TMI Blog2022 (4) TMI 180X X X X Extracts X X X X X X X X Extracts X X X X ..... deeming fiction for the chargeability of income overriding the provisions of section 4 r.w.s. 28 of the Act. We do not hesitate to hold that, by no stretch of imagination, an amount of TDS as appearing in the Form No 26AS shall be brought to tax as Income under the head Profits and Gains of business or profession applying the provisions of section 198, without reference to the method of accounting regularly employed by the assessee in relation to such business in question. As decided in Lloyd Insulation (India) Ltd [ 2013 (1) TMI 35 - ITAT NEW DELHI ] action of taxing the amount of TDS as income without reference to the method of accounting regularly employed by the assessee were held as contra legem. We do not subscribe the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to tax as Income , of the year of deduction, where the assessee follows mercantile system of accounting? 3. Before evolving the matter on facts for adjudication, it is necessary to reproduce the grounds challenged by the appellant as under; (1)In the facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming the addition made by AO of ₹ 5,85,803/-, explained to be of TDS on Advance received for contract work. Ld. CIT(A) was not justified in confirming the additions made by the AO (Empasis supplied) 4. The facts of the case culled out from the records pithily are; 4.1 The assessee is a registered partnership firm, engaged in Civil Road Construction business and for the AY 2012-2013 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and books of accounts placed before him, notifying the difference of ₹2,93,45,917/- in the turnover / total contract receipts from the business as per the Profit and Loss Account [for short P L ] with that of Form No 26AS, sought detailed clarification qua reconciliation from the appellant, and in reply thereof, the assessee substantiated the difference with reconciliation statements, establishing on record that the difference was on account of advance contract receipts from one of its debtor M/s Korba West Power Company Limited. 6.2 In support of aforesaid contention, the appellant brought to the notice of Ld AO that, the assessee for the purpose of its business, maintains its books of accounts following mercantile (accrual) s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for ready reference; 7.1 145 Method of accounting. (1) Income chargeable under the head Profits and gains of business or profession or Income from other sources shall, subject to the provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. (2) The Central Government may notify in the Official Gazette from time to time accounting standards to be followed by any class of assessees or in respect of any class of income. (3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) has not been regularly followed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit thereof is claimed by the assessees firm, hence it is indispensable for our adjudication to reproduce the provision of section 198 as under; 198 Tax deducted is income received 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: (Empasis supplied) 7.5 Before we proceed further in analysis, it must be born in mind that, the aforementioned section 198 falls in Chapter XVII of the Act, the title of which reads as Colle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mechanism provided by the legislature to safeguard against the probable claim of non-receipt or non-materialisation of income when accounted in accordance with the method of accounting regularly employed as per section 145(1) of the Act and by no means the provisions of chapter XVII were intend to create any deeming fiction for the chargeability of income overriding the provisions of section 4 r.w.s. 28 of the Act. 8. In the light of aforesaid discussion, we do not hesitate to hold that, by no stretch of imagination, an amount of TDS as appearing in the Form No 26AS shall be brought to tax as Income under the head Profits and Gains of business or profession applying the provisions of section 198, without reference to the method of acco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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