Disallowance of TDS U/S 37BA3

[Guest]

The Assesse is following Mercantile basis of accounting.

Based on Accrual method,Income was accounted before March 2010 (AY2010-11 )and offered to tax.

Assessment was completed, based on Income declared. Tax was computed, credit for TDS was given and assessment was completed for AY 2010-11.

CASE is for AY 2011-12, matter in Appeal.

For the above referred Income Bills were raised on the party next year in April 2010. Party deducted TDS in financial year 2010-11 (AY 2011-12).

The AO while scrutiny assessment disallowed TDS on the said Income with the reason U/S 37BA3 TDS is to be allowed in the year when income is offered to tax. In current year income is not offered to tax hence TDS is disallowed. He appreciated that income is already offered in PY, but section does not say that.

Generally income is spread in subsequent years and TDS is allowed partly in subsequent years. This is a pecular case where Income is already offered to tax and tax is paid but TDS is deducted next year.

No refund or claim for TDS could have been made in Past year since no TDS has been deducted and no tax has been credited to govt treasury.

Please give your valuable advice and if possible appropriate case laws.

Regards

CA LM Agrawal

9867710107

[Ganeshan Kalyani]

Sir, may I request you to please reproduce the section which you have referred to in your query. Thanks.

AI Summary

TDS timing conflict: whether withholding credit is disallowed when income was taxed earlier under accrual accounting. The core issue is whether TDS credit can be disallowed when income was offered to tax and assessed in an earlier year under accrual accounting but TDS was deducted by the payer only in a subsequent year; the assessing officer relied on a provision treating TDS as allowable only in the year income is offered to tax, despite the assesse having paid tax earlier and not having had TDS available to claim in that prior year.