Tds issue

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

13 December 2011 Can we claim TDS on Income deducted by any Co earlier. and After one quarter that Income is reversed & net amount( less TDS paid Back)

Case :-
•If We have invoiced a Pvt Ltd Co for domestic sales from April 2011 to June 2011 for around Rs. 1103K (inclusive of Service Tax)
•the Co. has paid us net amount of around Rs. 941K/- after deducting TDS of Rs. 104K/-
•In June end we have reversed entire Revenue charged to pvt ltd Co.

Now we have to refund the amount received to Pvt Co..

Please reply if we can avail credit of the TDS deducted by Pvt Ltd Co. while computing tax for FY 2011-12 or the same should be considered as expenses in our books & would be disallowed?

Guest

Guest (Expert)

13 December 2011 Certainly you can not claim TDS. Since you have refunded the NET amount which you received from that private limited company.

Ratan Sharma

Ratan Sharma (Expert)
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13 December 2011 TDS is a type of advance tax paid by the assessee. In my opinion you should claim the TDS in your return of income. The pvt ltd company has deducted the tax and paid with the govt therefore that company could not get back the refund of TDS made. It is only you who can get the credit of TDS made by pvt ltd co. Therefore in my opinion you should claim the TDS in your return of income. After receipt of refund whether you return the same to the pvt ltd co or not is a different issue. There is no question in debiting the same as expenditure in your accounts. You should show it as a TDS receivable account. Whether you have shown the income of TDS made or not is a irrelevant. It is like an advance tax paid by other person on behalf of you.

anurag

anurag (Expert)
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13 December 2011 Ask the company to revise the TDS return and make an application for the refund of tds to their ITO.
make pressure on the company to give the tds amt to u , when the are in the process of getting it from their ITO ward.

Querist : Anonymous

Querist : Anonymous (Querist)

14 December 2011 thanks to all...

Can anyone reply with any supporting of Case law or Section to support the opinion..

Ratan Sir@what happen when ITO ask for Income on which we are claiming TDS...at the time of scruitny???

Anurag Sir@it is not possible to do this. is there any other way???

please let me know

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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27 July 2025 This is a classic issue related to TDS credit and revenue reversal. Let me break it down clearly with relevant legal backing and practical insights:

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### Situation Recap:

* You invoiced a company for Rs. 11,03,000 (including service tax).
* They deducted TDS of Rs. 1,04,000 and paid you net Rs. 9,41,000.
* Later, you reversed the entire revenue (e.g., credit note or cancellation).
* You refunded the net amount (Rs. 9,41,000) to the company.
* Question: Can you still claim the TDS credit of Rs. 1,04,000 while filing your income tax return?

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### Key Points & Legal Position:

1. **TDS Credit Belongs to Deductee (You)**
The deductor (the company) deducts tax on your behalf and deposits it with the government. This amount is credited against your tax liability in Form 26AS.

2. **Reversal of Income Does Not Automatically Cancel TDS Credit**
The TDS was deducted on income you initially earned. Even if that income is reversed later, the tax was deducted and deposited.

3. **Accounting Treatment**

* You should reverse the revenue in your books.
* The TDS amount deducted by the company will be shown as **TDS receivable (advance tax paid)**.
* When you refund the net amount, that does not negate the tax credit available to you.

4. **Claiming TDS in Return**

* You can claim TDS credit while filing your income tax return for the relevant financial year (FY 2011-12 in this case).
* However, since the income was reversed, you may not have any tax liability on that income, so the TDS may result in a refund.

5. **Potential Issue: Income Reversal and Taxability**

* Since you reversed the income, you should **not include it as taxable income** in your return.
* Claiming TDS credit on reversed income might invite scrutiny — the Assessing Officer (AO) may question the mismatch between income declared and TDS claimed.

6. **Recommended Solution to Avoid Dispute**

* If possible, ask the deductor (company) to revise the TDS return and correct the TDS deducted for the reversed invoice.
* The company can file a request for refund of TDS from their assessing officer.
* This prevents mismatch and litigation.

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### Case Laws / Sections to Support Your Position:

* **Section 199 of Income Tax Act**: TDS credit is available to the deductee once TDS is deducted and deposited with the government.

* **CIT vs. M/s. Faridabad Club (Delhi HC)**: TDS deducted by the payer is an advance tax paid by the assessee, and credit should be given irrespective of subsequent disputes between payer and payee.

* **CIT vs. Ispat Industries Ltd. (Delhi HC)**: Income reversal does not nullify TDS credit if TDS was deducted and deposited.

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### What Happens at Scrutiny?

* AO will verify whether the income on which TDS was deducted is shown in your return.
* If the income is reversed and not declared, but TDS credit is claimed, AO may ask for explanation of mismatch.
* You can justify that income was reversed and hence not offered to tax but tax was deducted by the company before reversal, so TDS credit is legitimately yours.
* If possible, keep documentary evidence of revenue reversal and refund.

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### Summary:

| Aspect | Explanation |
| ----------------------- | ---------------------------------------------------------------------------------------------- |
| Can TDS be claimed? | Yes, TDS credit belongs to you since tax was deducted on your behalf and deposited by company. |
| Income reversal impact? | Income reversal means no tax liability on that amount, but TDS credit can still be claimed. |
| Accounting treatment | Reverse revenue; show TDS as receivable/advance tax paid. |
| Company’s role | Ideally, company should revise TDS return to avoid mismatch. |
| AO scrutiny risk | Possible; explain with documentation. |

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If you want, I can help draft a letter for the AO explaining this treatment or a request letter for the company to revise TDS return.

Would you like me to do that?

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