ACIT, CHENNAI v. M/s. Shri Thalam Finance and Investments, CHENNAI

ITA 1854/CHNY/2009 | 2006-2007
Pronouncement Date: 13-07-2011 | Result: Allowed

Appeal Details

RSA Number 185421714 RSA 2009
Bench Chennai
Appeal Number ITA 1854/CHNY/2009
Duration Of Justice 1 year(s) 7 month(s) 4 day(s)
Appellant ACIT, CHENNAI
Respondent M/s. Shri Thalam Finance and Investments, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 13-07-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted C
Tribunal Order Date 13-07-2011
Date Of Final Hearing 13-07-2011
Next Hearing Date 13-07-2011
Assessment Year 2006-2007
Appeal Filed On 09-12-2009
Judgment Text
IN THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI C BENCH CHENNAI. BEFORE SHRI.U.B.S. BEDI J.M. & SHRI. ABRAHAM P. GE ORGE A.M. I.T.A. NO.1854/MDS/2009 ASSESSMENT YEARS: 2006-07 THE ASSISTANT COMMISSIONER OF INCOME TAX BUSINESS CIRCLE II CHENNAI 600 034. VS. M/S. SHRI THALAM FINANCE AND INVESTMENTS MOOKAMBIKA COMPLEX MYLAPORE 4 LADY DESIKACHARI ROAD CHENNAI 4. [PAN:AAAFT4454H] (APPELLANT) (RESPONDENT) I.T.A. NO.1861/MDS/2009 ASSESSMENT YEARS: 2006-07 THE ASSISTANT COMMISSIONER OF INCOME TAX BUSINESS CIRCLE II CHENNAI 600 034. VS. M/S. SHRIRAM CONSTRUCTION FINANCE MOOKAMBIKA COMPLEX IV FLOOR 4 LADY DESIKACHARI ROAD MYLAPORE CHENNAI 4. [PAN:AAAFS2597N] (APPELLANT) (RESPONDENT) REVENUE BY : SHRI CLEMENT RAMESH KUMAR ASSESSEE BY : SHRI V.D. GOPAL ORDER PER U.B.S. BEDI J.M. THESE TWO APPEALS OF THE DEPARTMENT IN THE CASE OF TWO DIFFERENT ASSESSEES ARISE OUT OF THE ORDER PASSED BY THE LD. CIT(A) VI CHENNAI BOTH DATED 27.04.2009 RELEVANT TO THE ASSESSMENT YEAR 20 06-07 WHEREBY THE DEPARTMENT HAS CHALLENGED THE ACTION OF THE LD. CIT (A) IN ALLOWING CREDIT FOR TDS OF ` .10 54 425/- IN FIRST CASE AND ` . 18 56 851/- IN SECOND CASE WHEN THE CORRESPONDING INTEREST INCOME WAS NOT ADMITTED BY T HE ASSESSEES. I.T.A. NO I.T.A. NO I.T.A. NO I.T.A. NOS SS S. .. .1 11 18 88 85 55 54 & 1 4 & 1 4 & 1 4 & 18 88 86 66 61 11 1/ // /MDS/ MDS/ MDS/ MDS/0 00 09 99 9 2 2. THESE APPEALS INVOLVE IDENTICAL FACTS AND SIMIL AR ISSUES THEREFORE BEING DISPOSED OFF BY THIS SINGLE ORDER FOR THE SAKE OF C ONVENIENCE. 3. AT THE VERY OUTSET IT IS A COMMON GROUND OF BO TH THE SIDES THAT THE ISSUE INVOLVE IN THESE APPEALS IS COVERED AGAINST THE ASS ESSEE BY EARLIER DECISION OF THE ITAT CHENNAI A BENCH IN THE CASE OF ITO V. M/ S. SHRI ANUPALLAVI FINANCE & INVESTMENTS IN ITA NO. 1828/MDS/2009 FOR THE ASSE SSMENT YEAR 2006-07 DATED 10.12.2010. THEREFORE BOTH THE APPEALS OF TH E REVENUE SHOULD BE ACCEPTED BY REVERSING THE ORDER OF THE LD. CIT(A) I N THIS REGARD AS ISSUE IS SQUARELY COVERED. 4. AFTER HEARING BOTH THE SIDES AND CONSIDERING TH E MATERIAL ON RECORD WE FIND THAT SIMILAR ISSUE CAME FOR CONSIDERATION BEFO RE ITAT CHENNAI A BENCH IN THE CASE OF ITO V. M/S. SHRI ANUPALLAVI FINANCE & I NVESTMENTS IN ITA NO. 1828/MDS/2009 WHICH HAS BEEN DECIDED AGAINST THE A SSESSEE AND RELEVANT PORTION OF THE SAID ORDER IS REPRODUCED AS UNDER: 2. THE SHORT POINT ARISING IN APPEAL IS THE DENIAL OF CREDIT FOR TAX DEDUCTED AT SOURCE (TDS) FOR RS. 2 35 493/- TO