2011 (10) TMI 634 - AT - Income Tax

Credit for TDS - Held that - TDS relates reimbursement of expenses and the CIT(A) has directed the assessing officer to quantify the exact TDS relating to such reimbursement and then allow the amount of credit.

Summary

Issues involved:
1. Assessment of income for the assessment year 2003-04.
2. Allowance of credit for TDS for the assessee.
3. Treatment of advance subscription charges as income.

Issue 1: Assessment of income for the assessment year 2003-04:
The appeal was against the order passed by the CIT(A) regarding the assessment year 2003-04. The department contended that a specific amount should be brought to tax for the said assessment year and not for the subsequent year. The dispute arose from discrepancies in the gross receipts declared by the assessee. The Assessing Officer added a certain amount to the income of the assessee based on these discrepancies. The CIT(A) upheld this addition. However, the assessee argued that the said amount represented advance subscription charges and should not be treated as income. The ITAT, after considering the facts and evidence, concluded that the amount in question indeed represented an advance related to the assessment year 2004-05. Therefore, the addition made by the Assessing Officer for the assessment year 2003-04 was ordered to be deleted.

Issue 2: Allowance of credit for TDS for the assessee:
The counsel for the assessee contended that credit for TDS on reimbursement of expenses was not allowed by the Assessing Officer, despite the expenses being accepted as reimbursements. The ITAT noted that the TDS related to the reimbursement of expenses and directed the assessing officer to determine the exact TDS amount related to such reimbursements and allow the credit accordingly. The ITAT found no fault in the CIT(A)'s decision regarding this matter.

Issue 3: Treatment of advance subscription charges as income:
The primary contention of the assessee was that the amount in question, representing advance subscription charges received from another entity, should not be treated as income but as an advance for services to be provided in the subsequent year. The ITAT agreed with the assessee's argument, observing that both parties had accounted for the advance in their books and that there was no evidence to suggest that the amount was income for services rendered. The ITAT ordered the deletion of the addition made by the Assessing Officer in this regard. However, it directed the Assessing Officer to verify if the amount had been admitted as income in the assessment year 2004-05 and reopen the assessment if necessary.

In conclusion, the ITAT partially allowed the Revenue's appeal for statistical purposes. The judgment emphasized the importance of correctly assessing income for the relevant assessment year, allowing credit for TDS on reimbursements, and distinguishing between advance subscription charges and actual income. The decision provided clarity on the treatment of such financial transactions in the context of income tax assessments.