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TMI Blog2010 (12) TMI 334X X X X Extracts X X X X X X X X Extracts X X X X ..... ecognize interest as income only to the extent actually received by it. Now, that should not imply that it be denied credit for TDS on the tax actually deducted and deposited with Government treasury. The ld. CIT(A) allowed assessee relief by following the decision by Tribunal [Chennai Bench] in the case of a group concern, M/s. Shriram Investments [ITA No. 1124 and 1125/Mds/2001 dated 21.4.2006 for assessment years 1999-2000 and 2000-2001], reproducing the relevant findings of the tribunal in his order. Per the same, it stands held that the assessee having offered the amount of TDS as income for the year, credit for the same could not be denied to it. Aggrieved, the Revenue is in appeal before us. 3.1 Before us, the case was argued at length by both the sides. The ld. D.R. would submit that the issue stands settled, i.e., as far as the tribunal is concerned, by its Third Member decision in the case of Pradeep Kumar Dhir v. Asstt. CIT 107 ITD 118 (Chd) (TM). The said order is dated 27.4.2007, while the decision relied upon by the ld. CIT(A) is of a prior date. Further, vide the same, the controversy arising in the present case stands resolved, with the Third Member holding that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars in the same proportion in which the income is assessable to tax." Though, no doubt, it states the same thing as what the Revenue in the present case contends, or as held by the ld. Third Member, the sub-rule is only prospective, i.e., w.e.f.1/4/2009. If what stands held by tribunal per its Third Member decision were to be the only view, the lawmaker would have made the sub-rule operative from an earlier date. Also, it needs to be borne in mind that the issue at large is not one of section 199, or at least of section 199 alone, but of section 198 of the Act as well. On a query by the Bench as to whether the impugned TDS amount stood returned by the assessee as its income for the year, that being the premise of the decision in the case of Shriram Investments (supra) relied upon by the ld. CIT(A), he relied in the affirmative, though was unable to show the basis of his assertion with reference to any material on record. 3.3 The ld. D.R., in rejoinder, submitted that none of the decisions cited by the ld. AR bears any reference to the Third Member decision. The same is binding on a co-ordinate bench as held by the Special Bench of the Tribunal in the case of Dy. CIT v. Oman Inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e person receiving income. TDS on interest is covered by section 194A of the Act. Sub-section (1) thereof obliges persons specified thereunder responsible for paying interest [other than interest on securities] to deduct tax at source at the time of credit of such interest to the account of the payee or at the time of payment thereof, whichever is earlier. As such, the obligation cast u/s. 194(1), to which with some exceptions by way of monetary limits or certain specified transactions are listed per sub-section (3), is for deduction of tax at source at the earlier of the two points in time, i.e., payment or credit, the latter signifying accrual. In other words, the tax deduction has to match in time the earlier of the payment (receipt) or accrual. Put differently, the deduction of tax at source does not necessarily, or is not required to, march alongside the corresponding income, recognition of which by the recipient could be either on accrual or on receipt basis. The accrual of the tax liability on income would arise only on the same being/becoming assessable. There is thus an inherent mismatch, in terms of time, between the payment of tax (per TDS) and the accrual of tax liabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Pradip Kumar Dhir (supra). This also explains as to why the ld. D.R. was at pains to show the necessity for r. 37BA. As we see it, the said rule seeks to address the various contingencies that may arise in allowing the credit for TDS, viz. qua the years to which corresponding income is allocated; qua the persons in whose hands the corresponding income is assessable, as where the underlying security or asset yielding income subject to TDS is owned jointly, etc., some of which stood addressed by the erstwhile section 199 itself, vide proviso to sub-section (1) thereof, also omitted since. 4.3 Coming to section 198, the same reads as under: "All sums deducted in accordance with the foregoing provisions of this Chapter shall, for the purpose of computing the income of an assessee, be deemed to be income received: Provided that the sum being the tax paid, under sub-section (1A) of section 192 for the purpose of computing the income of an assessee, shall not be deemed to be income received." We are unable to understand as to how the said provision assists the assessee's case. All the section says, to state illustratively, is that if there is deduction of tax at source ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by some authority and raised by the assessee. The said understanding gets further validated by r. 37BA as well as by the Third Member decision by the tribunal. In fact, as our perusal of the said orders reveal, the controversy in those cases arose due to the peculiar circumstances, so that the matter required adjudication by reading the provision purposively; as where the corresponding 'income' represented a capital receipt, tax credit of TDS could not be denied. Similarly, when the work-in-progress is stated at the billed value, though the recognition of income is deferred to the completion of the project due to uncertainties prevalent in the trade, the corresponding tax deducted has to be allowed for the relevant year/s and could not be postponed till the completion of the project. The same, in our view, do not represent a rule, while the Third Member decision could be said to be representative of the consistent view of the tribunal in the matter. The issue under consideration is only the year of allowability of the credit for TDS, and which is precisely what the sections 198 & 199 seek to address. In any case, the law has to be read as it is and applied as justifiably and purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n fact, in this context, we may also add that the credit [for TDS] is to be allowed for the year for which the income is assessable, and not assessed, so that income has to, as per assessee's consistently followed method of accounting, be assessable for that year. As such, strictly speaking, the assessee would not be entitled to any credit for TDS even if the same stands returned for the year, being not assessable for the relevant year, even as there is no finding, or even a claim, qua the said returning, which is contradictory to the assessee's basis of returning income and, rather, abortive of the issue arising for our adjudication in the present case. Conclusion 5. The issue arising for our adjudication, i.e., the year of allowance of credit for TDS stands addressed by the clear language of the provisions itself. The same, rather, presents an ideal situation where the course yielded by plain common sense matches with that statutorily provided, i.e., allow credit for TDS against the corresponding income on its assessment, so that even the absence of section 199 would yield the said course in view of the dictum by the hon'ble apex court that tax laws should be applied, as far as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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