9911796707
TMI Blog2005 (9) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... his return of income, the total receipts amounted to Rs. 1,06,15,995.55 whereas the receipts credited in the Profit & Loss account worked out to Rs. 95,19,657. When asked to explain the difference, the assessee stated that out of the many TDS certificates submitted by the assessee, a certificate pertaining to Rs. 4,925 also was submitted in the year under appeal but the corresponding receipt of Rs. 2,46,268 has been credited in the succeeding previous year. This is because, according to the assessee, the assessee was billing for the services rendered in a month only in a subsequent month. The said receipt of Rs. 2,46,268 in fact related to the services rendered by the assessee in the month of March, 1997 for which the assessee had raised bill only in the succeeding month April 1997. The assessee explained that the said amount accounted in the month April 1997 has been included in the total receipts furnished for the assessment year 1998-99. He submitted that this is according to the consistent practice of accounting followed by the assessee-company. 4. The assessing authority, on the other hand, held that the assessee should have credited the amount of Rs. 2,46,268 due for the mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld provide for accounting receipts due for the month of March 1997 also. He submitted that this is more important because the assessee has claimed credit for the TDS certificate for Rs. 4,925 which in fact belonged to the bills raised for the month of March 1997. The learned D.R. submitted that the credit for the TDS and the offering of the corresponding income, both should be considered in the same assessment year. He submitted therefore that the orders passed by the lower authorities on this point are to be upheld. 8. We considered the matter in detail. There is no dispute regarding the method of accounting followed by the assessee. He is following the Mercantile System of Accounting. Therefore, whenever income is recognized, the assessee has credited the same in his books of account, irrespective of its actual receipt. This accrual of income is something different from raising bills against the services rendered by the assessee from month to month. The question of following either Accrual System of Accounting or Cash System of Accounting arises only when the income is recognized. In the method of billing employed by the assessee, income is recognized only on raising of bills. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edit for the corresponding TDS of Rs. 4,925 an equivalent amount would be treated as the income of the impugned assessment year, which would be reduced from the receipts of the ensuing assessment year. 12. In result, the appeal filed by the assessee is allowed. Order accordingly. Per T.K. Sharma, Judicial Member. - After having gone through the proposed order of the ld. Accountant Member, I find it difficult to agree with the findings and conclusion as drawn by him in view of specific provisions contained in sections 198 and 199 of the Income-tax Act regarding allowance of credit of TDS. 14. The undisputed facts are that the assessee is an individual, engaged in the business of providing security and housekeeping services to various establishments, as such, UTI, RCF & HDFC, etc. The assessee claimed TDS amounting to Rs. 5,929 in respect of three TDS certificates issued by RCF, Chembur pertaining to the period 1-4-1996 to 31-3-1997 as under: Date of credit Amount credited Tax deducted at source 9-4-1997 2,46,268.00 4,925 3-4-1997 8,954.25 179 21-4-1997 41,238.67 825 15. All the aforesaid three amounts were not included by the assessee in his income for the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 198, all sums deducted under Chapter XVII are required, for the purpose of computing the income of the assessee, to be deemed to be the income received. Therefore, tax deducted at source has to be treated as income received in assessment year 1997-98, i.e., the year in which the assessee has claimed the credit. According to section 199, the credit for tax deducted at source is required to be given for the amount so deducted on production of the certificate furnished under section 203 in the assessment made under this Act for the assessment year for which such income is assessable. It is, therefore, evident on the bare perusal of the provisions of the section 199 of the Income-tax Act that credit for tax deducted at source is required to be given in the assessment year in which the income relating thereto is assessable. It is undisputed position in the case under consideration that the assessee has claimed and Assessing Officer has allowed the credit for tax deducted at source in assessment year 1997-98 and hence, it is equally undisputable that income relating thereto has to be brought to tax in the said assessment year alone and in no other assessment year. This view is q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered in one and in the same assessment year and not in two different years. It is therefore, not possible to allow the assessee to avail the credit for tax deducted at source in assessment year 1997-98 and brings the corresponding income to tax in assessment year 1998-99. 22. As far as the second issue is concerned, the fact that the assessee himself has claimed and obtained the credit for tax deducted at source in assessment year 1997-98 itself precludes the assessee from alleging otherwise. The provisions of section 115 of the Evidence Act are quite apposite. The assessee made a declaration before the Assessing Officer that it was entitled to get the credit for TDS in 1997-98. The Assessing Officer acted on that declaration and allowed the credit for TDS in assessment year 1997-98. The Department thus altered its position on the basis of declaration made by the assessee, which was also in conformity with the provisions of section 199 of the Income-tax Act. The Department acting on the said declaration, did not charge interest under section 234A/234B/234C, which would have been chargeable if the credit for TDS had not been claimed by the assessee and allowed by the department. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received the benefit of TDS and was also allowed expenditure incurred in executing the said work. He cannot, in my humble view, turn around to say, in the face of the aforementioned facts, that the corresponding income is not taxable. 