Disallowance of TDS U/S 37BA3

[LM Agrawal]

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

AI Summary

Taxpayer Challenges TDS Disallowance for AY 2011-12 Under Section 37BA(3) Despite Income Taxed in Prior Year An issue was raised regarding the disallowance of Tax Deducted at Source (TDS) under Section 37BA(3) of the Income Tax Act. The taxpayer, using the mercantile accounting method, accounted for income before March 2010 (Assessment Year 2010-11), and the assessment was completed with TDS credit given. However, for Assessment Year 2011-12, the Assessing Officer disallowed TDS since the income was not offered to tax in that year, despite bills being raised and TDS deducted in the financial year 2010-11. The taxpayer seeks advice and relevant case laws on this peculiar situation where income was taxed in a prior year, but TDS was deducted later.