9911796707
TMI Blog2024 (12) TMI 520X X X X Extracts X X X X X X X X Extracts X X X X ..... omponent of the returns filed under the cash 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. Thus as per provisions of section 198 and the judicial precedents discussed above, we direct the ld. AO to recompute the assessed total income in terms of our above observations and findings. - Shri Satbeer Singh Godara, Judicial Member And Shri Girish Agrawal, Accountant Member For the Assessee : None For the Revenue : Smt. Mahita Nair, Sr. DR ORDER PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, vide order no. ITBA/NFAC/S/250/2023-24/1057624397(1), dated 02.11.2023, against the assessment order passed by the Assistant Commissioner of Income Tax 27(1), Mumbai, u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ), dated 22.12.2016 for Assessment Year 2014-15. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erchantile system of accounts, it credited the income in the account of assessee in its books of accounts and deposited the relevant TDS of Rs. 3,55,657/- which reflected in Form 26AS of the assessee. Assessee claimed that since he has not received the interest from the company and he following the cash system of accounting for such income, the unrealized interest income not received by the assessee was shown as a deduction u/s. 57 for the purpose of disclosure and representation in the return form. This was done since there is no column in the return form to reflect the situation which was posed before the assessee. According to the assessee, recognition of interest income was postponed to the extent of uncertainty involved and it will be recognised in the year in which it would be reasonably certain of its ultimate collection. Thus, he claimed this interest as income not received u/s. 57 of the Act, so as to avoid mismatch between the income reflected in the Form 26AS and the return filed by the assessee. 4.2. Ld. Assessing Officer completed the assessment after considering the submission made by the assessee to disallow the claim made u/s. 57 of Rs. 32,00,914/-. Aggrieved, asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome received by the assessee for the purpose of computing the income of an assessee. 6.2. In the present set of facts, TDS done by the company and deposited of Rs. 3,55,657/- which is duly reflected in the Form 26AS of the assessee for the year under consideration, is deemed to be income received by the assessee under the said section. This section deals with treating the TDS as income whenever an amount deducted becomes incapable of being adjusted or counted towards tax payable. 7. Similar issue had arisen before the Hon ble High Court of Andhra Pradesh, in the case of Y. Rathiesh vs. Commissioner of Income-tax-I (2014) 51 taxmann.com 59 (AP). Facts of this case are similar to the present set of facts wherein loan was given by the assessee to the company who just showed the accumulated interest in its books of accounts without making payment. However, the said company deducted TDS at source on the amount of interest payable and issued certificate in relation thereto. Assessee did not pay tax on the interest receivable by him from the company but enjoyed benefits of TDS made in that behalf. Ld. AO took objection to this and treated the interest receivable from the company as inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e systems for different components in one and the same returns. The broad distinction between these two systems is well known. Under the cash system, the assessee would be under an obligation to pay tax only on such of the amount which has been actually received by him. In contrast, under the mercantile system, mere entitlement to receive would bring about the obligation to pay tax. The assessees choose one of them or both of them for different parts, after taking note of the advantages and disadvantages in adopting these methods. 8. We are concerned with the income of the assessee in the Form of interest, on the loans which he has advanced to the two companies referred to above. As a matter of fact, he is the Managing Director of the 1st company. His case is that the 2nd company was paying interest regularly and in relation to the transaction of that company, he adopted mercantile system. There is no dispute 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. Anoth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest as and when he receives it, the amount covered by the TDS certificate can be treated as just income outstanding, till the actual date of receipt. 11. 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. 8. Considering the facts on record, provisions of section 198 and the judicial precedents discussed above, we direct the ld. AO to recompute the assessed total income in terms of our above observations and findings. 9. In the result, appeal of the assessee is partly allowed. Order pronounced on day of 27 September, 2024 under Rule 34 of The Income Tax (Appellate Tribunal) Rules, 1963 - - TaxTMI - T ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
