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TMI Blog2024 (12) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... by producing all its bank statements, establish that it really did not receive the interest of Rs.3,60,00,000/-, which it claimed to have not received." 2. "On the facts and in circumstances of the case and in Law, the Ld. CIT(A) apparently did not consider the fact that the assessee's debtor M/s. Dharti Dredging & Infrastructure Ltd. (DDIL) was classified by State Bank of India as NPA on 30.06.2018, but almost five months after this ie. on 08.11.2018 DDIL paid TDS of Rs.36,00,000/- on interest of Rs.3,60,00,000/-, which implies that mere classification of DDIL as NPA by its bank cannot be said to be the basis of its incapability to pay interest to the assessee, since had it been so, DDIL would have had no reason to pay only the said TDS and not paying the interest of Rs.3,60,00,000/-to the assessee, that too after being classified as NPA." 3. In this appeal, Revenue is aggrieved by the deletion of Rs.3.6 Crores added by the ld. Assessing Officer in respect of interest accrued and receivable by the assessee and credit for TDS thereon amounting to Rs.36 lakhs. 4. The Assessee had advanced Rs.30 Crore to M/s. DHARTI DREDGING & INFRASTRUCTURE LTD (Dharti) as under: Date Part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, assessee went in appeal before the ld. CIT(A). 5. Before the ld. CIT(A), assessee submitted that Dharti had become an NPA and in a petition filed by its bankers u/s. 7 of the Insolvency and Bankruptcy Code, (IBC) 2016, the National Company Law Tribunal (NCLT) has passed an order dated 05/04/2022, placing the said company under insolvency proceedings, and, therefore, there was no chance of recovery of the amount of Rs.3.6 Cr. The assessee, therefore, contended that the same cannot be considered as its income. It further submitted that it had not received any amount from Dharti till date and even in A.Y. 2019-20, no interest receivable from it was offered to tax and no addition was also made by the ld. Assessing Officer. Further, in A.Y. 2020-21, since Dharti had become an NPA, the assessee had written off the advance of Rs.30 Cr. in its books and had not claimed the write off of the amount of Rs.3.6 Cr. added by the ld. Assessing Officer in the year under consideration. Assessee placed reliance on various decisions in support of its contention that the interest income is not taxable in its hands in view of the fact that there is no possibility of receiving the same. According to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. Sr. DR, we do not find any reason to interfere with the said observations and findings arrived at by ld. CIT(A). However, in respect of TDS of Rs.36 lakhs done by Dharti and deposited in the government exchequer which is duly reflected in Form 26AS of the assessee in the year under consideration, needs a consideration since it forms part and parcel of amount of interest receivable of Rs.3.60 Crores. 6.1. In our understanding, in the given set of facts and circumstances, when the principal amount of income which has been subjected to deduction of tax at source bears an element of uncertainty and irrecoverability then in such a situation, the tax so deducted at sources and deposited by the deductor which appears in Form 26AS of the deductee, provisions of section 198 gets attracted. The said section reads as under: "Tax deducted is income received. 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 : Provided that the sum being the tax paid, under sub-section (1A) of section 192 for the purpose of computing the income of an assessee, shall not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follow the same to hold that in the present case, the amount of TDS reflected in Form 26AS of the assessee for the year under consideration in respect of TDS done by Dharti is to be treated as an item of income under the head "income from other sources" and provisions of section 198 be applied accordingly. It is important to note that once TDS is deducted, assessee cannot be permitted to use the certificate to cover other amounts while refusing to show the amount of interest in his return by resorting to difference in method of accounting system. The effect of the assessment made by the ld. AO is only that the assessee ought to desist from having the best of both the systems and discarding the one which is disadvantageous to him. If the assessee intends to take the TDS as component of tax paid by him, the corresponding income to the TDS must Form part of the return and the assessment. 6.5. For ease of reference relevant extracts from the above decision are reproduced as under: "The assessee has option to file returns by adopting the cash system or mercantile system. In a given case, he can adopt both the systems for different components in one and the same returns. The broad di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner and the Tribunal did not approve the method adopted by the appellant. 10. The appellant cannot be permitted to blow hot and cold at one and the same time. If no TDS was affected and interest was not paid, he would not have been under an obligation to show the amount of interest in his returns, much less to pay tax thereon. However, once TDS is affected, he cannot be permitted to use the certificate to cover other amounts even while refusing to show the amount of interest in his returns. The steps taken by the authorities in this behalf cannot be treated as applying the parameters for mercantile system to a component of the returns filed under the cash system. The effect of the order passed by the assessing officer as upheld by the Commissioner and the Tribunal is only that the appellant must desist from having the best of both the systems and discarding the one, which is disadvantageous to him. Once he intends to treat the amount deducted as TDS as a component of tax paid, the corresponding to the TDS must form part of the returns and assessment. On the other hand, if he intends to pay the tax on the interest as and when he receives it, the amount covered by the TDS ..... X X X X Extracts X X X X X X X X Extracts X X X X
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