Introduction

In a compelling case of ITA No. 813/DEL/2022, Brij Gopal Construction Company P. Ltd., based in Delhi, stood against the ACIT, Special Range-2, Delhi, over the denial of TDS credit on mobilization advances. The contest revolved around the assessment year 2015-16, with the Income Tax Appellate Tribunal (ITAT), Delhi, delivering a noteworthy judgment on the 19th of May, 2023.

The Background

The appellant, Brij Gopal Construction Company P. Ltd., is engaged in the business of civil construction and trading in securities. For the assessment year 2015-16, the company filed a return declaring a total income of Rs.20,36,52,330. During the assessment proceedings, a discrepancy arose due to the TDS credit claimed by the assessee on mobilization advances, which were not offered to tax as they were not considered income by the assessee.

The Rise of the Controversy

The crux of the controversy began when the Assessing Officer (AO) observed that the assessee had received mobilization advances amounting to substantial figures from different entities such as DDA Ashok Vihar, HSIDC, Barwala, and DDA (RPD-4), on which TDS was deducted. Despite the mobilization advance not being considered income and thus not offered to tax, the AO initially granted the TDS credit. However, this decision was later contested through an order under section 154, withdrawing said credit, which was subsequently upheld by the CIT(A).

The Tribunal’s Decision

Upon careful examination of the precedent settings and arguments presented, and in light of a similar case, Bikramjit Ahluwalia vs. JCIT, the Delhi Bench of ITAT leaned in favor of the appellant. It was recognized that the mobilization advance is in the nature of a loan, not income, hence not liable for TDS. However, since TDS was deducted, it was ruled that credit should be allowed.

Implications of the Judgment

This landmark judgment not only favored Brij Gopal Construction Company P. Ltd. by allowing the TDS credit but also set a significant precedent for similar cases. It underscored the importance of understanding the nature of mobilization advances and the rights of taxpayers to claim TDS credit when it is unjustly withheld.

Conclusion

The ruling in ITA No. 813/DEL/2022 has illuminated the path for many businesses engaged in civil construction and similar industries, clarifying the stance on mobilization advances and TDS credit. It represents a pivotal moment in the constant dialogue between taxpayers and the tax authorities, reinforcing the essence of equitable taxation.

ITA No. 813/DEL/2022: A Landmark Judgment on TDS Credit for Mobilization Advances