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Income Tax Appellate Tribunal, DELHI BENCH ‘G’ : NEW DELHI
Before: SHRI N.S. SAINI & SHRI KULDIP SINGH
PER KULDIP SINGH, JUDICIAL MEMBER :
The Appellant, Mrs. Swayam Prabha Jain (hereinafter referred to as the ‘assessee’) by filing the present appeal sought to set aside the impugned order dated 13.10.2015 passed by the Commissioner of Income-tax (Appeals)-18, New Delhi qua the assessment year 2012-13 on the grounds inter alia that :-
“1. The learned Commissioner of Income Tax (Appeals) has grossly erred both on facts and in law in confirming the order of assessment determining the total income of the appellant at Rs.27,50,931/- against the returned income of Rs.13,30,903/-, despite the fact that the Learned Commissioner of Income Tax (Appeals) in para 5.6 has observed that Rs.14,20,028/- was rightly assessed in the Assessment Year 2014-2015. He thus ought to have deleted the addition of Rs.14,20,028/- i.e. Rs.7,25,094/- and Rs.6,94,934/- being rent and interest on unpaid rent.
2. That the learned Commissioner of Income Tax (Appeals) has further erred in holding that in the income offered by the assessee of Rs.13,30,903/- (a sum of Rs.1,57,782/- representing the amount of tax deducted at source i.e., Rs.80,567/- towards rent and Rs.77,215/- by way of interest) though has been taxed yet no credit of the said sum could be allowed to her, despite the fact the Assessing Officer had granted such credit of tax deducted at source.
3. That on the aforesaid findings of the Commissioner of Income Tax (Appeals) thus the said sum of Rs.1,57,782/- could not have been assessed to tax as the income of the Assessment Year 2012-2013 and ought to have been excluded from the total income of the assessee.
That the learned Commissioner of Income Tax (Appeals) has further failed to appreciate that the deductor being the tenant, had deducted the tax at source in the Financial Year 2011-2012 of Rs.1,57,782/- (which sum has been included by the assessee as her income for the Assessment Year 2012-2013) had rightly been given credit of tax deducted at source, should have directed the credit be given of such tax deducted at source.
5. That the learned Commissioner of Income Tax (Appeals) has failed to consider that Rule 37 BA (3) of the Income Tax Rules, 1962 could not override the provisions of section 199 of the Act and thus the credit of TDS, in respect of which income has been assessed to tax, was required to be allowed to the assessee since on the first principle, the amount of TDS represented the amount of income of the assessee and was so assessable in that assessment year and as such credit of tax deducted at source should be granted to the assessee.
Further the levy of interest u/s 234B of the Income Tax Act, 1961 is also in disregard of the fact that the tax had been deducted at source and such amount of TDS could not have been disregarded, while computing the interest leviable under any of the provision of the Income Tax Act. It is therefore prayed that the addition sustained of Rs.14,20,028/- directed to be deleted. It be further held that the amount of tax deducted at source of Rs.1,57,782/- be granted to the assessee and no interest u/s 234B of the Income Tax Act, 1961 was thus leviable.”
Briefly stated the facts necessary for adjudication of the controversy at hand are : assessee has shown his income in the return of income at Rs.3,27,611/- under the head ‘income from house property’ including an income of Rs.80,567/- received from Goodyear India Limited being the tax deducted at source by Goodyear India Ltd. on the rental of Rs.8,05,661/-. The assessee has shown the arrear of rent which were not received during the year which was accrued but only TDS was deposited by that deductor, Goodyear India Ltd., which has been duly reflected in 26AS statement. The deductor, Goodyear India Ltd., has deposited the payment of Rs.7,25,094/- in the District Court due to civil litigation pending there, which has been settled in 2014-15. So the assessee has included aforesaid amount of Rs.7,25,095/- in her total income for AY 2014-15.
Assessing Officer however proceeded to hold that since TDS has been deducted and the assessee has not shown the income in the return of income, a sum of Rs.14,20,028/- (Rs.7,25,094/- + Rs.6,94,934/-) was to be added to the income of the assessee and determined the income of the assessee at Rs.27,50,931/- as against the returned income of the assessee at Rs.13,30,903/-.