25. In the result, the appeal of the assessee is dismissed. THIRD MEMBER ORDER Shri G.E. Veerabhadrappa, Vice-President. - There being a difference of opinion between the Members constituting the Division Bench, the Hon'ble President has referred, under section 255(4) of the Income-tax Act, 1961, the following point of difference to me as a Third Member to resolve the controversy: "1. Whether in the facts and circumstances of the case, the learned CIT(A) is justified in confirming the addition of Rs. 2,96,460.92 ps., made by the Assessing Officer in respect of 3 TDS certificates pertaining to the period 1-4-1996 to 31-3-1997 issued to the assessee by RCF?" 2. The facts in brief are the assessee, an individual, was carrying on the business of providing security and housekeeping services to different clientele. The assessment year involved is 1997-98. There is no dispute that the assessee was following mercantile system of accounting for rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has claimed credit for tax deducted at source in assessment year 1997-98 whereas, in fact, the amounts received were offered for taxation in the succeeding assessment year. He opined that in the light of the provisions of sections 198 and 199 of the Act, the action of the assessee is not justified. According to the learned Judicial Member, section 198 of the Act provides that all sums deducted under Chapter XVII are required, for the purpose of computing the income of the assessee to be deemed to be the income received and, therefore, the tax deducted at source has to be treated as income received in the assessment year 1997-98 itself. The learned Judicial Member further opined that according to section 199 of the Act, the credit for tax deducted at source is required to be given for the amount so deducted on production of the certificate furnished under section 203 of the Act in the assessment made under this Act for the assessment year for which such income is assessable. According to him, a bare perusal of section 199 of the Act shows that credit for tax deducted as source is required to be given in the assessment in which the income relating thereto is assessable. The Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 194C, section 194D, section 194E, section 194EE, section 194F, section 194G, section 194H, section 194-I, section 194J, section 194K, section 195, section 196A, section 196B, section 196C and section 196D shall, for the purpose of computing the income of an assessee, be deemed to be income received. 199. Any deduction made in accordance with the provisions of sections 192 to 194, section 194A, section 194B, section 194BB, section 194C, section 194D, section 194E, section 194EE, section 194F, section 194G, section 194H, section 194-I, section 194J, section 194K, section 195, section 196A, section 196B, section 196C and section 196D 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 depositor or owner of property or of unit holder or of the shareholder, as the case may be, and credit shall be given to him for the amount so deducted on the production of the certificate furnished under section 203 in the asset made under this Act for the assessment year for which such income is assessable: Provided that: (i) in a case where such person or owner or depositor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inciple has been approved by the Privy Council in Pondicherry Railway Co. Ltd. v. CIT 5 ITC 363, and by the Supreme Court in Badridas Daga v. CIT [1958] 34 ITR 10, Calcutta Co. Ltd. v. CIT [1959] 37 ITR 1 (SC) and CIT v. Bai Shirinbai (K) Kooka [1962] 46 ITR 86. The profits mentioned herein are the real profits and they must be ascertained on ordinary principles of commercial practice and commercial accounting. Therefore, the assessee's method of accounting becomes relevant for determining the income from the conduct of any business or exercise of any profession. The assessee, in this case, is rendering security and housekeeping services to various clientele such as UTI, RCF, HDFC, etc. The deductibility of any expenditure incurred by an assessee depends upon the method of accounting followed by him. The assessee, in this case, is following mercantile system of accounting. All expenses, to which liability is accrued in the accounting year, are deductible as business expenditure. In the same manner all business receipts will have to be determined on the basis of method of accounting employed by the assessee. Unless the assessee renders services for the entire month, it is not op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the person on whose behalf the deduction was made and to give credit for the amount so deducted on the production of the certificate in the assessment made for the assessment year for which such income is assessable. The second objective mentioned in section 199 is only to answer the question as to the year in which the credit for tax deducted at source shall be given. It links up the credit with assessment year in which such income is assessable. In other words, the Assessing Officer is bound to give credit in the year in which the income is offered to tax. This section 199 does not empower the Assessing Officer to determine the year of assessability of the income itself but it only mandates the year in which the credit is to be given on the basis of the certificate furnished. In other words, when the assessee produces the certificates of TDS, the Assessing Officer is required to verify whether the assessee has offered the income pertained to the certificate before giving credit. If he finds that the income of the certificate is not shown, the Assessing Officer has only not to give the credit for TDS in that assessment year and has to defer the credit being given to the year in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in question due to the method of accounting employed by her. But over the years, the effect on the Profit & Loss Account gets neutralized. Sections 198 and 199, it may again be stressed, do not in any way determine the year of assessability of profits and gains of business. They only deal with the year in which the TDS Certificates have to be given credit to. In my humble opinion, the decision of the Hon'ble Supreme Court in the case of Tuticorin Alkali Chemicals & Fertilizers Ltd. relied upon by the learned Judicial Member, does not in any way alter the year of assessability of income, which is governed under sections 28, 29 and 145 as has been interpreted by the Apex Court and as discussed by me above. 9. For the above reasons, I am in agreement with the view expressed by the learned Accountant Member. The matter will now be placed before the regular Bench to dispose of the appeal in accordance with the opinion of the majority. ORDER UNDER SECTION 255(4) OF THE INCOME TAX ACT, 1961 Per Dr. O.K. Narayanan, Accountant Member. - There having been a difference of opinion between the Members who originally heard this appeal, the following question was referred under section 255 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
