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2007 (4) TMI 294 - AT - Income TaxCredit For Tax Deducted - commission agent in hosiery yarn - cash system - difference of opinion between the Members of the Bench - Third Member Order - Whether the credit for the tax deducted at source in the previous year is to be allowed in the assessment year relevant to the year in which deduction has been made or in the year in which the income is assessable to tax? - Assessee is maintaining accounts on cash basis. Order Ld AM - HELD THAT:- In the instant case the TDS has been deducted from the income of the assessee in the financial year 2002-03 and the credit for the same shall be given to the assessee in the 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 Ld. CIT(A) 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. Order Ld JM - HELD THAT:- In my considered view, 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. Order Third Member - HELD THAT:- I am unable to agree with the ld AM that tax deducted at source is advance tax and credit for the same is to be given to the assessee in terms of section 219 of the Income-tax Act. The above section, as rightly pointed out by the learned Vice President, has no application in this case. There is a specific section i.e. section 199 of the Income-tax Act under which credit has to be allowed to the assessee of tax deducted at source when certificate is furnished u/s 203 of the Income-tax Act. It is clear that the assessee will not be entitled to have benefit or credit for the amount though mentioned in the certificate for the assessment year if income relatable to the amount is not shown and is not assessable in that assessment year. If instead of entire income referable to amount of tax deducted, only a portion of income is found assessable the benefit has to be allowed only on the portion shown. If balance income, on account of system of accounting followed by the assessee or for some other reason is found to be assessable in future, then the credit for the balance TDS can be allowed only in future when income is assessable. Credit allowed on pro rata basis in the year in which the certificate is issued and also in future where balance or such income is found to be assessable is as per the mandate of provision of section 199. Any amount which has not been assessed in any year but referred in the TDS certificate, cannot be claimed under section 199 of the Income-tax Act. The CBDT Circular also supports the view that where tax is deducted from the amount which is liable to be assessed and spread over more than one financial year, credit shall be allowed for TDS on pro rata basis and in the same proportion in which such income is offered for taxation in different assessment years. Benefit for the tax deducted at source is to be allowed as per statutory provisions contained in section 199 of the Act. It has nothing to do with the system of accounting followed by the assessee. Further there is no dispute that the Revenue should have a consistent approach but the above principle of law has no application where interpretation of statutory provisions is involved. If in a particular year a statutory provision was wrongly interpreted and applied, the Revenue can correct the error as income is required to be computed by correctly applying and enforcing law. Error cannot be perpetuated. Therefore on correct interpretation of section 199 and for the reasons given above, I am of the view that the Assessing Officer was right in allowing credit for tax deducted at source on pro rata basis. The credit for the balance amount mentioned in the certificate is to be allowed in the year in which such income is disclosed or is otherwise found to be assessable by the Revenue. Thus, I fully agree with the order proposed by the learned Vice President (JM).
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