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05 August 2021

Transition of accumulated credit in respect of TDS is allowed in terms of Sec 140 .

In the matter of DMR Constructions vs Assistant Commissioner, Commercial tax Department [2021] 125 taxmann.com 252 (Madras), The Competent Authority denied transition of accumulated TDS on the ground that the TDS did not bear the character of tax at the time of collection.

In instant case, Assessee has accumulated credit in respect of tax deducted at source (TDS) in terms of section 13 of the Tamil Nadu Value Added Tax Act, 2006. It sought transition of the accumulated TDS into its account for set off against output tax-GST liabilities.

It was held that any deduction made towards anticipated tax liability would assume the character of tax and will not change or fluctuate depending on whether it is held as credit or whether it is an adjustment against tax liability.

Further, Article 265 of the Constitution of India states that no amount may be collected without the authority of law. Thus when a payer deducts any amount from out of the amount payable to a payee/contractee, it is with the full authority of the law. The purpose of such deduction is to facilitate advance payment of tax. This is clear from the fact that whatever is deducted is immediately credited to the account of deductee and is automatically reflected as tax credit.

Section 140 of the Tamil Nadu Goods and Services Tax Act, 2017 (TNGST Act) talks of carrying forward of the credit of VAT and Entry Tax under the existing law. The term existing law is defined under section 2(48) of the TNGST Act to mean any law, notification, order, rule or regulation relating to levy and collection of duty or tax on goods or services made prior to the commencement of the TNGST Act. Since the amount collected/deducted has been captured in the returns of turnover filed by the assessee under the erstwhile TNVAT regime, such amount would stand included for the purposes of transition under section 140 of the TNGST Act.

In the light of discussion as above it was held that the impugned order passed by the Competent Authority deserved to be set aside. The assessee is entitled to transition accumulated TDS under the TNVAT Act in terms of section 140 of the TNGST Act.