THE ASSESSEE BY THE ASSESSING OFFICER AS THE RELEVANT INCOME I.E. ON WHICH TDS STANDS DEDUCTED HAD NOT BEEN ADMITTED BY THE ASSESSEE FOR THE RELEVANT YEAR. IN APPEAL THE ASSESSEE A FIRM IN THE BUSINESS OF INVESTMENTS AND FINANCE MAINTAINING ITS BOOKS O N CASH BASIS STATED THAT THE INTEREST STANDS CREDITED TO ITS ACCOUNT IN THEIR BO OKS BY THE CORPORATE CONCERNS - TO WHOM MONEY IS ADVANCED BY IT IN THE COURSE OF IT S BUSINESS - ON ACCRUAL BASIS AND ACCORDINGLY TAX DEDUCTED AT SOURCE THEREFROM AT THE PRESCRIBED RATES. THE ASSESSEE HOWEVER WOULD RECOGNIZE INTEREST AS INCO ME ONLY TO THE EXTENT ACTUALLY RECEIVED BY IT. NOW THAT SHOULD NOT IMPL Y THAT IT BE DENIED CREDIT FOR TDS ON THE TAX ACTUALLY DEDUCTED AND DEPOSITED WITH GOVERNMENT TREASURY. THE LD. CIT(A) ALLOWED ASSESSEE RELIEF BY FOLLOWING THE DECISION BY TRIBUNAL [CHENNAI BENCH] IN THE CASE OF A GROUP CONCERN M/ S. SHRIRAM INVESTMENTS [ITA NO. 1124 AND 1125/MDS/2001 DATED 21.4.2006 FOR ASSESSMENT YEARS 1999- 2000 AND 2000-2001] REPRODUCING THE RELEVANT FINDI NGS OF THE TRIBUNAL IN HIS ORDER. PER THE SAME IT STANDS HELD THAT THE ASSES SEE HAVING OFFERED THE AMOUNT OF TDS AS INCOME FOR THE YEAR CREDIT FOR THE SAME COULD NOT BE DENIED TO IT. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. I.T.A. NO I.T.A. NO I.T.A. NO I.T.A. NOS SS S. .. .1 11 18 88 85 55 54 & 1 4 & 1 4 & 1 4 & 18 88 86 66 61 11 1/ // /MDS/ MDS/ MDS/ MDS/0 00 09 99 9 3 3.1 BEFORE US THE CASE WAS ARGUED AT LENGTH BY BO TH THE SIDES. THE LD. D.R. WOULD SUBMIT THAT THE ISSUE STANDS SETTLED I.E. A S FAR AS THE TRIBUNAL IS CONCERNED BY ITS THIRD MEMBER DECISION IN THE CASE OF PRADEEP KUMAR DHIR VS. CIT (ASSTT.) 107 ITD 118 [CHD] [TM]. THE SAID ORD ER IS DATED 27.4.2007 WHILE THE DECISION RELIED UPON BY THE LD. CIT(A) IS OF A PRIOR DATE. FURTHER VIDE THE SAME THE CONTROVERSY ARISING IN THE PRESENT CASE S TANDS RESOLVED WITH THE THIRD MEMBER HOLDING THAT THE ASSESSEE SHALL BE IN TERMS OF SECTION 199 OF THE INCOME-TAX ACT 1961 (`THE ACT HEREINAFTER) ALLOW ED CREDIT FOR TDS ON A PRORATA BASIS I.E. IN THE PROPORTION IN WHICH THE INCOME WHICH IS THE SUBJECT MATTER OF TDS STANDS OFFERED TO TAX FOR THE CURRENT YEAR. THIS IS PRECISELY WHAT SECTION 199 SAYS WITH SUB-SECTION (1) THEREOF CLEA RLY STATING THAT CREDIT FOR TDS WOULD BE ALLOWED ON THE PRODUCTION OF THE CERTIFICA TE U/S. 203 OF THE ACT [TDS CERTIFICATE] IN THE ASSESSMENT UNDER THIS ACT FOR T HE YEAR FOR WHICH SUCH INCOME IS ASSESSABLE. IN FACT EVEN PRIOR TO THE THIRD ME MBER (TM) DECISION AFORESAID THE TRIBUNAL HAD BEEN CONSISTENTLY TAKING THIS VIEW AND FOR WHICH HE PLACED ON RECORD THE DECISION IN THE CASE OF CIT (DY) VS. EAS T COAST CONSTRUCTIONS AND INDUSTRIES LTD (IN ITA NO. 2782/MDS/2005 DATED 5.1 .2007 FOR ASSESSMENT YEAR 2002-03). THE VIEW HAS NOT CHANGED OVER TIME WITH THE TRIBUNAL CONTINUING TO HOLD LIKEWISE AS IN THE CASE OF CIT VS. A.R. REHMA N (IN ITA 1405 TO 1409/MDS/2008 DATED 5.1.2010) AND CIT (ASSTT.) VS. SARDA VELU (IN ITA NO. 1403/MDS/2009 DATED 24.6.2010 FOR ASSESSMENT YEAR 2 006-07). 