2018 (5) TMI 751

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.... 2. On the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals)-34 Mumbai erred in sustaining the ad-hoc addition of Rs. 1,00,000/- in respect of business promotion expenses, telephone expenses and travel expenses. The appellant prays that the addition may be deleted. 3. On the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals)-34-Mumbai erred in sustaining that the TDS credit to be restricted by Rs. 8,06,493/- on income in Assessment Year 2010-11. The appellant prays to Your Honor that the restriction of Rs. 8,06,493/- may be deleted. 2.1 Briefly stated the assessee being resident individual engaged as consultant has been assessed at Rs. 227.35 Lacs after certain additions as against returned income of Rs. 224.93 Lacs e-filed by the assessee on 02/10/2010. 2.2 During assessment proceedings, it was noted that the assessee sold an immoveable property for Rs. 10.11 Lacs and earned short term capital gain thereupon, which was offered to tax. However, the value of the property as per stamp duty authorities for the purpose of levy of stamp duty was Rs. 11,14,013/-. Resultantly....

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....ered to tax in the concerned year. According to the appellant, Rule 37BA(3) does not apply to his case as he follows cash system of accounting and as per section 198 of the Act, tax deducted at source is deemed to be the income received by the payee and since the assessee is following cash system of accounting, said TDS gets assessed in the year of withholding by the payer as per the method of accounting followed by the said payer. 9.10. I find that the contention of the appellant is not correct in so far as the appellant is following cash system of accounting and according to the same, income is offered for tax in the year of actual receipt. It is an undisputed fact that TDS corresponding to such income can be claimed only in the year in which such income is offered for tax. Though section 198 of the Act deems tax deducted at source as income received by the payee, it is nowhere mentioned in the section that the same should be claimed by the payee in the year of its deduction itself. TDS though is a part of income of the payee it is not actual receipt in his hands. Therefore, the argument of the assessee that since he is following cash system of accounting such TDS needs ....

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....which is in consonance with the provisions of Section 198 which stipulates that the amount of tax deducted at source shall be deemed to be the income received. Proceeding further, in terms of Section 199(1), the amount of tax deducted at source is to be treated as a payment of tax on behalf of the person from whose income the deduction was made. There is no quarrel up-to this point. The only point which arises for our consideration is the relevant AY, in which the credit of such TDS would be available to the assessee. For the purpose of granting credit of TDS, the Board, in terms of Section 199(3), has framed Rule 37BA, which is extracted below:- Credit for tax deducted at source for the purposes of section 199. 37BA. (1) Credit for tax deducted at source and paid to the Central Government in accordance with the provisions of Chapter XVII, shall be given to the person to whom payment has been made or credit has been given (hereinafter referred to as deductee) on the basis of information relating to deduction of tax furnished by the deductor to the income-tax authority or the person authorised by such authority. (2)[(i) Where under any provisions of the Ac....

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....e Tribunal rendered in ITO Vs. Shri Anupallavi Finance & Investments [2010 Chennai Tribunal 9 Taxmann.com 163] where a view has been taken that credit of TDS would be available only in the year when the corresponding income is offered to tax by the assessee. 7.2 So far as the decision of higher Judicial Authority is concerned, we find that Hon'ble Kerala High Court in CIT Vs. Smt. Pushpa Vijoy [19 Taxmann.com 157] has clinched the issue in the following manner:- 11. The question to be considered is whether the assessing officer was justified in refusing to give credit for tax payments based on TDS certificates issued by the Bank for the reason that income is not returned for assessment by the assessees in the assessment year following the year in which tax is recovered and paid by the Banks. We do not think there is any justification for assessees' claim because Section 199 of the Income Tax Act makes it clear that the assessee is entitled to credit based on TDS certificate only in the assessment year in which income from which tax is deducted is assessed. Therefore, when the statute makes it mandatory that credit of tax based on TDS certificate is available only in....