2022 (6) TMI 451 - AT - Income Tax

Accrual of Interest income - income from other sources - double taxation - assessee has already offered the yearly amount of interest in earlier years on accrual basis - assessee earned interest income which was offered to tax on accrual basis - HELD THAT - In our considered view, we are in agreement with the assessee that since the interest income has been offered to tax in the respective assessment years (from AY 2011-12 to AY 2017-18) on accrual basis, the same income cannot be taxed in the impugned assessment year under consideration only for the reason that the deductor HDFC bank has deducted TDS on the entire interest amount at the time of payment on cash basis, since the same would amount to double taxation. Therefore, the order of Ld. CIT(A) is set aside and the appeal of the assessee is allowed.

Summary

Issues: Appeal against order of National Faceless Appeal Centre for assessment year 2017-18 - Addition of interest income under Income from other sources - Delay in filing appeal - Double taxation issue.

Analysis:
1. Delay in Filing Appeal:
The appeal was filed 38 days late, attributed to the Covid-19 outbreak. The delay was condoned due to the minor nature of the delay and in the interests of justice, as the Departmental Representative did not object to it.

2. Addition of Interest Income:
The assessee's appeal contested the addition of Rs. 4,69,510 as interest income under Income from other sources, which had already been offered for taxation in previous years. The contention was that TDS was deducted on a cash basis by the deductor HDFC Bank, while the income had been accounted for on an accrual basis in earlier years. The CIT(A) upheld the addition, citing lack of evidence from the appellant to support the claim of double taxation.

3. Double Taxation Issue:
The assessee argued that receiving the entire maturity interest amount in the impugned year, on which TDS was deducted, would lead to double taxation since the yearly interest amounts had already been taxed in previous years on an accrual basis. Supporting documents and a High Court decision were presented to bolster the claim. The Tribunal agreed with the assessee, ruling that taxing the same income again would amount to double taxation. The CIT(A)'s order was set aside, and the appeal was allowed.

In conclusion, the Tribunal allowed the appeal, emphasizing that income already taxed on an accrual basis in previous years should not be taxed again due to TDS deduction on a cash basis. The principle of avoiding double taxation was upheld, and the decision was pronounced in favor of the assessee on 8th June 2022.