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TMI Blog2007 (4) TMI 294X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 15,030 based on the respective TDS certificates in Form No. 16A accompanying return of income. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 TDS was to be allowed only to the extent it related to the income declared by the assessee. 8. We have heard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 2002-03 and the credit for the same shall be given to the assessee in the regular assessment. Regular assessment in this case relate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chool 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 disallowed 20 per cent of the motor car expenses and depreciation. Ld. CIT(A) confirmed the action of the Assessing Officer. 16. After considering th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 193096 10138 10138 10138 Total 205592 11413 11413 11413 Referring to the provisions of section 199(1) of the Income-tax Act, 1961, the Assessing Officer held that since the assessee has declared the ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 to the assessee in the regular assessment." A plain reading of the section does not leave me in doubt that the said section refers to any sum recovered from an assessee as advance tax in pursuance of Chapter XVII. Any sum paid or recovere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 paid on behalf of the persons referred to in sub-section (1) or, as the case may be, sub-section (2) and credit shall be given to him for the amount so deducted in the assessment made under this Act for the assessment year for which such income is assessable without the production of certifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant 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 there is a difference of opinion between the Members of the Bench, the point of difference is being referred to the Hon'ble President under section 255(4) for nomination of a Third Member. The point of difference is identified as under :- "Whether the credit for the tax deducted at source in the previou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the balance income would be shown as assessable. 3. The aforesaid action of the Assessing Officer was challenged in appeal before the Commissioner of Income-tax (Appeals) but without any success. The learned Commissioner of Income-tax (Appeals) agreed with the view taken by the Assessing Officer. The decision of I.T.A.T. Mumbai 'J' Bench in the case of Toyo Engg. India Ltd. (supra) relied before the ld. CIT(A) was held to be distinguishable as in that case, the assessee-company had refle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, 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 deducted at source cannot be treated as the payment of advance tax. In this connection, the learned Vice President referred to provisions of section 219 relied upon by the learned Accountant Member and observed that tax deducted at source was not covered by the above provisions. Moreover, when credit for TDS is to be allowed under a specific provision i.e. section 199 of the Income-tax Act, general provisions of section like 219 can have no application. On consideration of provisions of section 199, which is reprod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. [1999] 240 ITR 335. The learned counsel also emphasized that the income was required to be computed as per regular and consistent system of accounting followed by the assessee. Claim of tax deducted at source, according to Shri Jain, was part of system of accounting and as the credit was allowed to the assessee in the past on the basis of assessment year mentioned in the certificate, that system could not be changed in the year under appeal. The learned counsel for the assessee again relied upon the decision of ITAT Mumbai 'J' Bench in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 satisfied. It is, therefore, 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll 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 pertained to the certificate before giving credit. If he finds that the income of the certificate is not shown, the Assessing Officer has not only to give the credit for TDS in that assessment year and has to defer the credit being given to the year in which the income is to be assessed." 13. The CBDT Circular No. 5 of 2001, dated 2-3-2001 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 dif ..... X X X X Extracts X X X X X X X X Extracts X X X X
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