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TMI Blog2019 (12) TMI 903X X X X Extracts X X X X X X X X Extracts X X X X ..... property income of these are not allowable. 2. Briefly stated facts of the case are that during the year under consideration, the assessee was engaged in the business of purchasing of properties and to earn income from letting out of those properties. The assessee filed return of income on 29/09/2012, declaring rental income of 45,72,850/-. The case was selected for the scrutiny and notice under section 143(2) of the Income-tax Act, 1961 (in short "the Act") was issued and complied with. In the assessment completed under section 143(3) of the Act on 18/03/2015, the Assessing Officer made adjustment to the income and credit of the tax as under: 1. TDS credit of 5,85,000/-, which was deducted by M/s. Root Corporation Ltd. on advance rent paid of 58,50,000/- was not allowed by the Assessing Officer in the year under consideration as the corresponding income was not offered in the return of income filed for the year under consideration. 2. Fuel, Power and maintenance expenses of Rs. 5,26,469/- claimed under the head 'business expenses' were disallowed on the ground that same pertains to house property, income from which has been assessed under the head 'income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee only as advance rent and not rental income for the year under consideration. The assessee contested that benefit of deduction of the tax has to be allowed to the assessee and the government cannot sit over the money of the taxpayer without any credit. The learned CIT(A), after considering the submission of the assessee, upheld the finding of the Assessing Officer observing as under: "4.1 I have carefully considered the written submissions of the Ld. AR and assessment order passed by the AO. Considering the same, it is pertinent to mention here that in the present case, the main issue is that assessee has claimed deduction on account of TDS of Rs. 5,85,000/- but the corresponding advance rent on which the said deduction has been made, is not offered for taxation purpose. In this backdrop of the case, it is pertinent to discuss the provisions of section 198 of the Act, which provides as under: "section 198 - all sums deducted in accordance with (the foregoing provisions of this chapter) shall, for the purpose of computing the income of an assessee, be deemed to be income received." Further, section 199(1) discuss about credit for tax deducted, providing as under: " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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. While in respect of his transaction with the 1st company, he adopted cash system, as regards the transaction with the 2nd company, he adopted the mercantile system. The' result was that he did not pay the tax on the interest payable to him by the 1st company, even while he enjoyed the entire benefit of TDS made in that behalf. There is no dispute about the interest paid by the 2nd company, since the appellant has shown the same as f income and paid tax thereon. The assessing officer took objection to this and passed an order of assessment treating the interest payable by the 1st company on transfer basis, as income and levied tax. The same result ensued for various financial years. Aggrieved by that, the appellant filed appeals before the Commissioner of Income Tax, Visakhapatnam. The appeals were dismissed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ispute about payment of tax on that. For the transaction with the 1st company, he has chosen to adopt the cash system. He stated that though the amount payable to him as interest was being shown in the account books of the company, the actual payment of the amount was not done. Another contention was that even while not paying the amount, TDS was affected. By adopting the cash system for this component of his returns, the appellant did not pay any tax on the interest payable to him by the 1st company, on the ground that the amount has not 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount representing TDS as tax and on the other hand, it shall be treated as an item of income for the concerned assessment year. The miscellaneous petitions filed in these appeals shall also stand disposed of. There shall be no order as to costs. b. From the above judicial pronouncement, it is clearly held that assessee is duty bound to offer the amount of Rs. 58,50,000/- for taxation on which TDS was deducted at Rs. 5,85,000/-, which was claimed in the return. In the present case, as per the ratio of above judgment, provisions of Section 198 gets attracted and amount of Rs,58,50,000/- partakes the character of income which is taxable. c. Further, in the judicial pronouncement reported as Pardeep Kumar Dhir vs. ACIT (2008) 303 ITR (AT) 45 (Chd.), it was held that, the deductee will not be entitled to have benefit or credit for the whole amount mentioned in the TDS certificate, if the whole income relatable to that amount is not shown and is not assessable in that assessment year, if instead of the entire income referable to the amount of tax deducted, only a portion of income is found assessable, the benefit has to be allowed only on the portion shown...." From the ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy stand covered by the 30% deduction under the income from house property. The claim of the assessee that the expenses pertain to the portion of the property, which is not rented out and the expenses have been incurred wholly and exclusively for the purpose of the business. The learned CIT(A) upheld the disallowance observing as under: "4.2 On careful consideration of the written submissions of the Ld. AR, it can easily be gathered that he is trying to justify the above submissions on the ground that the expenses, in question, which have been disallowed by the AO pertained to the business of the assessee, which were necessary to carry on the same. Before the AO it was contended that above expenses do not pertain to the property rented out but relates to the business. However, from the details available on record, copies of audited accounts, it is clearly evident that appellant company's main source of income is only rental receipts. From the schedule of fixed assets, forming part of audited accounts, it is clearly established that there are only land and buildings and capital work in progress and no other business asset. On perusal of various schedules, it is evident that asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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