4. Assessee carried the matter by way of an appeal before the ld. CIT (A) by challenging the addition made by the AO of Rs.7,25,094/- and Rs.6,94,934/- who has allowed the appeal subject to certain observations. Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal.
We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
GROUND NO.1 6. Undisputedly, assessee has shown an income of Rs.3,27,611/- in her return of income which includes an income of Rs.80,567/- being the TDS deducted at source by Goodyear India Ltd. on the rent of Rs.8,05,661/-. It is also not in dispute that the rental of Rs.7,25,094/- remained deposited in the District Court due to some civil litigation pending between the assessee and its tenant which got settled in AY 2014-15. It is also not in dispute that M/s. Goodyear India Ltd. deposited an amount of Rs.6,94,934/- on account of interest on rental to the account of assessee. It is also not in dispute that the assessee has duly shown the aforesaid rent of Rs.7,25,094/- in its return of income for AY 2014-15. It is also not in dispute that the assessee’s system of accounting is cash and not maintaining any books of account.
AO made addition of Rs.7,25,094/- and Rs.6,94,934/- under the head “income from house property” and “income from other sources” respectively during the year under assessment on the ground that when the income arises/received in AY 2012-13 as per court orders and TDS was deducted on the said income, the same is to be assessed during the year under assessment.
In the backdrop of the aforesaid undisputed facts and the grounds of appeal raised by the assessee, the sole question arises for determination in this case is :-
“as to whether AO/CIT(A) have erred in treating the rental of Rs.7,25,094/- as income for AY 2012-13 the year under assessment which remained deposited in the District Court due to some litigation and was released in AY 2014-15?
The ld. CIT (A) while deciding this issue returned the following findings :-
“5.6 Further it is also observed that section 25B makes a special provision for arrears of rent received by an assessee. The provision reads as under: Section - 25B: 32[Special provision for arrears of rent received. 25B. Where the assessee- (a) is the owner of any property consisting of any buildings or lands appurtenant thereto which has been let to a tenant; and (b) has received any amount, by way of arrears of rent from such property, not charged to income-tax for any previous year, the amount so received, after deducting 33[ a sum equal to thirty per cent of such amount], shall be deemed to be the income chargeable under the head "Income from house property" and accordingly charged to income-tax as the income of that previous year in which such rent is received, whether the assessee is the owner of that property in that year or not.] And in that view of the matter, the amount is to be right.fi.1lly assessed in the year in which the amount has been finally received by the assessee that is assessment year 14-15. In this connection, the assessee has made a contention that even if it is held that the amount is assessable in the current year, the assessing officer ought to give allowance of 30% as per the provisions of section 25B. The claim is reasonable and just, but in view of my decision that the amount is not to be assessed in the current year, the matter remains academic.”
10. Bare perusal of the findings returned by the ld. CIT (A) on the issue in controversy apparently makes its clear that the rental of Rs.7,25,094/- and Rs.6,94,934/- on account of interest is to be rightfully assessed in the year under which the same was finally received by the assessee i.e. AY 2014-15. However, ld. CIT (A) though agreed with the factual and legal position has left the issue unanswered by treating the same as academic one on the ground that the AO ought to give allowance of 30% as per provisions of section 25B. Furthermore, when undisputedly amount of Rs.80,567/- and Rs.77,215/- being the tax deducted at source on the enhanced rental and interest on unpaid sum of rent respectively has been declared by the assessee during the year under assessment and the renal of Rs.7,25,094/- was declared as income in AY 2014- 15 in the year when the assessee received the same after settlement of the civil dispute by the District Court, makes the controversy ample clear that the rental of Rs.7,25,094/- and Rs.6,94,934/- on account of interest which remained deposited in the District Court till AY 2014-15 was not to be assessed in AY 2012-13 rather it has been rightfully declared as income by the assessee in AY 2014-15.
So, we are of the considered view that the ld. CIT (A) has erred in not directing the AO to delete the addition of Rs.14,20,028/-, Rs.7,25,094/- and Rs.6,94,934/- being the rental and interest respectively received by the assessee in AY 2014-15, hence the same is ordered to be deleted. Consequently, ground no.1 is determined in favour of the assessee.
