TaxTMI 
TaxTMI 
2007 (4) TMI 294
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....ssessing Officer has given credit of TDS on proportionate basis to the assessee which is illegal and against the IT Act and this issue has not been decided by the Ld. CIT(A)-I, Ludhiana hence the order under section 250(6) is not in accordance with law. (c) The Assessing Officer has allowed TDS credit of Rs. 4,279 against Rs. 15,030 claimed and deducted and reflected in the books on cash basis, hence the credit of TDS of Rs. 15,030 may please be allowed. 3. That the addition of Rs. 47,000 on account of low household withdrawals upheld by Ld. CIT(A)-I may please be deleted. 4. That disallowance of Rs. 4,211 on account of electricity, Telephone expenses at Rs. 10,546 and motor car expenses at Rs. 1,539 upheld by the Ld. CIT(A)-I may please be allowed. 5. That the appellant craves for permission to add, amend or alter any ground of appeal at the time of hearing." 3. The grievance of the assessee vide ground Nos. 1 and 2 relates to credit of TDS. 4. The facts related to this issue in brief are that the assessee had been following cash system of accounting and claimed credit for TDS deducted and paid by various parties on his behalf at Rs. 15,03....
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.... for TDS is being claimed has not been shown as income in the relevant previous year. Therefore, the action of the Assessing Officer is justified and ground of appeal is dismissed." Now the assessee is in appeal. 6. Ld. Counsel for the assessee reiterated the submissions made before the authorities below. He further submitted that the assessee, although was showing income on receipt basis by following the cash system but the TDS was to be considered for the year to which it belonged. He further stated that the Assessing Officer has no power to adjust the TDS on pro rata basis. Reliance was placed on the decision of ITAT Mumbai Bench in the case of Toya Engg. India Ltd. v. Jt. CIT [2006] 5 SOT 616. It was also submitted that in the preceding years full amount of TDS had been considered and no adjustment was made on pro rata basis. 7. In her rival submissions. Ld. DR for the revenue strongly supported the orders of authorities below and further submitted that as per the provisions of section 199 of Income-tax Act the credit for TDS shall be given to the assessee for the amount which is assessable and since the income was shown by the assessee on receipt basis, the benefit of....
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.... considered in part, i.e., on pro rata basis only for the income declared by the assessee on receipt basis. The tax deducted at source from the income of the assessee is akin to the advance tax, so, the credit for advance tax is to be given as per the provisions of section 219 of Income-tax Act which read as under : "Any sum, other than a penalty or interest, paid by or recovered from an assessee as advance tax in pursuance of this Chapter shall be treated as a payment of tax in respect of the income of the period which would be the previous year for an assessment for the assessment year next following the financial year in which it was payable, and credit therefor shall be given to the assessee in the regular assessment." From the above provisions, it is crystal clear that any sum recovered from the assessee as advance tax in pursuance of Chapter XVII of Income-tax Act, shall be treated as payment of tax in respect of income of the period which would be the previous year for an assessment for the assessment year next following the financial year in which it was payable. In the instant case the TDS has been deducted from the income of the assessee in the financial year ....
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.... also did not rebut this contention of the assessee that the school fee of both the children was Rs. 700 p.m. and the children were going to school on cycles, no servant even maid servant was kept, and that the assessee was not a member of any club. We are, therefore, of the view that the estimate made by the Assessing Officer is on higher side to meet the ends of justice, household expenses are estimated at Rs. 6,000 p.m. In other words, the addition to the extent of Rs. 23,000 is sustained and the assessee will get a relief of Rs. 24,000. 14. The next issue vide ground No. 4 relates to disallowances of Rs. 4,211 on account of electricity, Rs. 10,546 on account of telephone expenses and Rs. 15,939 on account of motor car expenses which were made by the Assessing Officer and the disallowance had been sustained by the Ld. CIT(A). 15. The facts related to this issue in brief are that the Assessing Officer made the aforesaid disallowances by considering the possibility that the expenses were being incurred for personal purposes also. He disallowed ¼th of the electricity and telephone expenses incurred by the assessee at Rs. 16,846 and Rs. 42,185 respectively and also disa....
