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2012 (2) TMI 632 - AT - Income TaxDisallowance of the claim for credit of TDS u/s. 199 - Held that - The fee involved is paid subsequently i.e. after 31.3.1998. Since the assessee follows cash system of accounting it did not account for the total fee involved of ₹ 1017843/- as the same was not received by the assessee. However, the parties involved deducted tax on this amount and paid in government account for the credit of assessee. Since this TDS amount was paid to the credit of the assessee it accounted for amount of TDS as fee received and accordingly it claimed benefit of the same. Assessee s action is in accordance with provisions of section 199 and the assessee is eligible for seeking credit of the TDS amount. Hence, set aside the orders of the authorities below and decide the issue in favour of the assessee.
Issues: Disallowance of TDS credit under Section 199 of the Income Tax Act, 1961
Analysis: 1. The appeal was against the Commissioner of Income Tax (Appeals) order confirming the disallowance of the claim for credit of TDS under Section 199 of the Income Tax Act, 1961. The Assessing Officer withdrew the claim of TDS amounting to &8377; 99,532 as the assessee failed to provide evidence of fee receipt during the relevant assessment year. Only a proportionate TDS amount of &8377; 11,429 was allowed, leading to the disallowance of the balance amount. 2. The Assessing Officer emphasized that the assessee did not substantiate the claim for TDS as per Section 199 of the IT Act. The Assessing Officer also highlighted the lack of evidence regarding the payment of fees by deductors before 1.4.2008. Consequently, the credit for TDS of &8377; 1,10,961 was not allowed, except for a proportionate amount of &8377; 11,429 included in the declared income, resulting in the withdrawal of the remaining TDS amount. Analysis: 1. The Commissioner of Income Tax (Appeals) upheld the Assessing Officer's decision, noting the failure of the assessee to provide evidence of fee receipt during the assessment year and to substantiate the TDS claim under Section 199 of the IT Act. Consequently, the Commissioner confirmed the disallowance of the TDS credit, allowing only a proportionate amount and withdrawing the rest. 2. The assessee contended that under the cash system of accounting, income relates to actual receipts, and TDS deposited by deductors amounted to advance payment towards professional services. However, the Commissioner upheld the disallowance, agreeing with the Assessing Officer's findings and sustaining the withdrawal of the TDS credit. Analysis: 1. The Appellate Tribunal considered the case of a chartered accountancy firm where TDS was deducted by parties on a fee amount, which was not received by the assessee by a certain date due to differences in accounting systems. The Tribunal referred to Section 199(1) of the IT Act, stating that any deduction paid to the government is deemed as tax payment on behalf of the assessee from whose income the deduction was made. 2. The Tribunal concluded that since the TDS amount was paid to the government on behalf of the assessee, it should be treated as income, allowing for the credit of the TDS amount. Therefore, the Tribunal set aside the lower authorities' orders and ruled in favor of the assessee, allowing the appeal and granting the TDS credit.
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