ACIT 26(1), MUMBAI V. DEVESH JANI, MUMBAI

ITA 7071/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1352 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 21-11-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Keywords: Business income; Opportunity of being heard
• Section: 43B; 201(1); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 6391/MUM/2014 ASSESSMENT YEAR: 2011-12 SHRI DEVESH N JANI VS. ACIT 21(2) 372/8 VASANT CHS LTD., BHAUDAJI MUMBAI ROAD, MATUNGA MUMBAI 400019 PAN NO. AEPJ2009J ITA NO. 7071/MUM/2014 ASSESSMENT YEAR: 2011-12 ACIT 21(2) VS. SHRI DEVESH N JANI R. NO. 508, C-10, 5 TH FLOOR, 372/8, VASANT CHS LTD., BKC ,BANDRA (E), BHAUDAJI ROAD, MATUNGA, MUMBAI 400051 MUMBAI 400019 PAN NO. AEIPJ2009J (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MALAV P. SHETH, AR REVENUE BY: SHRI LOVE KUMAR, DR DATE OF HEARING : 24/0 1/2017 DATE OF PRONOUNCEMENT: 11/04/2017 ORDER PER N.K. PRADHAN, AM THESE TWO CROSS APPEALS ONE BY THE ASSESSEE AND T HE OTHER BY THE REVENUE FOR THE ASSESSMENT YEAR 2011-12 DIREC TED AGAINST THE ORDER OF THE COMMISSIONER (APPEALS) 32, MUMBAI, I NVOLVE SOME COMMON ISSUES. AS SUCH, WE ARE PROCEEDING TO DISPOS E THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE . ITA NO. 6391 & 7071/MUM/2014 2 2. THE GROUND OF APPEAL FILED BY THE ASSESSEE READS AS UNDER: ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE UNDER S ECTION 43B OF THE INCOME-TAX ACT, 1961 (ACT) IN RELATION TO PROVISION FOR BMC CHARGES OF RS. 27,04,976/- WITHOUT APPRECIATING THAT THE AMOUNT PAYABLE IS IN THE NATURE OF PREMIUM PAYABLE TO BMC AND THEREFORE, NOT IN THE NATURE OF ANY TAX/DUTY/CESS O R FEE WITHIN THE MEANING OF SECTION 43B. 3. IN A NUTSHELL, THE FACTS ARE THAT THE ASSESSEE HAS DEBITED PROVISIONAL EXPENSES OF RS. 1,15,00,000/- IN HIS P& L A/C FOR SHYAM VIHAR PROJECT. IN RESPONSE TO A QUERY RAISED BY THE ASSESSING OFFICER (AO), THE ASSESSEE SUBMITTED THAT AMOUNT OF RS. 87, 95,024/- WAS SPENT TILL 31.03.2012 AND THE REMAINING AMOUNT OF R S. 27,04,976/- REMAINED UNSPENT. THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE AMOUNT OF RS. 27,04,976/- IS TO BE PAID TO GOVT. AU THORITIES FOR OBTAINING OC ETC.. THE AO OBSERVED THAT THE LIABILI TY OF RS. 27,04,976/- IS TO BE PAID TO GOVT. AUTHORITIES AS FEES AND AS P ER PROVISIONS OF SECTION 43B OF THE ACT, SUCH EXPENSES ARE ALLOWABLE ONLY IF PAID BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME. AS THE ASSESSEE HAD NOT PAID THE ABOVE AMOUNT BEFORE FILING THE RETURN OF INCOME , THE AO MADE DISALLOWANCE OF RS. 27,04,976/- U/S 43B OF THE ACT. