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TMI Blog2018 (5) TMI 1592X X X X Extracts X X X X X X X X Extracts X X X X ..... ance on mobilization advance and not entire contract receipts were received in the relevant Assessment Year - Held that:- We direct the assessing officer to examine the income offered the tune of 6,00,000/- in the Assessment Year under consideration, and allow the TDS credit proportionately to the amount of 6,00,000/- and balance TDS credit on the remaining sum of 20,48,000/- (that is, 26,48,000 6,00,000) should be allowed in subsequent years in accordance with law. Hence, we allow this ground of the assessee for statistical purposes. X X X X Extracts X X X X X X X X Extracts X X X X ..... has not incurred any expenses attributable to earning of the exempt income. However, the AO rejected the contention of the assessee and held that the Assessee Company has failed to bring anything on record to substantiate their claim of not incurring expenditure in earning the exempt income. From perusal of accounts it wasnoted by AO that the assessee has both borrowed funds and own funds. There has been investment in the past years also and the investment in the current year also. During the year also the assessee has purchased as well as sold shares and mutual funds. This isevident from the share transaction details. From examination of accounts it was evident that the assessee has utilized even borrowed funds for making investment. The AO noted that theprovisions of Rule 8D were on the statute book for the F.Y. 2008-09 andfor A.Y.2009-10, the disallowance can only be computed as per Rule 8D of the Income Tax Rules and this way the AO computed the disallowance as per Rule 8D as follows: (i) Expenditure directly relating to exempt income = Rs. NIL (ii) Interest paid A × B÷C = X A = Interest = ₹ 3,14,456/- B = Average value of Investment = ₹ 3,80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t income to the tune of ₹ 55,68,925/- for taxation during the relevant assessment year. After setting off interest expenses with interest income, a net interest income comes to the tune of ₹ 52,54,469/- ( that is, ₹ 55,68,925 - ₹ 3,14,456). The said net interest income of ₹ 52,54,469/- has been offered by the assessee for tax during the relevant assessment year. Based on these facts we note that there is no interest expenses debited in the profit and loss account. After setting off interest expense with interest income, the resulted amount of ₹ 52,54,469/- comes as a net interest income which can not be disallowed under Rule 8D (2) (ii) of the Income Tax Rules. Therefore, we note that there is no interest expenditure in the assessee's case under consideration, interest received is more than the interest paid and the net result is interest income, therefore, no disallowance should be made under Rule 8D(2)(ii) of the I.T. Rules.We note that disallowance u/s 14A can come into play only out of expenses claimed for deduction, but in the assessee`s case under consideration, after setting off interest income, the resulted amount comes as net interest i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grievance raised by the assesseeis as follows: The CIT(A) erred in not allowing TDS credit to the tune of ₹ 60,004/- on mobilization advance and not entire contract receipts were received in the relevant Assessment Year. 11. The brief facts qua the issue are that from the reconciliation of TDS certificates and advances received, it was observed by the AO that the assessee has claimed the TDS credit of ₹ 60,004/- in respect of receipts which are accounted as advances. On queried, during the assessment proceedings, the assessee replied to the assessing officer as follows: "R.D. Division, Cuttack, the contractee has paid mobilization advance to the assessee of ₹ 26,48,000/- as per agreement and income tax of ₹ 60,004/- is being deducted therefrom." It was submitted thatas per agreement, the said mobilization advance is not contract receipts of theassessee and the advance shall be recovered from the bills raised by the contractee and ₹ 6,00,000/- has been recovered in A.Y.2009-10 and no tax has been deducted there from. Therefore, the assessee has no other option other than claiming the benefit of credit of the entire T.D.S. of ₹ 60,004/- as it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of this Chapter 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 of the depositor or of the owner of property or of the unit-holder, or of the shareholder, as the case may be." (2) Any sum referred to in sub-section (1A) of section 192 and paid to the Central Government shall be treated as the tax paid on behalf of the person in respect of whose income such payment of tax has been made. (3) The Board may, for the purposes of giving credit in respect of tax deducted or tax paid in terms of the provisions of this Chapter, make such rules as may be necessary, including the rules for the purposes of giving credit to a person other than those referred to in sub-section (1) and sub-section (2) and also the assessment year for which such credit may be given.] We note that section 199 of the Income Tax Act clearly provides that whenever the assessee offered income, the TDS credit has to be given to the assessee, and the said section does not speak that proportionate TDS credit should not be allowed to the assessee. As per sub -section (3) of section 199 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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