3.2 THE LD. A.R. ON THE OTHER HAND WOULD SUBMIT THAT THE VERY FACT THAT THE ISSUE REQUIRED A REFERENCE TO A THIRD MEMBER IMPLIE S THAT IT IS DEBATABLE. TOWARD THIS HE ALSO PLACED ON RECORD A DECISION BY THE TRIBUNAL IN THE CASE OF TOYO ENGINEERING INDIA LTD. VS. CIT (JT.) (2006) 5 SOT 616 [MUM]; ESCORTS LIMITED VS. CIT (DY.) (2007) 15 SOT 368 [DEL]; AND SUPREME RENEWABLE ENERGY LIMITED VS. ITO [2010] 3 ITR [TRIBUNAL] 339 [CHENNAI]. DEDUCTION OF TAX AT SOURCE IS AT PRESCRIBED RATES IN COMPLIANCE WITH THE STATUTORY DUTY CAST ON THE PAYER I.E. TO DEDUCT AND PAY TAX TO THE CREDI T OF THE CENTRAL GOVERNMENT AND NO INFERENCE AS TO THE TAX LIABILITY IN ITS RES PECT OR EVEN THE TAXABILITY OF THE SAME FOLLOWS. THE PAYEE-DEDUCTEE MAY RATHER HAVE INCURRED LOSSES FOR THE RELEVANT YEAR AS IT IS ONLY THE INCOME AFTER SETT ING OFF ALL THE EXPENSES AND/OR OTHER CLAIMS THAT IS ASSESSABLE FOR THE YEAR. FUR THER HE DREW ATTENTION TO RULE 37BA OF INCOME-TAX RULES 1962 [`THE RULES FOR SHO RT] PLACING A COPY OF THE SAME ON RECORD. SUB-RULE 3(II) OF THE RULES READS AS UNDER: WHERE TAX HAS BEEN DEDUCTED AT SOURCE AND PAID TO THE CENTRAL GOVERNMENT AND INCOME IS ASSESSABLE OVER A NUMBER O F YEARS CREDIT FOR TAX DEDUCTED AT SOURCE SHALL BE ALLOWED ACROSS THOS E YEARS IN THE SAME PROPORTION IN WHICH THE INCOME IS ASSESSABLE TO TAX . THOUGH NO DOUBT IT STATES THE SAME THING AS WHAT THE REVENUE IN THE PRESENT CASE CONTENDS OR AS HELD BY THE LD. THIRD MEMBER THE SUB-RULE IS ONLY PROSPECTIVE I.E. W.E.F. 1/4/2009. IF WHAT STANDS HELD BY TRIBUNAL PER ITS THIRD I.T.A. NO I.T.A. NO I.T.A. NO I.T.A. NOS SS S. .. .1 11 18 88 85 55 54 & 1 4 & 1 4 & 1 4 & 18 88 86 66 61 11 1/ // /MDS/ MDS/ MDS/ MDS/0 00 09 99 9 4 MEMBER DECISION WERE TO BE THE ONLY VIEW THE LAWMA KER WOULD HAVE MADE THE SUB-RULE OPERATIVE FROM AN EARLIER DATE. ALSO IT N EEDS TO BE BORNE IN MIND THAT THE ISSUE AT LARGE IS NOT ONE OF SECTION 199 OR AT LEAST OF SECTION 199 ALONE BUT OF SECTION 198 OF THE ACT AS WELL. ON A QUERY BY T HE BENCH AS TO WHETHER THE IMPUGNED TDS AMOUNT STOOD RETURNED BY THE ASSESSEE AS ITS INCOME FOR THE YEAR THAT BEING THE PREMISE OF THE DECISION IN THE CASE OF SHRIRAM INVESTMENTS (SUPRA) RELIED UPON BY THE LD. CIT(A) HE RELIED IN THE AFF IRMATIVE THOUGH WAS UNABLE TO SHOW THE BASIS OF HIS ASSERTION WITH REFERENCE TO A NY MATERIAL ON RECORD. 3.3 THE LD. D.R. IN REJOINDER SUBMITTED THAT NON E OF THE DECISIONS CITED BY THE LD. AR BEARS ANY REFERENCE TO THE THIRD MEMBER DECISION. THE SAME IS BINDING ON A CO-ORDINATE BENCH AS HELD BY THE SPECI AL BENCH OF THE TRIBUNAL IN THE CASE OF DY. CIT VS. OMAN INTERNATIONAL BANK SA OG 100 ITD 285 [MUMBAI] [SB]. SECONDLY SECTION 199 OF THE ACT HA S WITNESSED A CHANGE BY THE FINANCE ACT 2008 W.E.F. 1.4.2008; THE FOLLOWING W ORDS OCCURRING AT THE END OF SUB-SECTION (1) THEREOF HAVING BEEN OMITTED SINCE . AND CREDIT SHALL BE GIVEN TO HIM FOR THE AMOUNT SO DEDUCTED ON THE 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 . THE CO-OPTION OF RULE 37BA IN THE RULES FOLLOWS THE SAID OMISSION AND ON LY SEEKS TO FORMULATE WHAT IS OTHERWISE OBVIOUS AND IMPLICIT IN SECTION 199 ITSEL F I.E. THAT THE CREDIT FOR TAX DEDUCTED AT SOURCE SHALL FOLLOW