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FIL ED AN APPEAL BEFORE THE LEARNED CIT(A). WE FIND THAT THE LEARNED CIT(A) HAS DISMISSED THE APPEAL FILED BY THE ASSESSEE ON THE R EASONS THAT (I) THE AMOUNT OF RS. 27,04,976/- REPRESENTS 50% OF THE BAL ANCE AS ONE TIME PREMIUM I.E. THE DIFFERENCE DEMANDED BY THE BMC WHI CH IS PAYABLE BY THE ASSESSEE BEFORE NOC TO OCCUPATION / BCC WHIC HEVER IS EARLIER, (II) THE LETTER ISSUED BY BMC SHOWS THAT THE AMOUNT OF RS. 24,10,500/- HAS BEEN MENTIONED TOWARDS BALANCE AMOUNT OF ONE TI ME PREMIUM / ITA NO. 6391 & 7071/MUM/2014 3 DIFFERENCE DEMANDED BY BMC AND APPARENTLY THIS APPE ARS TO BE 50% OF ONE TIME PREMIUM FOR THE EXCESS FLOOR AREA, ETC. (III) IT IS FOR SERVICES THAT AS PER THE LAWS GOVERNING IN FORCE TH AT BMC CHARGES ITS FEES, THOUGH MAY BE CALLED AS ONE TIME PREMIUM FOR THE USE OF EXCESS FLOOR AREA, (IV) IT IS THE ASSESSEE WHO WANTED TO U TILISE EXCESS FLOOR AREA FOR WHICH BMC AS PER THEIR RULE WERE TO GRANT PERMISSION AND ENTER SUCH PERMISSION GRANTED IN THEIR RECORDS AND THEREBY LEGITIMISE USE OF SUCH EXCESS FLOOR AREA FOR WHICH THEY HAVE C HARGED A FEE BY THE NAME ONE TIME PREMIUM AND (V) SECTION 43B SAYS ANY SUM PAYABLE BY THE ASSESSEE BY WAY OF TAX, DUTY, CESS OR FEE, BY W HATEVER NAME CALLED, UNDER ANY LAW FOR THE TIME BEING IN FORCE. 5. BEFORE US, THE LEARNED COUNSEL OF THE ASSESSEE SUBM ITS THAT OUT OF THE PROVISION OF RS. 1,15,00,000/-, THE ACTUAL E XPENSES INCURRED IN A.Y. 2012-13 AMOUNT TO RS. 87,95,024/- AND THE BALA NCE AMOUNT OF RS. 27,04,976/- IS THE AMOUNT PROVIDED FOR THE FSI PREM IUM TO BE PAID WHEN DEMANDED BY BMC. IT IS SUBMITTED THAT THE SAID AMOUNT OF FSI PREMIUM DOES NOT FALL WITHIN THE AMBIT OF TAX, DUT Y, CESS OR FEE WITHIN SECTION 43B(A). IT IS STATED THAT THE SAID P AYMENT WAS MADE FOR OBTAINING ADDITIONAL FSI, THEREBY IT IS PAYMENT TOW ARDS ACQUISITION OF LICENSE. AT THE MOST, IT CAN BE SAID AS PAYMENT TOW ARDS OBTAINING LEASEHOLD RIGHTS WHEREIN BMC IS THE LESSOR. SINCE I T IS TOWARDS OBTAINING EXCLUSIVE RIGHTS / PRIVILEGE OF BMC, THER E WAS NO CONSIDERATION FOR SERVICES FROM BMC. THE FACT THAT THIS IS PAYMENT TOWARDS LICENSE FEE / CONSIDERATION FOR OBTAINING E XCLUSIVE RIGHT IS PROVED FROM THE FACT THAT BMC ITSELF HAS STATED SO IN ITS LETTER DATED 18.03.2008 (PAGE 16 & 17 OF THE PAPER BOOK). THE BM C HAS ALSO STATED THAT IF ANY EXTRA POTENTIAL IS DERIVED IN TH E FORM OF ADDITIONAL ITA NO. 6391 & 7071/MUM/2014 4 FSI ON THE SAID PLOT DUE TO REVISION OF THE POLICIE S / RULES ETC., IT, AS LESSOR WILL HAVE EXCLUSIVE RIGHT OF TAKING ONE TIME PREMIUM FOR