GROUNDS NO.2 TO 6 11. Undisputedly, the assessee has shown her returned income during the year under assessment at Rs.13,30,903/- which includes an amount of Rs.1,57,782/- being the amount of tax deducted at source i.e. Rs.80,567/- towards rent and Rs.77,215/- by way of interest. It is also not in dispute that though the amount of TDS towards rent of Rs.80,567/- and an amount of Rs.77,215/- by way of interest was paid to the assessee who has shown as such in her return of income for AY 2012-13 but the rent on which TDS was deducted at source and interest of rent was only realized to the assessee in AY 2014-15.
Now, the grievance of the assessee is that she has received the rental on which TDS and interest was paid in AY 2012-13 was realized in AY 2014-15 due to civil litigation pending in the District Court, the credit of same should be given in the year in which the TDS was deducted because the said amount cannot be treated as income for the year under assessment as the assessee has received the rental lying deposited with District Court in AY 2014- 15 only.
The learned AR for the assessee contended that under Rule 37 BA(3) of the Income-tax Rules, 1962 (for short ‘the Rules”) if the tax deducted at source is included in the total income, the credit of TDS is to be allowed in the year of its inclusion and relied upon the decision rendered by the coordinate Bench of the Tribunal in Shri Chander Shekhar Aggarwal vs. ACIT in order dated 11.01.2016.
The co-ordinate Bench of the Tribunal in the case of Shri Chander Shekhar Aggarwal (supra) decided by the issue in favour of the assessee by returning following findings :-
“8. We have carefully considered the original submission and perused the material on record. It is noticed that in the instant case assessee as adopted cash method of accounting. He furnished his return of income claiming credit of TDS of Rs.79,91,290/- which was further revised to Rs.80,16,290/-. The AO restricted the credit of Rs.71,20,267/- in the intimation u/s 143(1) of the Act. The CIT(A) has upheld the restriction inter- alia on the ground that credit of TDS is to be allowed in terms of Rule 37BA(2) of the Rules and as such the credit would be allowable on pro rata basis in the year in which the certificate is issued and also in future where balance of such income is found to be assessable as per the mandate of section 199 of the Act. She has held that any amount which has not been assessed in any year but referred in the TDS certificate cannot be claimed under section 199 of the Act.
9. Sub-section (1) of section 199 of the Act provides that “any deduction made in accordance with the foregoing provisions of this chapter 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. In view thereof, since the tax was deducted at source by the deductor and the amount was deposited by the deductor on behalf of the assessee, the said sum is deemed to be the payment of tax made on behalf of the assessee. Also, section 198 of the Act provides that all sums deducted in accordance with Chapter XVII-B of the Act shall for the purposes of computing the income of an assessee be deemed to be income received. Thus, section 198 of the Act specifically provides that tax deducted at source shall for the purpose of computing income of an assessee will be deemed to be income received by the assessee. Thus, there is no justification not to grant credit of tax deducted and deposited to the account of Central Government by the deductor to the assessee from whose income, such tax has been deducted by the deductor, more particularly when such TDS stands duly declared as income by the assessee. The conclusion of the CIT(A) to grant proportionate credit is also not in accordance with the cash system of accounting followed by the assessee. The CIT(A) in her order has laid much emphasis on Rule 37BA of the Rules. Rule 37BA as inserted w.e.f. 1.4.2009 reads as under:-
“Credit for tax deducted at source for the purposes of section 199: 37BA.(1) Credit for tax deducted at source and paid to the Central Government in accordance with the provisions of Chapter XVII, shall be given to the person to whom payment has been made or credit has been given (hereinafter referred to as deductee) on the basis of information relating to deduction of tax furnished by the deductor to the income-tax authority or the person authorized by such authority. (2) [(i) Where under any provisions of the Act, the whole or any part of the income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, credit for the whole or any part of the tax deducted at source, as the case may be, shall be given to the other person and not to the deductee:
Provided that the deductee files a declaration with the deductor and the deductor reports the tax deduction in the name of the other person in the information relating to deduction of tax referred to in sub-rule (1).] (ii) The declaration filed by the deductee under clause (i) shall contain the name, address, permanent account number of the person to whom credit is to be given, payment or credit in relation to which credit is to be given and reasons for giving credit to such person.