THE ASSESSMENT OF T HE CORRESPONDING INCOME. THIRDLY THE PROPORTION BEING ADVANCED BY THE ASSES SEE IF ACCEPTED WOULD DEFEAT THE VERY PURPOSE OF THE RELEVANT PROVISION [ SECTION 199]. SUPPOSE AN ASSESSEE IS PAID AN ADVANCE OF RS. 20 LAKHS IN YEAR ONE (Y1). HE ADMITS THE SAME AS INCOME TO THE EXTENT OF RS. 5 LAKHS FOR Y1 THOUGH AVAILS CREDIT FOR THE ENTIRE TDS ON RS. 20 LAKHS. HE RETURNS ANOTHER RS. 5 LAKHS FROM THE SAME FOR Y2 BUT DOES NOT RETURN THE BALANCE RS.10 LAKHS WH ICH FALLS TO BE ASSESSED FOR Y3 (SAY). THE GOVERNMENT WOULD STAND TO LOOSE 50% OF ITS RECEIPT BY WAY OF TAX WHICH IT OTHERWISE WOULD HAVE SECURED THRO TDS AT LEAST TO SOME EXTENT. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AS WELL AS THE CASE LAW CITED. 4.1 IT PASSES OUR COMPREHENSION AS TO WHAT THE CONTROVERSY IN THE PRESENT CASE IS ABOUT. THE DEDUCTION OF TAX AT SOURCE IS M ADE IN ACCORDANCE WITH PROVISIONS OF PART B TO CHAPTER XVII OF THE ACT TIT LED `COLLECTION AND RECOVERY OF TAX. PART A OF THE SAID CHAPTER IS TITLED `GEN ERAL AND CONTAINS TWO PROVISIONS WHICH ARE IN THE NATURE OF A PRELUDE TO THE ENSUING PARTS OF THE CHAPTER. SECTION 190 OF THE ACT CLARIFIES THAT THE TAX SHALL BE DEDUCTED AND COLLECTED AS THE CASE MAY BE AS PER THE PROVISION S OF THE CHAPTER NOTWITHSTANDING THAT THE REGULAR ASSESSMENT IN RESP ECT OF INCOME (WHICH IS SUBJECT TO TAX DEDUCTION OR COLLECTION) IS TO BE MA DE IN A LATER ASSESSMENT YEAR AND FURTHER THAT THE SAID PROVISION IS WITHOUT PR EJUDICE TO THE CHARGE OF TAX ON INCOME U/S. 4(1) OF THE ACT. SECTION 191 STATES TH AT TDS IS ONLY ONE OF THE MODES OF RECOVERY OF TAX AND THAT THE SAME DOES NOT PREC LUDE DIRECT PAYMENT OF TAX BY I.T.A. NO I.T.A. NO I.T.A. NO I.T.A. NOS SS S. .. .1 11 18 88 85 55 54 & 1 4 & 1 4 & 1 4 & 18 88 86 66 61 11 1/ // /MDS/ MDS/ MDS/ MDS/0 00 09 99 9 5 THE PERSON RECEIVING INCOME. TDS ON INTEREST IS CO VERED BY SECTION 194A OF THE ACT. SUB-SECTION (1) THEREOF OBLIGES PERSONS SPECI FIED THEREUNDER RESPONSIBLE FOR PAYING INTEREST [OTHER THAN INTEREST ON SECURIT IES] TO DEDUCT TAX AT SOURCE AT THE TIME OF CREDIT OF SUCH INTEREST TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF WHICHEVER IS EARLIER. AS SUCH TH E OBLIGATION CAST U/S. 194(1) TO WHICH WITH SOME EXCEPTIONS BY WAY OF MONETARY LI MITS OR CERTAIN SPECIFIED TRANSACTIONS ARE LISTED PER SUB-SECTION (3) IS FOR DEDUCTION OF TAX AT SOURCE AT THE EARLIER OF THE TWO POINTS IN TIME I.E. PAYMEN T OR CREDIT THE LATTER SIGNIFYING ACCRUAL. IN OTHER WORDS THE TAX DEDUCTION HAS TO M ATCH - IN TIME - THE EARLIER OF THE PAYMENT (RECEIPT) OR ACCRUAL. PUT DIFFERENTLY THE DEDUCTION OF TAX AT SOURCE DOES NOT NECESSARILY OR IS NOT REQUIRED TO MARCH ALONGSIDE THE CORRESPONDING INCOME RECOGNITION OF WHICH BY THE RECIPIENT COULD BE EITHER ON ACCRUAL OR ON RECEIPT BASIS. THE ACCRUAL OF THE TAX LIABILITY ON INCOME WOULD ARISE ONLY ON THE SAME BEING/BECOMING ASSESSABLE. THERE IS THUS AN IN HERENT MISMATCH IN TERMS OF TIME BETWEEN THE PAYMENT OF TAX (PER TDS) AND T HE ACCRUAL OF TAX LIABILITY AGAINST THE CORRESPONDING INCOME I.E. GIVEN THE F ACT OF ADMISSION OF INCOME AS PER THE RELEVANT PROVISIONS OF LAW. IT IS IN VIEW OF AND TO ADDRESS THIS MISMATCH IN TIME SO THAT THE TAX STANDS DEDUCTED WHILE THE CORRESPONDING INCOME THOUGH ACCRUED HAS YET TO BE RECEIVED OR THOUGH RECEIVED AS BY WAY OF AN ADVANCE IS YET TO ACCRUE THAT THE LAW [PER SECTION 199 R/W SS . 