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....sment order, the Assessing Officer has pointed out that assessee has been following system of accounting on cash basis and has claimed credit for tax deducted at source aggregating to Rs. 15,030 on the basis of TDS certificates in Form No. 16A accompanying the return of income. It has been pointed out by the Assessing Officer that whereas the amount in respect of which tax has been deducted at source has been credited in the account of the assessee by the parties in their books of account, the assessee has declared only the income which has been received in the year under appeal on cash basis. The Assessing Officer has given the following chart in regard to the receipts and tax deducted at source vis-a-vis the credit claimed by the assessee:- Sr.No. Name of the Party (deducting tax) Amount of receipt credited on accrual basis as per TDS certificate Amount of TDS as per TDS certificate Amount of receipt declared by the assessee in the return of income Amount of TDS for which credit claimed 1. M/s. KNA International Ltd. 3405 347 347 347 2. M/s. A.K. Sales Corpn. 9091 928 928 928 3. M/s. Ajanta 193....
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.... tax has been deducted at source. According to my ld. brother, since tax has been deducted at source in the financial year 2002-03, the Assessing Officer was bound to give credit to the assessee in the assessment year 2003-04 for the entire tax deducted at source notwithstanding the fact that the assessee had offered only the component of TDS as income for the year under appeal. In my considered view, provisions of section 219 relate to the credit in respect of the advance tax and in my humble view and with due respects to my learned brother, tax deducted at source is not akin to advance tax in the light of specific provisions of the Act. Section 219 of the Income-tax Act, 1961 has been quoted by my ld. brother and for the sake of ready reference the same is reproduced hereunder:- "219. Credit for advance tax.-Any sum, other than a penalty or interest, paid by or recovered from an assessee as advance tax in pursuance of this Chapter shall be treated as a payment of tax in respect of the income of the period which would be the previous year for an assessment for the assessment year next following the financial year in which it was payable, and credit therefor shall be given....
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.... shall be given to, such other person in such circumstances as may be prescribed. Provided further that where any property, deposit, security, unit or share is owned jointly by two or more persons not constituting a partnership, the payment shall be deemed to have been made on behalf of, and credit shall be given to, each such person in the same proportion in which rent, interest on deposit or on security or income in respect of unit or dividend on share is assessable as his income. (2) Any sum referred to in sub-section (1A) of section 192 and paid to the Central Government shall be treated as the tax paid on behalf of the person in respect of whose income, such payment of tax has been made and credit shall be given to him for the amount so paid on production of the certificate furnished under section 203 in the assessment under this Act for the assessment year for which such income is assessable. (3) Where any deduction is made in accordance with the foregoing provisions of this Chapter on or after 1-4-2006 and paid to the Central Government, the amount of tax deducted and specified in the statement referred to in section 203AA shall be treated as tax p....
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....directed to be allowed credit for. 10. In the light of above discussion, I am of the considered view that as per provisions of section 199, the assessee is entitled to the credit in respect of tax deducted at source in the year in which the income is assessable and not in the assessment year relevant to previous year in respect of which tax has been deducted at source. This ground of appeal raised by the assessee in this regard is accordingly dismissed. 11. Before parting, I would like to mention that the ld. Departmental Representative had pointed out before us that major portion of income received by the assessee is from M/s. Ajanta, a sister concern. In that case, deduction for expenses is claimed on accrual basis and tax is deducted at source from the income due to the assessee. But the assessee is not showing the income on the ground of following cash system of accounting and simultaneously claiming refund of the tax deducted at source. The contention is firstly unverifiable from record. Secondly, these facts are not crucial for deciding the issue. ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 The appeal of the assessee was heard by a Division Bench. Since....
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....rty Amount of receipt credited on accrual basis as per TDS certificate Amount of TDS as per TDS certificate Amount of receipt declared by the assessee in return of income Credit for TDS allowable on pro rata basis for the year under assessment Balance amount of TDS for which credit will be allowed in the year in which the balance income becomes assessable. (1) (2) (3) (4) (5) (6) (5 - 6) 1. M/s. KNA International Ltd. 3,405 347 347 35 312 2. M/s. A.K. Sales Corpn. 90,191 928 928 95 833 3. M/s. Ajanta International 1,93,096 10,138 10,138 532 9,606 Total 2,05,592 11,413 11,413 662 10,751 2.1 The Assessing Officer was of the view that the credit of tax deducted could only be allowed to the extent the income was shown as "assessable" in the light of the provision of section 199 of the Income-tax Act (hereinafter referred to 'Act'). As entire income referred to in the TDS Certificate was not disclosed, the Assessing Officer allowed credit of TDS at Rs. 4,279 on a pro rata basis. The Assessing Officer held that the balance credit would be allowable in the year in which ....