(iii) The deductor shall issue the certificate for deduction of tax at source in the name of the person in whose name credit is shown in the information relating to deduction of tax referred to in sub-rule (1) and shall keep the declaration in his safe custody. (3)(i) Credit for tax deducted at source and paid to the Central Government, shall be given for the assessment year for which such income is assessable.
(ii) Where tax has been deducted at source and paid to the Central Government and the income is assessable over a number of years, credit for tax deducted at source shall be allowed across those years in the same proportion in which the income is assessable to tax. (4) Credit for tax deducted at source and paid to the account of the Central Government shall be granted on the basis of- (i) the information relating to deduction of tax furnished by the deductor to the income-tax authority or the person authorized by such authority; and (ii) the information in the return of income in respect of the claim for the credit, Subject to verification in accordance with the risk management strategy formulated by the Board from time to time.]”
A reading of the aforesaid will make it apparent that Rule 37BA(1) of the Act provides rules relating to have credit for the purpose of section 199 of the Act as is provided in section 199(3) of the Act. Rule 37BA(3)(i) of the Act provides that credit for tax deducted at source and credited to the account of Central Government shall be given for the assessment year for which, such income is assessable. Thus, if the said rule is read, it is clear that the assessee is entitled to get credit of the tax deducted at source once such income is included in his income. The admitted facts of the case of the appellant is that the tax deducted at source has been offered as income by the appellant in his return of income and therefore, having regard to even the rules, the assessee is entitled to credit of the tax deducted at source. The assessee before the CIT(A) had provided an illustration whereby it was submitted that assuming an assessee follows cash system of accounting and raises an invoice of Rs. 100/- for the services rendered in financial year 2010-11 on his client and the said client deposits TDS of Rs. 10/- to the credit of the account of the assessee and issued a certificate of TDS to the assessee and thus, it was submitted that an amount of Rs. 10/- was since deducted in respect of the assessee, the said sum is income of the assessee which is assessable to tax. It was submitted that once an income is assessable to tax, the assessee is eligible for credit despite the fact that remaining amount would be taxable in the succeeding years. We are in an agreement with the above submission that the TDS deducted by the deductor on behalf of the assessee and offered as income is to be allowed as credit in the year of deduction of tax deducted at source. Rule 37BA of the Act provides that credit for TDS should be allowed in the year in which income is assessable. Further clause (ii) of Rule 37BA(3) of the Act provides that where tax has been deducted at source paid to the Central Government and the income is assessable over a number of years, credit for tax deducted at source shall be allowed across those years in the same proportion in which the income is assessable to tax. In our considered opinion, this rule is only applicable where entire compensation is received in advance but the same is not assessable to tax in that year but is assessable in a number of years. However, such rule has no applicability, where assessee follows cash system of accounting. This can be supported from the illustration that suppose as assessee who is following cash system of accounting raises an invoice of Rs. 100/- in respect of which deductor deducts TDS of Rs. 10/- and deposits to the account of the Central Government. Accordingly, the assessee would offer an income of Rs. 10/- and claim TDS of Rs. 10/-. However in the opinion of the revenue, the assessee would not be entitled to credit of the entire TDS of Rs. 10/- but would be entitled to proportionate credit only. Now let us assume that Rs. 90/- is never paid to the assessee by the deductor. In such circumstances, Rs. 9/- which was deducted as TDS by the deductor would never be available for credit to the assessee though the said sums stand duly deposited to the account of the Central Government. Rule. 37BA(3) of the Act cannot be interpreted so as to say that TDS deducted at source and deposited to the account of the Central Government is though income of the assessee but is not eligible for credit of tax in the year when such TDS was offered as income. This view is otherwise also not in accordance with the provisions contained in section 198 and 199 of the Act. The proposition as laid out by the CIT(A) and learned DR before us therefore cannot be countenanced. In arriving at the above conclusion, we also derive support from the decision of Visakhapatnam Bench in the case of Peddu Srinivasa Rao (supra) has held as under: “8. We have carefully perused the provisions of section 199 of the Act and according to the pre-amended