TMI Blog2018 (6) TMI 601X X X X Extracts X X X X X X X X Extracts X X X X ..... e applicable to him - therefore, the provision of Section 40(a)(ia) for making disallowance of expenditure for no-deduction of TDS will not apply - Decided in favor of assessee. Taxability of amount on which TDS credit has been claimed - receipt of advances - Held that:- Where assessee receives an advance, then it would be liability for him, that is, an obligation for him and he will show this obligation in liability side of the Balance Sheet - in some case out of great caution some companies/assesses deduct TDS on advance payment for safe side, to avoid the future consequences etc, but this does not mean that advance is an income of the assessee, it will be an obligation/liability till the related work/service gets executed as per terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xman 258 (2013)], wherein it has been ruled that the fact that the impact of s.40(a)(ia) is harsh is no ground to read the same in a manner which was not intended by the legislature . 3. That the Ld. CIT(A) has erred in directing the A.O. to delete the addition ofRs.6,93,039/-, stating that it was but an advance by the assessee to the party, which is in violation of the ruling of the Hon ble Calcutta High Court in the case of CIT vs Crescent Export Syndicate [216 taxman 258 (2013)], wherein it has been ruled that the key words in s. 40(a)(ia) are on which tax is deductible at source under Chapter XVII-B and this makes it clear that it applies to all expenses. Nothing turns on the fact that the legislature used the word payable an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourer. Sri Shopujan Singh (Sardar) had worked throughout the Financial Year 2007-08 and maintained account and therefore he had a closing balance with the assessee. Therefore, the Assessing Officer noted that there is payee and payer relationship existed, and the so called Labour Sardars are payees and assessee is the payer. Since, the assessee has made the payment to the Labour Sardars and not directly to the labourers, therefore, the assessee was supposed to deduct TDS while paying labour charges to the Labour Sardars. Hence, the Assessing Officer disallowed the amount to the tune of ₹ 43,17,719/- u/s 40(a)(ia) of the Act. 5. On appeal by the assessee, the ld. CIT(A) deleted the addition made by the Assessing Officer. Aggrieved b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no clarity on the subject, therefore, disallowance should be deleted. 7. We have given a careful consideration to the rival submissions and perused the materials available on records, we note that in the assessee s case under consideration for the Assessment Year 2006-07, which is immediately preceding of the Financial Year 2007-08, the assessee s turnover was to the tune of ₹ 38,45,650/- which was below the threshold limit i.e. ₹ 40,00,000/- specified in Clause (a) (b) of Section 44AB of the Act. The assessee submitted Income Tax Return on 29.11.2007 for Financial year 2006-07 and offered Gross total Income of ₹ 3,20,675/- (8.34% of ₹ 38,45,650/-) under Section 44AD and thus assessee offered profit more th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve paid to the assessee during the Assessment Year 2008-09 ₹ 60,87,502/- and deducted TDS of ₹ 1,37,931/-. During the assessment proceedings, the assessee submitted that these payments were purely advances and advances received is not an income as no bill has been raised during the F.Y. 2007-08. However, the Assessing Officer rejected the contention of the assessee and held that as per Section 198 of the Act, tax deduction of income received is necessary and the AO also noted that as M/s. Dream Bake Pvt. Ltd. has deducted tax while making advance payment to the assessee, therefore, as per section 198 of the Act, the said advance should be assessee's deemed income, as tax was deducted from the advance payment and assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. From the above noted provisions of section 198, it is clear that all sums deducted shall, for the purpose of computing the income of an assessee, be deemed to be income received. But this principle does not fit in case of advance received. When an assessee receives an advance, then it would be liability for him, that is, an obligation for him and he will show this obligation in liability side of the Balance Shee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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