9911796707
TMI Blog1983 (7) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... follows mercantile system of accounting and its accounting year is the financial year ending on31-3-1979relevant for the assessment year 1979-80. Since the assessee is following mercantile system of accounting, it included the interest accrued on the advances made by the assessee to the aforesaid two concerns for the assessment year 1979-80. The assessee also filed certificates under section 203 of the Income-tax Act, 1961 ('the Act') in order to claim the tax deducted at source in respect of the interest receivable from the two concerns. The ITO did not agree to give credit for tax deducted at source on the ground that they did not pertain to the assessment year 1979-80. So far as New Central Jute Mills Co. Ltd. is concerned, it deducted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest on securities'. This is covered by section 194A of the Act. The relevant portion of this section may be stated as under : " (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of interest other than income chargeable under the head 'Interest on securities', shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force :" We are deliberately omitting the proviso as it deals with the procedure to be followed in case where no deduction is made. This provision enjoins upon every pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned person under section 203. Thirdly, the credit will be given in the assessment for the immediately following assessment year. It looks as though the words 'immediately following assessment year' must be read along with the date on which the deduction is made. Section 203 envisages every person to furnish a certificate to the person from whose income the tax is deducted at source giving all the necessary particulars. These particulars are actually prescribed in Form No. 19A. Section 205 on which lot of emphasis has been placed by the counsel for the assessee, reads as follows : " Where tax is deductible at the source under sections 192 to 194, section 194A, section 194B, section 194BB, section 194C, section 194D and section 195 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at source must be taken into account. However, we do not think that the matter is so simple as that. The emphasis that the tax deducted at source should be directly linked up with the income returned perhaps is misplaced as we will presently show. As already mentioned section 194 gives the option to the person, who is responsible to pay the interest income, to deduct tax at the time of credit of such income to the account of the payee (this arises when the person is following mercantile system of accounting). In the alternative, the tax can be deducted at the time of payment of the amount in cash. In this case though the record is not very clear as to whether on the dates mentioned already the two concerns paid the amounts or not, but fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficate in Form No. 19A in order to get the benefit of tax deducted at source. 4. The real question to be considered is whether merely because the assessee has returned the interest income on accrual basis in the return of income for the assessment year 1979-80, the assessee can get the benefit of tax deducted at source even though the date on which the deduction took place falls beyond the assessment year 1979-80. In our opinion, the simple test to give the benefit of tax deducted at source is contained in section 199 and that is on the production of the certificate furnished under section 203. The law enjoins on the person who deducts the tax to give a certificate as per the provisions of section 203 and the benefit of the tax deducted a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is actual deduction coupled with the certificate by the person who deducts it. 5. We can illustrate how the benefit of tax deducted at source has nothing to do with the actual income returned with reference to several situations. If the payee and the payer adopt cash system of accounting and they have same accounting year, difficulties may not arise at all. Similarly, if both of them adopt mercantile system of accounting with the same accounting year, no difficulty may arise. But if one follows cash system and the other follows mercantile system, there is bound to be anomaly, if one wants to correlate the benefit of tax deducted at source with the income which is included in the assessment. Similarly, there will be undue complications whe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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