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TMI Blog2012 (3) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment by the assessees in the assessment year following the year in which tax is recovered and paid by the Banks - Section 199 of the Income Tax Act makes it clear that the assessee is entitled to credit based on TDS certificate only in the assessment year in which income from which tax is deducted is assessed - Decided against the assessee. If Section 145(1) is amended for assessment of income on which TDS is made in the assessment year following the year in which deduction is made irrespective of the system of accounting followed by the assessee, the same will avoid problems for the assessees and the Department. - Decided in favor of the revenue - IT Appeal NOs. 596, 708, 1122, 1273 & 1464 OF 2009 - - - Dated:- 2-1-2012 - C.N. RAMACHANDRAN NAIR AND V. CHITAMBARESH, JJ. P.K.R. Menon and Jose Joseph for the Appellant. P. Balakrishnan for the Respondent. JUDGMENT Ramachandran Nair, J. The question raised in the two sets of appeals filed by the Revenue against the orders of the Income Tax Appellate Tribunal issued in favour of the two assessees is one and the same, i.e., whether the assessees are entitled to credit, tax deducted at source in the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals), the assessees raised a contention that only the tax amount covered by the TDS certificates issued by the Banks is their income received in cash during the previous year relevant for the assessment year and therefore the TDS amount itself should be assessed as "income" and the assessees are entitled to refund of the balance amount. Even though the first appellate authority did not accept this contention, he held that even if interest is not assessable in the assessment years concerned, the assessees are entitled to credit of tax recovered at source in the assessment years relevant for the previous years during which recovery of tax and remittance of the same was made by the banks. On appeals filed by the Revenue, though the Tribunal did not agree with all the findings of the CIT(Appeals), they held that the assessees are entitled to full credit of tax in the assessment years concerned, no matter interest income on which deduction has been made is not returned or assessed in those assessment years. It is against these orders that the Department has filed these appeals. 6. During hearing, counsel for the respondents submitted that by virtue of Section 268A of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h sides and on going through the order of the Tribunal, what we notice is that though the Tribunal has referred to Section 199 of the Income Tax Act, they have not considered the scope of the provisions in detail. Section 199 of the Income Tax Act has undergone various changes and for reference, we extract hereunder the section as it stood during the relevant assessment years, i.e., 1997-1998 to 2000-2001, to which these appeals relate. "199. Credit for tax deducted - Any deduction made in accordance with the provisions of sections 192 to 194, section 194A, section 194B, section 194BB, section 194C, section 194D, section 194E, section 194EE, section 194F, section 194G, section 194H, section 194-I, section 194J, section 194K, section 195, section 196A, section 196B, section 196C and section 196D and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made, or of the owner of the security, or depositor or owner of property or of unitholder or of the shareholder, as the case may be, and credit shall be given to him for the amount so deducted on the production of the certificate furnished under section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edited based on TDS certificate only in the assessment in which the income from which deduction is made is assessed to tax. So much so, Section 143(1)(c) will be subject to sub-sections (1) and (3) of Section 199 read with Rule 37BA of the Income Tax Rules and when taken together the effect is that the assessees can retain the TDS certificates and claim credit in the assessment for the assessment year in which assessee returns the income on which deduction of tax is made for assessment. 10. The respondents-assessees' counsel rightly pointed out that the assessees are entitled to account income from interest which is the income from other sources, in accordance with the system of accounting followed by the assessees as provided under Section 145(1) of the Income Tax Act. We do not think there can be any controversy on the issue because the entire interest income can be accounted on cash basis and the assessees need to return the income for assessment year following the year in which it is received. The Department also does not dispute this claim of the assessee and in fact the interest income in respect of which tax is recovered by the Banks at the time of credit is not assessed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with Rule 37BA of the Income Tax Rules serve a purpose because if income is not assessable in the assessment year and at the same time assessees are entitled to credit of tax recovered and remitted in respect of such income, the Department will be compelled to refund the entire tax amount every year and along with it if refund is not made within three months from filing of return, mandatory interest will also payable, as provided under Section 243(1) of the Income Tax Act which will defeat the purpose of TDS provisions in the Act. Therefore, we do not find any justification for the Tribunal to allow credit of tax based on TDS certificates without corresponding assessment of income in the assessment years concerned which is against the statutory provision. We also do not find any merit in the contention of the respondents-assessees that the amount covered by TDS certificates itself should be treated as income of the previous year relevant for the assessment year concerned and the tax amount should be assessed as income by simultaneously giving credit for the full amount of tax remitted by the payer. In these cases, the entire interest credited should be assessed on maturity of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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