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....he regular assessment. Regular assessment in this case relates to assessment year 2003-04 so, any tax paid by the assessee in the form of advance tax or deducted by other parties in the form of TDS in the previous year 2002-03 shall be considered only for the assessment year 2003-04. In other words, TDS cannot be adjusted on pro rata basis even if the income is shown by the assessee on cash basis but the TDS has been deducted by the payer on the basis of expenses incurred by him on mercantile basis. We, therefore, considering the totality of the facts, set aside the order of learned Commissioner of Income-tax (Appeals) and direct the Assessing Officer to allow the claim of the assessee in respect of TDS on the basis of TDS certificate furnished by him." 6. The learned Judicial Member (Hon'ble Vice President) did not agree with the view taken by the learned Accountant Member. He noted that the Assessing Officer has found that the assessee disclosed income of Rs. 11,413 only out of the total amount of Rs. 2,05,592 from which TDS was deducted. Accordingly, on pro rata basis, credit of TDS for income disclosed was allowed. The ld. Judicial Member was further of the view that tax ded....
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....h tax has been deducted at source. This ground of appeal raised by the assessee in this regard is accordingly dismissed." 7. On account of the above difference, the matter has been referred to me. The case was fixed for hearing and both the parties have been heard. 8. The learned counsel for the assessee Shri Subhash C. Jain vehemently contended that the assessee was maintaining books on cash system of accounting which was regularly followed in the past and in the year of account. Even the revenue has accepted this system without any dispute. Credit for tax deducted at source was also allowed in the assessment year mentioned in the certificate although full amount on which deduction was made was not disclosed. A part of income was disclosed in the subsequent years. This approach was adopted all along and, therefore, there was no justification for making a departure. The ld. Counsel therefore, submitted that the Revenue was duty bound to adopt consistent approach and could not deviate from practice followed by it in the past. To support this contention, the learned counsel relied upon the decision of Hon'ble Madras High Court in the case of CIT v. Sundaram Industries Ltd. [199....
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.... allowed to the assessee of tax deducted at source when certificate is furnished under section 203 of the Income-tax Act. The provision of the said section has been quoted by the learned Accountant Member and Hon'ble Vice President and, therefore, I am not reproducing whole of the section. Important portion of the section relating to credit to be given is being reproduced hereunder :- "Credit shall be given to him for the amount so deducted on the production of the certificate furnished under section 203 in the assessment made under this Act for the assessment year for which such income is assessable." [Emphasis supplied] 11. So as per the above section credit is to be given to him (assessee) for the amount so deducted in the assessment made under this Act for the assessment year for which such income is assessable. So important conditions for getting benefit of TDS as per section 199 are; (a)the assessee should produce the certificate for the amount of tax deducted at source; (b)show that income subjected to TDS is disclosed in the return of the assessment year as 'assessable'. 11.1 Thus both the above mentioned conditions are to be satisf....
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....visions as discussed above, the assessee is not entitled to claim the same." 12. Further in the case of Smt. Varsha G. Salunke ( supra) has held as under :- "Section 199 of the Act has two objectives - one to declare the TDS as payment of tax on behalf of the person on whose behalf the deduction was made and to give credit for the amount so deducted on the production of the certificate in the assessment made for the assessment year for which such income is assessable. The second objective mentioned in section 199 is only to answer the question as to the year in which the credit for TDS shall be given. It links up the credit with assessment year in which such income is assessable. In other words, the Assessing Officer is bound to give credit in the year in which the income is offered to tax. This section 199 does not empower the Assessing Officer to determine the year of assessability of the income itself but it only mandates the year in which the credit is to be given on the basis of the certificate furnished. In other words, when the assessee produces the certificates of TDS, the Assessing Officer is required to verify whether the assessee has offered the income pertai....