provisions of section 199, the credit of deduction made in accordance with the relevant provisions of this chapter and paid to the Central Government, shall be given for the amount so deducted on the production of the certificate furnished u/s 203 for the assessment made under this Act for the assessment year for which such income is assessable. But in the amended provisions the words "for the assessment year for which such income is assessable" has been omitted. Meaning thereby, that the legislature was quite conscious about the facts and hardships faced by some assessees, while making the amendments in section 199 and in amended provisions nothing has been stated about the year in which the credit of TDS is to be claimed. As per amended provisions of section 199, in sub-section 1, it has been stated that any deductions made in accordance with the foregoing provisions of this chapter 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. Therefore, as per the amended provisions, once the TDS was deducted, a credit of the same to be given to the assessees, irrespective of the year to which it relates. The pre-amended and the amended provisions of section 199 are extracted hereunder: "Section 199: Credit for tax deducted - (1) Any deduction made in accordance with the foregoing provisions of this Chapter 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 assessment made under this Act for the assessment year for which such income is assessable: (3) The Board may, for the purposes of giving credit in respect of tax deducted or tax paid in terms of the provisions of this Chapter, make such rules as may be necessary, including the rules for the purposes of giving credit to a person other than those referred to in sub-section (1) and sub-section (2) and also the assessment year for which such credit may be given. Section
(1) Any deduction made in accordance with the foregoing provisions of this Chapter 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 of the depositor or of the owner of property or of the unit-holder, or of the shareholder, as the case may be. (2) Any sum referred to in sub-section (1A) of section 192 and paid to the Central Government shall be treated as the tax paid on behalf of the person in respect of whose income such payment of tax has been made." 11. Infact the above view has also been followed by Ahmedabad Bench in the case of Sadhbav Engineering Ltd. (supra) wherein it was held as under: “26. We find that the Visakhapatnam Bench in the case of Peddu Srinivasa Rao (supra) has held as under: ……. The ld. DR could not cite any contrary decision or any other good reason for which the aforesaid decision of the Co-ordinate Bench of the Tribunal should not be followed by us. Respectfully following the aforesaid order of the Tribunal, we set aside the orders of the lower authorities and direct the AO to allow credit for the TDS to the assessee. Thus, the ground of appeal
of the assessee is allowed.”
12. For the reasons stated above, the claim of the assessee is allowed in as much as it is held that the assessee would be entitled to credit of the entire TDS offered as income by the assessee in his return of income. The grounds raised are therefore, allowed.”
15. However, we are of the considered view that the decision relied upon by the assessee rendered by the coordinate Bench of the Tribunal in Shri Chander Shekhar Aggarwal (supra) is to be read in the light of the provisions contained u/s 37BA (3) of the Rules which is extracted below for ready perusal :-
“(3)(i) Credit for tax deducted at source and paid to the Central Government, shall be given for the assessment year for which such income is assessable. (ii) Where tax has been deducted at source and paid to the Central Government and the income is assessable over a number of years, credit for tax deducted at source shall be allowed across those years in the same proportion in which the income is assessable to tax.”
Section 37BA (3) is categoric enough to explain as to how the credit for tax deducted at source and paid to the account of the Central Government is to be given. When the tax deducted at source and paid to the Central Government and the income is assessable over a number of years, the credit for tax deducted at source shall be allowed across those years in the same proportionate in which the income is assessable to tax. In other words, an amount of TDS towards rent of Rs.80,567/- and an amount of Rs.77,215/- by way of interest is to be assessable on the income of AY 2012-13 proportionately and the credit for tax of the remaining TDS paid to the Central Government shall be given to the assessee in AY 2014-15 when actual rent of Rs.7,25,094/- and Rs.6,94,934/- on account of interest has been realized on settlement of the civil dispute. So, the AO is directed to give the credit of tax deducted at source and paid to the assessee in proportionate of income assessable to tax in AY 2012-13 and 2014-15. Consequently, grounds no.2 to 6 are determined in favour of the assessee. 16. Resultantly, the appeal filed by the assessee is allowed. Order pronounced in open court on this 26th day of February, 2019.