2018 (5) TMI 751 - AT - Income Tax

Addition u/s 50C - addition on Short Term Capital Gain - Held that - We find that the property has been sold for ₹ 10.11 Lacs as against stamp duty value of ₹ 11.14 Lacs and differential of the two do not exceed even 10% of the stamp duty valuation. There is nothing on record to suggest that the assessee has received any amount over and above the agreed consideration. Therefore, keeping valuation being subjective matter, the impugned additions were not justified and therefore, stand deleted. Ground No.1 stand allowed. Adhoc disallowance against certain expenditure claimed by the assessee - Held that - We find that the assessee has claimed aggregate expenditure of ₹ 15.75 Lacs under these head and the disallowance percentage comes to only 6.35%. The same, in our opinion, is quite reasonable keeping in view the fact that the personal element in the same could not be ruled out. Ground No. 2 stand dismissed. TDS credit - Credit for tax deducted at source for the purposes of section 199 - relevant AY - Held that - The credit of tax deducted at source was to be given for the AY for which such income was assessable. We find that there are two lines of thoughts on the issue one which favors grant of full TDS credit in the year of deduction itself and the other which, following strict interpretation, allows TDS credit in AY in which the income has actually been assessed/offered to tax.

Issues Involved:
1. Addition of ?1,03,013 as Short Term Capital Gain under Section 50C of the Income Tax Act, 1961.
2. Ad-hoc addition of ?1,00,000 in respect of business promotion expenses, telephone expenses, and travel expenses.
3. Restriction of TDS credit by ?8,06,493 on income in Assessment Year 2010-11.

Detailed Analysis:

1. Addition of ?1,03,013 as Short Term Capital Gain under Section 50C:
The assessee sold an immovable property for ?10.11 Lacs, which was offered to tax. However, the stamp duty authorities valued the property at ?11.14 Lacs. The Assessing Officer (AO) applied Section 50C and added the differential amount of ?1,03,013 to the income. The Tribunal found that the differential amount did not exceed 10% of the stamp duty valuation and there was no evidence of the assessee receiving any amount over the agreed consideration. Therefore, the addition under Section 50C was not justified and was deleted. Ground No. 1 was allowed.

2. Ad-hoc Addition of ?1,00,000:
The AO made an ad-hoc disallowance of ?1 Lacs to account for personal elements in sales promotion, telephone, travel, and medical expenses claimed by the assessee. The Tribunal observed that the disallowance percentage was only 6.35% of the total claimed expenditure of ?15.75 Lacs, which was reasonable given the potential personal element. Therefore, the ad-hoc disallowance was upheld. Ground No. 2 was dismissed.

3. Restriction of TDS Credit by ?8,06,493:
The assessee claimed TDS credit of ?8,41,240 but did not offer the corresponding consultancy income of ?83,70,287 to tax as it was not received during the impugned AY. The AO restricted the TDS credit to ?84,547 and disallowed the balance ?7,56,693. Similarly, for royalty receipts, the AO disallowed TDS credit of ?49,800. The total TDS credit disallowed was ?8,06,493. The CIT(A) upheld the AO's decision, stating that TDS credit should be given in the year the income is received. The Tribunal noted that the assessee follows the cash system of accounting and that TDS credit should be given in the year the corresponding income is offered to tax, as per Rule 37BA(3)(i). The Tribunal dismissed the assessee's appeal, aligning with the Kerala High Court's decision in CIT Vs. Smt. Pushpa Vijoy, which mandates that TDS credit is available only in the year the income is assessed. Ground No. 3 was dismissed.

Conclusion:
The assessee's appeal was partly allowed. The addition under Section 50C was deleted, the ad-hoc disallowance was upheld, and the restriction of TDS credit was maintained in accordance with statutory provisions and judicial precedents.

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