2023 (3) TMI 212 - AT - Income Tax

Deduction of tax deducted at source in the computation of income exempt u/s 11 - authorities below have held that TDS cannot be treated as application of income so as to qualify for deduction in computing the total income exempt under the Act - interpretation of sections 11(1)(a)/11(2) qua the amount of tax deducted at source claimed as application against the interest income, which was accounted for on gross basis in the Income and expenditure account - HELD THAT:- As it only the net amount of Rs.90/- which can be said to be available with the assessee for application or accumulation, the deduction on account of tax deducted at source has to be allowed in computing the amount of income available after entering such income at gross level. If suppose, in a later year, the amount of tax deducted at source in this year is refunded fully or partly, the amount of such refund shall fall for consideration on the income side of the Income and expenditure account. On a specific query, the ld. AR pointed out that income-tax refund was granted to the assessee in the succeeding year for a sum of Rs.1,55,39,950/-, which was duly included on the income side of the Income and expenditure account.

As gone through the Income and expenditure account for the succeeding year ending 31-03-2017, in which the last item on the Income side is ‘Income-tax refund” amounting to Rs.1,55,39,950/-. Computation of income for such later year has been done by including the amount of income-tax refund in the gross income available for application or accumulation - the authorities below were not justified in jettisoning the claim of allowing deduction of TDS in the computation of income available for application or accumulation. The impugned order is overturned pro tanto. Appeal is allowed.