TDS credit cannot be denied merely because corresponding income is not taxable in the hands of the assessee. Rule 37BA which stipulates grant of TDS credit does not mandate corresponding income being offered for tax.

16. TS-570-ITAT-2026 (Hyderabad)

Transmission Corporation of Telangana v. DCIT

A.Y.: 2018-19

Date of Order: 30.3.2026

Section: 199, Rule 37BA

TDS credit cannot be denied merely because corresponding income is not taxable in the hands of the assessee. Rule 37BA which stipulates grant of TDS credit does not mandate corresponding income being offered for tax.

FACTS

The assessee company engaged in business of transmission of electrical energy in state of Telangana filed its return of income declaring a loss of Rs.119.05 crore. Subsequently, a revised return of income was filed declaring a loss of Rs.227.33 crore and a profit of Rs.102.46 crore under MAT provisions. The Assessing Officer (AO) while assessing the total income of the assessee interalia made an addition of Rs.121.92 crore on account of interest from deposits of unutilised Lift Irrigation Scheme (LIS) Fund. The assessee had not offered this income for taxation but the credit for TDS on this interest income was claimed. The AO also rejected the claim of TDS on interest receipt.