190 & 191] CLARIFIES THAT THE CREDIT FOR THE TDS SHALL BE AVAILABLE FOR THE YEAR FOR WHICH THE CORRESPONDING INCOME IS ASSESSABLE. IT I.E. THE LAW AS PROVIDE D BY THE STATUTE TO OUR MIND COULD NOT GET CLEARER THAN THIS. 4.2 THE CONTROVERSY IN FACT SHOULD NOT OBTAI N EVEN IN THE ABSENCE OF THE PROVISION OF S. 199 AS SECTION 191 CLEARLY STATES THAT TDS IS ONLY ONE OF THE MODES OF RECOVERY OF TAX SO THAT TAX TO THAT EXTEN T HAS BEEN PAID ON A PARTICULAR INCOME AND THE LIABILITY TO TAX OF THE ASSESSEE-DE DUCTEE ON THE CORRESPONDING INCOME ABATES TO THAT EXTENT. NOW IT CANNOT BE TH AT WHILE THE TAX DEDUCTION AT SOURCE WHICH IS ONLY A MANNER OR MODE OF PAYMENT O R RECOVERY OF TAX IS ON INCOME A THE CREDIT THEREOF IS ALLOWED AGAINST I NCOME B. IN ANY CASE SECTION 199 MAKES THINGS ABUNDANTLY CLEAR ELIMINAT ING SCOPE OF ANY DOUBT. SUB- RULE 3(I) OF SECTION 37BA IS IDENTICALLY WORDED I. E. EMPLOYS THE SAME WORDS AS OF THE ERSTWHILE SECTION 199 OF THE ACT REPRODUCED HEREINABOVE SINCE OMITTED. SUB-RULE 3(II) OF THE ACT FURTHER CLARIFIES THAT WH ERE THE INCOME SUBJECT TO TDS IS ASSESSABLE OVER A NUMBER OF YEARS CREDIT FOR TDS S HALL BE ALLOWED ACROSS THOSE YEARS PROPORTIONATELY. CLEARLY A COURSE THAT PLAIN COMMON SENSE AND LINEAR THINKING WOULD SUGGEST GIVEN RULE 37BA(3)(I) OF TH E ACT. IN OTHER WORDS THERE IS A COMPLETE HARMONY BETWEEN THE ERSTWHILE SECTIO N 199 AND SECTION 199 AS IT NOW READS [AFTER SUBSTITUTION BY FINANCE ACT 2008 W.E.F. 1.4.2008] R/W R. 37BA. IN FACT THE TRIBUNAL IN MOST CASES INCLUDING THOS E CITED BEFORE US HAS DE HORS THE SAID PROVISION HELD EXACTLY WHAT R. 37BA(3)(II) STATES THAT IS PRIOR TO THE SAID RULE AND ONLY ON THE BASIS THAT THE CREDIT F OR TDS IS TO BE ALLOWED ONLY FOR THE ASSESSMENT YEAR FOR WHICH THE INCOME IS ASSESSA BLE. AS SUCH THE ASSESSEES CASE GETS NO SUPPORT WITH REFERENCE TO RULE 37BA OF THE RULES AS SOUGHT TO BE DRAWN BY THE LD. A.R. THE SAID RULE RATHER FURTH ER ENDORSES AND VALIDATES THE I.T.A. NO I.T.A. NO I.T.A. NO I.T.A. NOS SS S. .. .1 11 18 88 85 55 54 & 1 4 & 1 4 & 1 4 & 18 88 86 66 61 11 1/ // /MDS/ MDS/ MDS/ MDS/0 00 09 99 9 6 THIRD MEMBER DECISION OF THE TRIBUNAL IN THE CASE O F PRADIP KUMAR DHIR (SUPRA). THIS ALSO EXPLAINS AS TO WHY THE LD. D.R. WAS AT PAINS TO SHOW THE NECESSITY FOR R. 37BA. AS WE SEE IT THE SAID RULE SEEKS TO ADDRESS THE VARIOUS CONTINGENCIES THAT MAY ARISE IN ALLOWING THE CREDIT FOR TDS VIZ. QUA THE YEARS TO WHICH CORRESPONDING INCOME IS ALLOCATED; QUA THE PE RSONS IN WHOSE HANDS THE CORRESPONDING INCOME IS ASSESSABLE AS WHERE THE UN DERLYING SECURITY OR ASSET YIELDING INCOME SUBJECT TO TDS IS OWNED JOINTLY ET C. SOME OF WHICH STOOD ADDRESSED BY THE ERSTWHILE S. 199 ITSELF VIDE PRO VISO TO SUB-SECTION (1) THEREOF ALSO OMITTED SINCE. 