Tax treatment of TDS claim written off.

 

Nowadays neither CPC, Bangalore neither AO is allowing TDS credit unless and until the TDS amount is not reflected in FORM 26AS. Where Assessee after due efforts is not getting the total credit of the TDS amount equals to the TDS amount reflected in ' TDS RECEIVABLE A/C', and AO or CPC are allowing SHORT TDS credit, because of that ' TDS RECEIVABLE A/C ' showing Debit Balance.

 

In such cases where Assessee is not getting the Full TDS credit and there occurs some short TDS credit, Assessee has the option to " Write-off " the unadjusted balance amount in " TDS RECEIVABLE A/C" and debit the same to P&L A/C as " BAD DEBT" u/s 36(1)(vii) r w s 36(2). This view is upheld by Courts in favour of the Assessee in the following Case laws:

 

• CIT vs. Shreyans Industries Ltd (P&H HC).
• DCIT vs. AGC Network Ltd ( Mum. Trib).
• ACIT VS. Kelly Services India Pvt Ltd ( Del.Trib).

 

Once the ' TDS RECEIVABLE ' amount is written off in books of accounts, AO can not insist proof of Correspondence with the Deductor as held by SC in the case of " CIT vs. TRF LTD". When in future any TDS credit was allowed relating to the TDS RECEIVABLE which was written off, same has to be offered to tax u/s 41(1).

 

Conclusion : 

 

1. Once the assessee is not getting Full TDS credit and short TDS credit is shown in " TDS RECEIVABLE A/C", Assessee can avail the benefit of Bad Debt u/s 36(1)(vii) r.w.s 36(2).

 

2. For the availing benefit of " BAD DEBT," the assessee shall ensure that income relating to that un-availed TDS was put to tax in earlier previous years.