9911796707
TMI Blog2014 (9) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... llant. The appellant was functioning as a Managing Director of M/s. A.P. Tanneries Limited (for short, the 1st company). He gave loan of certain amounts to the said company as well as to another company by name M/s. Associated Tanners (for short, the 2nd company). The latter was paying interest on the amount advanced by him regularly, whereas the former was just showing the accumulated interest, in its account books without making actual payment. It was also his case that even while showing the interest payable to him in the account books, the 1st company deducted tax at source (TDS) on the amount of interest payable and issued certificates, in relation thereto. In the returns filed by him, the appellant was adopting a hybrid procedure. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the appellant was entitled to claim the benefit thereof. Sri S.R. Ashok, learned Senior Counsel for the Income Tax Department submits that though it is permissible for an assessee to adopt dual method for the same returns, the appellant cannot claim the benefit of TDS in its entirety and at the same time, refuse to pay tax on the corresponding interest. Learned Senior Counsel submits that the appellant acquired a right to receive interest from the 1st company once it was shown in the account books of that organization; and that is sufficient to levy tax upon the appellant, particularly when he is taking full advantage of the amount recovered as TDS. The assessee has option to file returns by adopting the cash system or mercantile syste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been paid at all. If that were to have been all, there would not have been any controversy. The reason is that under the cash system, the liability to pay tax arises only when the concerned amount is received as income. The 1st company made TDS in respect of the amount payable to the appellant as interest and issued certificate. The appellant wanted to use the certificate in its entirety. In other words, the amount reflected in the TDS certificate was being shown as tax already paid. This would have devastating effect. The amount covered by the certificate would take care of the interest payable on other income of the appellant. For example, if the amount reflected in TDS constitutes tax payable on a sum of Rs. 1,00,000/-, that would have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tstanding, till the actual date of receipt. In the facts of the present case, Section 198 gets attracted. Whenever an amount deducted as tax at source becomes incapable of being adjusted or counted towards tax payable, it acquires the character of income. In such an event, it partakes the character of any other income and is liable to be dealt with accordingly, in the order of assessment. Since the appellant has adopted the cash system and he did not receive the interest regarding which the TDS was affected, the TDS amount deserves to be treated as income. However, the attempt made by him to treat that amount as tax for the corresponding amount, cannot be permitted. For the foregoing reasons, we partly allow the appeals holding that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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