been deducted at source is entitled to the credit, regardless of administrative mismatches in reporting. The Tribunal noted that the purpose of TDS credit is to avoid double taxation and to give effect to the economic reality of income taxation.
"The ratio laid down in the above decision of the Hon’ble High Court is that claim for TDS credit to the assessee cannot be denied on the technical ground that the TDS certificate is in the name of the sister concern after having assessed the income in the hands of the assessee."
The Tribunal observed that the CIT(A)’s direction to the Assessing Officer to condition TDS credit on the deductor revising the TDS return placed an unreasonable burden on the assessee, who has no control over the filing or revision of returns by third parties. The Tribunal emphasized that the AO’s duty is to verify whether the income has been taxed in the assessee’s hands and whether the associate concern has not claimed the same credit. If both conditions are satisfied, the credit must be allowed.
The Tribunal further held that Form 26AS is an informational document and not a statutory bar to credit. The substance of the transaction - that the income was earned by the assessee and tax was deducted on it - must prevail over technical discrepancies in reporting.
The Verdict
The appellant’s appeal was allowed for statistical purposes. The Tribunal set aside the condition imposed by the CIT(A) requiring the assessee to secure revision of TDS returns by the deductors. The matter was remitted to the Assessing Officer to allow TDS credit of Rs. 11,62,312, subject to verification that the corresponding income has been assessed in the hands of the appellant and that the associate concern (DHS LLP) has not claimed the same TDS credit in any assessment year. The AO was directed to provide the appellant a reasonable opportunity of being heard before finalizing the credit.
What This Means For Similar Cases
TDS Credit Is Not Dependent on PAN Matching
- Practitioners can now argue that TDS credit must be allowed if the income is taxed in the assessee’s hands, even if Form 26AS reflects the credit under a related entity’s PAN.
- The burden of proof shifts to the Revenue to establish that the associate concern has claimed the same credit, not to the assessee to fix reporting errors.
AO’s Duty Is Verification, Not Imposition of Impossible Conditions
- Assessing Officers must verify the substance of the transaction - income taxation and non-duplication - rather than mechanically rejecting credit due to PAN mismatch.
- Directions requiring revision of TDS returns by third parties are legally unsustainable and must be challenged.
Associate Entities Are Not Barriers to Credit
- Where firms operate through associate entities (e.g., LLPs, subsidiaries) for operational or contractual reasons, TDS credits flowing to those entities must be claimable by the principal assessee if income is taxed in their hands.
- This principle applies equally to group companies, professional partnerships, and service providers using third-party payment structures.
Documentation Strategy
- Assessees should maintain internal records linking payments received, TDS deducted, and the entity on whose PAN the TDS was reported.
- A sworn affidavit or declaration from the associate entity confirming non-claim of credit should be submitted proactively to avoid litigation.
Precedent Value
This decision aligns with the broader trend in tax jurisprudence favoring substance over form. It reinforces the principle established in CIT v. M/s. S. R. D. Industries and CIT v. M/s. S. S. K. Enterprises, where courts have consistently held that technicalities in TDS reporting cannot override the statutory entitlement under Section 199.
Practical Takeaway
- File a detailed submission with the AO at the time of assessment, attaching proof of income realization and non-claim by associate.
- If denied, challenge the denial before CIT(A) citing this judgment and the Chennai ITAT decision.
- Do not accept conditions requiring third-party action as valid legal requirements.
No Double Claim Rule Is Key
The judgment does not permit automatic credit. The Revenue retains the right to deny credit if the associate concern has already claimed it. The burden of proving non-claim lies with the Revenue, not the assessee.
Statutory Basis Confirmed
The Tribunal’s reliance on Section 199 and Rule 37BA confirms that the entitlement to TDS credit is statutory and not contingent on administrative convenience or digital reporting accuracy.
Future Litigation
This judgment will be cited in cases involving TDS credits in the context of:
- Group companies
- Professional firms using associate entities
- Digital platforms paying professionals through third-party accounts
- Cross-border payments routed through Indian associates
Practitioners should now routinely raise this argument in TDS credit disputes.
Conclusion
The ITAT has restored the primacy of economic substance in TDS credit claims. The ruling is a significant win for taxpayers operating through associate entities and sets a clear precedent against arbitrary denial of statutory credits on technical grounds.
Statutory Provisions Cited
- Section 199 of the Income Tax Act, 1961
- Rule 37BA of the Income Tax Rules, 1962
Key Takeaway for Practitioners
"If the income is taxed in your hands, and no one else has claimed the TDS, the credit is yours - regardless of whose PAN it appears under in Form 26AS."
Recommended Action
- Review all TDS credits claimed in A.Y. 2024-25 and subsequent years.
- Identify any credits reflected under associate PANs.
- Prepare documentation linking income to TDS and non-claim by associates.
- File revised submissions or appeals where credit was denied on technical grounds.
This judgment transforms the landscape of TDS credit claims in India and must be integrated into all tax compliance and litigation strategies.