4.3 COMING TO SECTION 198 THE SAME READS AS UNDER : ALL SUMS DEDUCTED IN ACCORDANCE WITH THE FOREGOING PROVISIONS OF THIS CHAPTER SHALL FOR THE PURPOSE OF COMPUTING THE INC OME 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 BE DEEMED TO BE INCOME RECEIVED. WE ARE UNABLE TO UNDERSTAND AS TO HOW THE SAID PROV ISION ASSISTS THE ASSESSEES CASE. ALL THE SECTION SAYS TO STATE IL LUSTRATIVELY IS THAT IF THERE IS DEDUCTION OF TAX AT SOURCE OUT OF INCOME OF RS. 10 0 [SAY @ 10%] CREDITING OR PAYING ASSESSEE RS 90 THE SAME I.E. RS 10/- IS ALSO HIS INCOME. IT NOWHERE SPEAKS OF THE YEAR FOR WHICH THE SAID AMOUNT OF TDS IS TO BE DEEMED AS INCOME RECEIVED. THE SAME WOULD UNDERSTANDABLY ONLY CORR ESPOND TO THE BALANCE 90%. AS SUCH IF 30% OF THE TOTAL RECEIPT/CREDIT IS ASSE SSABLE FOR A PARTICULAR YEAR IT SHALL BY VIRTUE OF SECTION 198 OF THE ACT BE RECKO NED AT RS. 30/- [RS. 100 X 30%] AND NOT RS. 27 [RS. 90 X 30%]. THUS THOUGH AGAIN A NATURAL CONSEQUENCE OF THE FACT THAT TAX DEDUCTED IS ONLY OUT OF THE AMOUNT PA ID OR DUE TO BE PAID AS INCOME AND IN SATISFACTION OF THE TAX LIABILITY ON THE GROSS AMOUNT TO THAT EXTENT YET CLARIFIES THE MATTER AS IT MAY BE OPEN TO SOME BODY TO SAY THAT TDS OF RS. 10/- HAS NEITHER BEEN CREDITED NOR RECEIVED SO THA T IT DOES NOT FORM PART OF INCOME RECEIVED OR ARISING AND THUS OUTSIDE THE S COPE OF S. 5 OF THE ACT. THAT TO OUR MIND IS SUM AND SUBSTANCE OF SECTION 198. 4.4 TRUE TAX DEDUCTION ALSO DOES NOT AGREE I.E. IN QUANTUM WITH THE ACTUAL TAX LIABILITY ARISING ON THE CORRESPONDING INCOME WHICH HAS TO BE DETERMINED ONLY AFTER GIVING EFFECT TO ALL RELEVANT AND APPLIC ABLE PROVISIONS OF THE ACT. BUT THEN IT IS NEITHER THE REVENUES CLAIM NOR ANYBOD YS CASE THAT THE TWO SHOULD AGREE. TDS IS ONLY AN ESTIMATED TAX DEDUCTED AT S OURCE AT THE PRESCRIBED RATES OUT OF THE STIPULATED INCOMES. THE ACTUAL TAX LIAB ILITY OF THE ASSESSEE-DEDUCTEE FOR THE YEAR MAY BE HIGHER OR LOWER THAN THE AMOUNT OF TDS RESULTING IN PAYMENT OR REFUND OF TAX AS THE CASE MAY BE. THE B ONE OF CONTENTION IN THE PRESENT CASE IS THE YEAR FOR WHICH THE CREDIT FOR T DS IS TO BE ALLOWED AND WHICH AS PER THE CLEAR PRESCRIPTION OF LAW IS TO BE THE YEAR FOR WHICH CORRESPONDING INCOME IS ASSESSABLE TO TAX. I.T.A. NO I.T.A. NO I.T.A. NO I.T.A. NOS SS S. .. .1 11 18 88 85 55 54 & 1 4 & 1 4 & 1 4 & 18 88 86 66 61 11 1/ // /MDS/ MDS/ MDS/ MDS/0 00 09 99 9 7 4.5 COMING TO THE DECISIONS CITED BEFORE US NONE O F THEM AS POINTED OUT BY THE LD. D.R. ADVERT TO THE THIRD MEMBER DECISION; ALL BUT ONE I.E. SUPREME RENEWABLE ENERGY LTD. (SUPRA) BEING PRIOR TO THE S AME OR ITS REPORTING. AS SUCH WE FAIL TO SEE AS TO HOW THESE WOULD PREVAIL OVER THE CLEAR PROVISIONS OF THE ACT I.E. SECTIONS 198 & 199 OF THE ACT [R/W S S. 190 & 191]. THE HONBLE APEX COURT IN ESCORTS LTD. V. UNION OF INDIA (1993) 199 ITR 43 (SC) HAS HELD THAT WHERE A PROVISION IS CLEAR AS TO ITS SCOPE T HAT INTERPRETATION IS TO BE ADOPTED IRRESPECTIVE OF ACCEPTANCE OF A CONTRARY V IEW BY SOME AUTHORITY AND RAISED BY THE ASSESSEE. THE SAID UNDERSTANDING GETS FURTHER VALIDATED BY R. 37BA AS WELL AS BY THE THIRD MEMBER DECISION BY THE TRIB UNAL. IN FACT AS OUR PERUSAL OF THE SAID ORDERS REVEAL THE