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TMI Blog2012 (3) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... ks entitling them for interest on deposits which was periodically credited by the Bank in the deposit account. As required under Section 194A of the Income-tax Act, the Banks recovered tax at source on the interest credited in the deposit account of the respondents-assessees and issued TDS certificates to the respondents. Though the respondents did not return interest income from these deposits as their income of the following assessment years, they claimed credit of tax based on TDS certificates issued by the banks. The assessment years concerned are 1997-1998 to 2000-2001. The assessing officer declined to give credit for the tax recovered and remitted by the Banks in the name of the respondents in the following assessment years for the reason that interest income on which recovery of tax is made by the Banks is not returned or assessed as income for the said assessment years. 4. Insofar as the assessees' claim that interest income credited by the Bank is not assessable in the assessment year following the year of deduction is concerned, the respondents-assessees' claim is that they are following cash system of accounting and so much so they are liable to pay tax on the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is involved. In these cases, we notice that question of law raised is substantially important because the orders of the Tribunal will apply for subsequent years, not only in the case of these assessees but in the case of other assessees also. Moreover, we notice that the Tribunal has rendered their decision without reference to statutory provisions and no High Court judgment is cited on the issue raised. Further the Supreme Court has in the case of CIT v. Surya Herbal Ltd. [2011] 202 Taxman 462/14 taxmann.com 142 held that the High Court can ignore the Circulars and proceed to decide statutory appeals on merits, if the question involved is substantial and arise in many cases and for subsequent years. We therefore reject the objection raised on maintainability and proceed to consider the question raised in the Appeals on merit. 7. The senior counsel for the Revenue raised the contention that tax deducted at source should be credited in the assessment for any assessment year only if the very same income from which tax is deducted is assessed for that year. On the other hand, the counsel appearing for the respondents referred to the findings of the Tribunal with specific reference to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are is assessable as the income of a person other than the shareholder, the payment shall be deemed to have been made on behalf of and the credit shall be given to, such other person in such circumstances as may be prescribed. [Emphasis supplied] What is clear from the above provision is that the assessee is entitled to credit of tax paid in the assessment in which the income is assessed. In other words, the assessee should claim credit of tax based on TDS certificate in the year in which the assessee returns the income from which deduction is made for the purpose of assessment. Even after the amendment of the section through the introduction of sub-section (3) of Section 199 of the Income Tax Act, the Central Board was authorised to make rules for giving credit for tax deducted at source. As required under that section, Rule 37BA was framed by the Income Tax (6th Amendment) Rules, 2009 wherein it is specifically provided sub-rule 3(i) as follows:- (3)(i) Credit for tax deducted at source and paid to the Central Government shall be given for the assessment year for which such income is assessable. 9. As already stated, the Tribunal however without referring to the statutory prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the assessment year in which the income from which tax deducted at source is assessed, we do not know how the Tribunal can over-rule the statutory provisions and allow the claim. In our view, going by the practical difficulty to retain TDS certificates for several years until the interest is returned for assessment on cash basis, prudent assessees should return income on which tax is recovered and remitted by the payer in the assessment year following the year in which such income is subject to deduction of tax and remittance by the payer. The assessees who do not do it should follow Section 199 and Rule 37BA, retain the TDS certificates and claim credit in the assessment year in which such income is returned for assessment. 12. The finding of the Tribunal that there is no provision in the Income Tax Act or Rules to defer credit of tax in assessments based on TDS certificates obtained is really incorrect because sub-sections (1) and (3) of Section 199 read with Rule 37BA of the Income Tax Rules s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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