TDS credit cannot be denied merely due to technical mismatches –
Here is an important Mumbai ITAT ruling for ruling for taxpayers & consultants wherein it has been held that TDS credit cannot be denied merely due to technical mismatches.
This Mumbai ITAT decision has reinforced a crucial principle: once tax is deducted and deposited with the Central Government, TDS credit must be granted to the person in whose hands the related income is assessable, as per section 199 read with Rule 37BA. Mere technical issues such as PAN/Form 26AS mismatches, timing of offering income, or other reporting discrepancies cannot, by themselves, be a ground to permanently deny TDS credit, subject to verification and ensuring that there is no double claim.
The judgement protects genuine taxpayers from losing TDS credit due to diductor’s errors or system mismatches & recognises that TDS credit must follow the income, not just the name/PAN appearing in Form 26AS. It also prevents double taxation and “unjust enrichment” of the Revenue where TDS has already reached the Government.
𝑇ℎ𝑒 𝑐𝑜𝑛𝑠𝑖𝑠𝑡𝑒𝑛𝑡 𝑚𝑒𝑠𝑠𝑎𝑔𝑒 𝑓𝑟𝑜𝑚 𝑡ℎ𝑒𝑠𝑒 𝑑𝑒𝑐𝑖𝑠𝑖𝑜𝑛𝑠 𝑖𝑠 𝑐𝑙𝑒𝑎𝑟: 𝑜𝑛𝑐𝑒 𝑇𝐷𝑆 ℎ𝑎𝑠 𝑏𝑒𝑒𝑛 𝑑𝑒𝑑𝑢𝑐𝑡𝑒𝑑 𝑎𝑛𝑑 𝑝𝑎𝑖𝑑 𝑡𝑜 𝑡ℎ𝑒 𝐺𝑜𝑣𝑒𝑟𝑛𝑚𝑒𝑛𝑡, 𝑡ℎ𝑒 𝐷𝑒𝑝𝑎𝑟𝑡𝑚𝑒𝑛𝑡 𝑐𝑎𝑛𝑛𝑜𝑡 𝑟𝑒𝑓𝑢𝑠𝑒 𝑡𝑜 𝑔𝑖𝑣𝑒 𝑐𝑟𝑒𝑑𝑖𝑡 𝑡𝑜 𝑎𝑛𝑦 𝑒𝑙𝑖𝑔𝑖𝑏𝑙𝑒 𝑝𝑒𝑟𝑠𝑜𝑛, 𝑠𝑜 𝑙𝑜𝑛𝑔 𝑎𝑠 𝑡ℎ𝑒 𝑖𝑛𝑐𝑜𝑚𝑒 𝑖𝑠 𝑑𝑢𝑙𝑦 𝑡𝑎𝑥𝑒𝑑 𝑎𝑛𝑑 𝑛𝑜 𝑑𝑜𝑢𝑏𝑙𝑒 𝑏𝑒𝑛𝑒𝑓𝑖𝑡 𝑖𝑠 𝑎𝑙𝑙𝑜𝑤𝑒𝑑. 𝑇ℎ𝑖𝑠 𝑗𝑢𝑟𝑖𝑠𝑝𝑟𝑢𝑑𝑒𝑛𝑐𝑒 𝑖𝑠 𝑎 𝑝𝑜𝑤𝑒𝑟𝑓𝑢𝑙 𝑡𝑜𝑜𝑙 in 𝑠𝑎𝑓𝑒𝑔𝑢𝑎𝑟𝑑𝑖𝑛𝑔 𝑡𝑎𝑥𝑝𝑎𝑦𝑒𝑟𝑠 𝑎𝑔𝑎𝑖𝑛𝑠𝑡 𝑚𝑒𝑐ℎ𝑎𝑛𝑖𝑐𝑎𝑙 𝑑𝑖𝑠𝑎𝑙𝑙𝑜𝑤𝑎𝑛𝑐𝑒𝑠
Case Name: Daiwa Capital Markets India Pvt. Ltd. Vs ACIT (ITA No. 5338/Mum/2025, 2013-14)
Situations where this principle is very useful
1.26AS/PAN mismatch or wrong quoting of PAN by the diductor.
2.Cross‑border income or non‑resident cases where reporting flows differ from TDS trail.
3.Multiple employers / salary restructures during the year.
4.Business transfers, mergers/demergers, or cases where income is taxed in one entity but TDS is in the name of another.
Action points for taxpayers & professionals
Preserve and rely on primary evidence – Form 16/16A, pay slips, agreements, invoices, bank statements – to establish the link between income and TDS.
Specifically invoke section 199, Rule 37BA and supportive ITAT rulings in responses to CPC adjustments, rectification applications and appeals wherever TDS credit is denied or short‑granted.
Educate clients that a TDS mismatch notice is not the final word; with proper documentation and legal support, relief is often possible.