CONTROVERSY IN THOSE CASES AROSE DUE TO THE PECULIAR CIRCUMSTANCES SO THAT THE MATTER REQUIRED ADJUDICATION BY READING THE PROVISION PURPOSIVELY; AS WHERE THE CORRESPONDING INCOME REPRESENTED A CAPITAL RECEIPT TAX CREDIT OF TDS COULD NOT BE DEN IED. SIMILARLY WHEN THE WORK- IN-PROGRESS IS STATED AT THE BILLED VALUE THOUGH T HE RECOGNITION OF INCOME IS DEFERRED TO THE COMPLETION OF THE PROJECT DUE TO UN CERTAINTIES PREVALENT IN THE TRADE THE CORRESPONDING TAX DEDUCTED HAS TO BE ALL OWED FOR THE RELEVANT YEAR/S AND COULD NOT BE POSTPONED TILL THE COMPLETION OF T HE PROJECT. THE SAME IN OUR VIEW DO NOT REPRESENT A RULE WHILE THE THIRD MEMB ER DECISION COULD BE SAID TO BE REPRESENTATIVE OF THE CONSISTENT VIEW OF THE TRI BUNAL IN THE MATTER. THE ISSUE UNDER CONSIDERATION IS ONLY THE YEAR OF ALLOWABILIT Y OF THE CREDIT FOR TDS AND WHICH IS PRECISELY WHAT THE SECTIONS 198 & 199 SEEK TO ADDRESS. IN ANY CASE THE LAW HAS TO BE READ AS IT IS AND APPLIED AS JUSTIFIA BLY AND PURPOSIVELY AS THE CIRCUMSTANCES OF THE CASE ADMIT. AS SOUGHT TO BE E MPHASIZED BY US THE PROVISION [SECTION 199 OF THE ACT] EVEN OTHERWISE REPRESENTS A COMMON SENSE PURPOSIVE VIEW OF THE MATTER; TDS BEING ONLY A MANN ER OF RECOVERY OF TAX SO THAT IT WOULD SUBJECT TO THE PROVISIONS TO THE CON TRARY BE ALLOWABLE ONLY AGAINST THE CORRESPONDING INCOME AS OTHERWISE TAX ON ONE I NCOME MAY GET SET OFF AGAINST TDS ON ANOTHER AND WHICH WOULD BE DEFEATIV E OF ITS CONCEPT AS WELL AS CONTRADICTORY TO THE TDS PROVISIONS. 4.6 FINALLY WE MAY ALSO ADVERT TO THE QUESTION AD DRESSED BY THE BENCH TO THE LD. A.R. WHO STATED THAT TDS AMOUNT [RS 2.14 LA KHS] STANDS OFFERED AS INCOME FOR THE YEAR SO THAT CREDIT FOR THE SAME AS TAX PAID WOULD ENSUE AS HELD IN THE CASE OF SHRIRAM INVESTMENTS (SUPRA). THE SA ME IS FIRSTLY WITHOUT ANY BASIS; THE FINDING BY THE ASSESSING OFFICER (WHICH STANDS NOT REBUTTED) AS WELL AS THE VERY BASIS OF HIS ORDER DENYING CREDIT OF TD S BEING THAT THE CORRESPONDING INCOME HAS NOT BEEN OFFERED TO TAX FO R THE RELEVANT YEAR. THE LD. CIT(A) HAS NOT ISSUED ANY FINDING IN THE MATTER WHI LE APPLYING THE DECISION IN THE CASE OF SHRIRAM INVESTMENTS (SUPRA) EVEN AS T HEREIN LIES THE ROOT OF THE CONTROVERSY. FURTHER THE AVERMENT BY THE LD. A.R. IS RATHER IN CONTRADICTION WITH THE ASSESSEES PROFESSED METHOD OF RECOGNIZING INCO ME I.E. CASH (RECEIPT) BASIS SO THAT IT IS NOT UNDERSTOOD AS TO HOW THE IMPUGNED TDS AMOUNT WAS ACCOUNTED FOR AS INCOME FOR THE YEAR. IT COULD AT BEST ACC OUNT FOR THE AMOUNT OF TDS PROPORTIONATE TO THE INCOME ACTUALLY RECEIVED AND A CCOUNTED FOR AS ITS INCOME FOR THE YEAR I.E. WHAT S. 198 IN FACT MANDATES. THE DENIAL OF CREDIT FOR TDS IN I.T.A. NO I.T.A. NO I.T.A. NO I.T.A. NOS SS S. .. .1 11 18 88 85 55 54 & 1 4 & 1 4 & 1 4 & 18 88 86 66 61 11 1/ // /MDS/ MDS/ MDS/ MDS/0 00 09 99 9 8 ONLY ON ACCOUNT FOR THE INCOME NOT RECEIVED BY THE ASSESSEE AND AS SUCH NOT RECOGNIZED AND RETURNED BY IT SO THAT THERE IS NO SCOPE OF THE IMPUGNED TDS BEING INCLUSIVE OF SUCH A PROPORTIONATE AMOUNT AND TOWARD WHICH WE ALSO DO NOT FIND ANY CLAIM BY THE ASSESSEE BEFORE ANY FORUM INCLUDING US AND THE