ITAT Delhi Allows Hasbro SA To Submit Evidence For TDS Credit, Holds Technical Lapse Cannot Deny Claim

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT)  held that an assessee should not be penalised for a technical lapse in filing evidence and allowed Swiss-based Hasbro SA to submit additional evidence in support of its claim for TDS credit. It remanded the matter to the assessing officer for fresh consideration.

A Bench comprising Accountant Member Ramit Kochar and Judicial Member Raj Kumar Chauhan passed the order in an appeal filed by Hasbro SA against the Commissioner of Income Tax (Appeals), which had upheld the denial of TDS credit of Rs. 21.14 lakh for the assessment year 2020–21.

The Bench noted:

“The assessee/appellant should not be penalized for mere technical lapse on their part by not filing the relevant document at the relevant time. Further, no prejudice is going to be caused to revenue as the lawful tax is already deducted/deposited.”

The dispute arose when Hasbro SA, globally known for its portfolio of toys and games including Monopoly, Transformers, and Nerf Guns, filed its return processed by the Centralised Processing Centre, Bengaluru under Section 143(1) of the Income Tax Act. While assessing its income at Rs. 2.11 crore, the CPC denied the TDS credit of Rs. 21.14 lakh, resulting in a demand of Rs. 27.07 lakh, including interest.

The assessee's rectification application under Section 154 was rejected, and the CIT(A) affirmed the rejection, holding that the corresponding royalty income and TDS were reflected in Form 26AS for assessment year 2021–22 and not for the year under consideration.

Before the Tribunal, Hasbro SA contended that the royalty income had accrued in assessment year 2020–21 and had been duly offered to tax in that year in accordance with the India–Switzerland Double Taxation Avoidance Agreement. The assessee sought permission to place additional evidence on record, including invoices and extracts from the audited financial statements of Hasbro India Toys Pvt. Ltd., which had deducted the tax.

Allowing the application under Rule 29 of the Income Tax (Appellate Tribunal) Rules, the Tribunal observed that the assessee had acted in bona fide belief, and neither the assessing officer nor the first appellate authority had specifically required it to produce documents substantiating the year of accrual of income.

Accordingly, the Tribunal remanded the matter to the assessing officer, directing them to examine the additional evidence and grant the TDS credit in accordance with law after verification.