ITO Business Ward –II (4) v. M/s Shri Anupallavi Finance & Investments (2011-TIOL-78-ITAT-MAD)
Facts: The assessee is a firm and engaged in business of financing and follows cash system of accounting. It gave a loan to a company on interest. The borrower while crediting the interest deducted TDS and issued TDS certificate. The assessee claimed the credit of TDS without offering the corresponding income to tax . The AO disallowed the claim of the assessee .The CIT (A) allowed the appeal of the assessee.
Issue: When should be TDS credit be allowed to the tax payer?
Decision:
• As per the provisions of the ITA tax deduction has to match – in time – the earlier of payment or accrual.
• HenceTDS need not march alongside the corresponding income which may be offered to tax by the tax payer on accrual or receipt as the case may be.
•As a result there is a time mismatch between the tax deduction and the accrual of tax liability.
•However, section is very clear. It provides for availability of tax credit in the year for which the corresponding income is assessable.
THE TRIBUNAL’S VIEW THAT,- “However, section is very clear. It provides for availability of tax credit in the year for which the corresponding income is assessable.”, AS IS NOTED, APPEARS TO BE THE ONE AND ONLY POSSIBLE. THAT BEING SO,IT IS QUITE UNCLEAR WHY / HOW THE THE FIRST APPEAL WAS ALLOWED, AND ON WHAT GROUNDS.
VSWAMI