ASSERTION MADE - WITHOUT EVEN ATTEMPTING TO SUBSTA NTIATE THE SAME - WAS ONLY IN RESPONSE TO A QUERY BY THE BENCH. FURTHER EVEN ASSUMING HYPOTHETICALLY OF THE IMPUGN ED TDS AMOUNT HAVING BEEN RETURNED AS INCOME FOR THE YEAR THE AS SESSEE COULD CLAIM CREDIT IN ITS RESPECT ONLY TO THE EXTENT OF THE AMOUNT OF TDS PROPORTIONATE TO THE SAME. THAT IS IF THE TDS RATE IS 10% (SAY) AT RS. 0.214 LACS. IN FACT IN THIS CONTEXT WE MAY ALSO ADD THAT THE CREDIT [FOR TDS] IS TO BE ALLOWED FOR THE YEAR FOR WHICH THE INCOME IS ASSESSABLE AND NOT ASSESSED SO THAT INCOME HAS TO AS PER ASSESSEES CONSISTENTLY FOLLOWED METHOD OF ACCOUNTI NG BE ASSESSABLE FOR THAT YEAR. AS SUCH STRICTLY SPEAKING THE ASSESSEE WOUL D NOT BE ENTITLED TO ANY CREDIT FOR TDS EVEN IF THE SAME STANDS RETURNED FOR THE YE AR BEING NOT ASSESSABLE FOR THE RELEVANT YEAR EVEN AS THERE IS NO FINDING OR EVEN A CLAIM QUA THE SAID RETURNING WHICH IS CONTRADICTORY TO THE ASSESSEES BASIS OF RETURNING INCOME AND RATHER ABORTIVE OF THE ISSUE ARISING FOR OUR ADJUDICATION IN THE PRESENT CASE. 5. CONCLUSION THE ISSUE ARISING FOR OUR ADJUDICATION I.E. THE Y EAR OF ALLOWANCE OF CREDIT FOR TDS STANDS ADDRESSED BY THE CLEAR LANGUAGE OF THE P ROVISIONS ITSELF. THE SAME RATHER PRESENTS AN IDEAL SITUATION WHERE THE COURS E YIELDED BY PLAIN COMMON SENSE MATCHES WITH THAT STATUTORILY PROVIDED I.E. ALLOW CREDIT FOR TDS AGAINST THE CORRESPONDING INCOME ON ITS ASSESSMENT SO THAT EVEN THE ABSENCE OF SECTION 199 WOULD YIELD THE SAID COURSE IN VIEW OF THE DICT UM BY THE HON'BLE APEX COURT THAT TAX LAWS SHOULD BE APPLIED AS FAR AS CIRCUMST ANCES MAY ADMIT IN AN EQUITABLE MANNER [REFER: CIT V. GHOTLA J.H. (1985) 156 ITR 323 (SC)]. IN FACT IN ALL THE DECISIONS CITED BY THE REVENUE IN ITS FA VOUR I.E. EXCEPT FOR THE THIRD MEMBER DECISION THE TRIBUNALS VERDICT ARISES FOLL OWING THIS APPROACH AND IS WITHOUT REFERENCE TO SECTION 199 OF THE ACT. RULE 37BA FURTHER VALIDATES THE REVENUES STAND. THE SAME STANDS BROUGHT ON THE STA TUTE WITH EFFECT FROM A LATER DATE TO PROVIDE FOR A COMPREHENSIVE GUIDELINE FOR ALL MATTERS RELATING TO THE ALLOWANCE OF CREDIT FOR TDS IN THE VARIETY OF SITUA TIONS THAT GENERALLY OBTAIN. THE ARGUMENT OF NONRETROSPECTIVITY OF THE SAID RULE - WHICH HAS NOT BEEN APPLIED BY THE REVENUE - BY THE LD. A.R. IS BOTH M ISCONCEIVED AND SPECIOUS. 6. IN THE RESULT APPEAL OF THE REVENUE IS ALLOWED . 5. AS THE ISSUE IS SQUARELY COVERED IN FAVOUR OF T HE REVENUE AS ACCEPTED BY THE LD. COUNSEL FOR THE ASSESSEE ALSO THEREFORE FOLLOWING THE SAID DECISION I.T.A. NO I.T.A. NO I.T.A. NO I.T.A. NOS SS S. .. .1 11 18 88 85 55 54 & 1 4 & 1 4 & 1 4 & 18 88 86 66 61 11 1/ // /MDS/ MDS/ MDS/ MDS/0 00 09 99 9 9 WE DECIDE THE ISSUE RAISED BY THE REVENUE IN ITS F AVOUR BY REVERSING THE ORDER OF THE LD. CIT(A) AND RESTORING THAT OF THE ASSESSI NG OFFICER. 6. AS A RESULT BOTH THE APPEALS OF THE REVENUE AR E ACCEPTED. ORDER PRONOUNCED SOON AFTER THE CONCLUSION OF HEAR ING ON 13.07.2011. SD/- SD/- (ABRAHAM P. GEORGE) ACCOUNTANT MEMBER (U.B.S. BEDI) JUDICIAL MEMBER CHENNAI DATED THE 13.07.2011 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.