THE SAID EXTRA FSI AS PER THE THEN PREVAILING POLICY. T HUS, THE LEARNED COUNSEL SUBMITS THAT FEE U/S 43B(A) ENVISAGES ONL Y SERVICE FEES AND NOT FEES FOR OBTAINING EXCLUSIVE TRADING RIGHTS. IT DOES NOT ENVISAGE LEASE PREMIUM / RENT. REGARDING THE FINDING OF THE LEARNED CIT(A) THAT THE SAID PROVISION IS A CONTINGENT LIABILITY, THE LEARNED COUNSEL SUBMITS THAT THERE IS PRESENT OBLIGATION ON THE PAR T OF THE ASSESSEE TO MAKE PAYMENT TO BMC OF THE SAID FSI PREMIUM AND THI S OBLIGATION IS ARISING OUT OF PAST EVENT, WHEREIN REASONABLE ESTIM ATE HAS BEEN MADE. 6. ON THE OTHER HAND, THE LEARNED DR SUPPORTS THE ORDE R OF THE LEARNED CIT(A) CONFIRMING THE DISALLOWANCE OF PROVI SION OF EXPENSES OF RS. 27,04,976/- MADE BY THE AO U/S 43B OF THE ACT. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. LET US RECAPITULATE THE FACTS. THE AMOUNT OF RS. 27,04,976/- IS PROVIDED FOR THE FSI PREMIUM TO BE P AID WHEN DEMANDED BY THE BMC. THE ASSESSEE HAD ALREADY PAID FIRST (50%) OF THE FSI PREMIUM IN F.Y. 2007-08 AMOUNTING TO RS. 24 ,10,500/-. THE BALANCE 50% WAS TO BE PAID WHEN DEMANDED BY BMC WHI CH SHALL BE BEFORE NOC TO OCCUPATION/ BCC WHICHEVER IS EARLIER. THIS HAS BEEN STATED BY BMC IN THEIR LETTER DATED 18.03.2008. NO W WE REFER TO SECTION 43B WHICH READS AS UNDER: NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PR OVISION OF THIS ACT, A DEDUCTION OTHERWISE ALLOWABLE UNDER THIS ACT IN RESPECT OF- (A) ANY SUM PAYABLE BY THE ASSESSEE BY WAY OF TAX, DUTY , CESS OR FEE, BY WHATEVER NAME CALLED UNDER ANY LAW FOR THE TIME BEI NG IN FORCE OR ITA NO. 6391 & 7071/MUM/2014 5 SHALL BE ALLOWED IRRESPECTIVE OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE ASSESSEE ACCORD ING TO THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY HIM ONLY IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF THAT PREVIO US YEAR IN WHICH SUCH SUM IS ACTUALLY PAID BY HIM. A PLAIN READING OF THE ABOVE SHOWS THAT SECTION 43B (A) DOES NOT ENVISAGE FEES FOR OBTAINING EXCLUSIVE TRADING RIGHT S. HE DOES NOT ENVISAGE LEASE PREMIUM / RENT. IN THE CASE OF CIT VS. C.J. INTERNATIONAL HOTELS LTD. (2002) 75 TTJ (DEL) 285, IT HAS BEEN HELD THAT THE LICENSE FEE CHARGED BY A MUNICIPAL CORPORATION FROM THE ASS ESSEE FOR GRANTING LICENSE TO THE ASSESSEE TO CONSTRUCT A HOT EL ON A PLOT OF LAND IS OF THE NATURE OF LAND REVENUE AND AS SUCH IT WOULD BE OUT OF PURVIEW OF SECTION 43B AS IT IS CLEARLY ARISING OUT OF A CO NTRACTUAL OBLIGATION AND IS NOT LEVIED BY ANY ACT OF CENTRAL OR STATE LE GISLATURE. IN GARO DEVI VS. ITO (2001) 71 TTJ (ASR.) 880, IT IS HELD THAT PREMIUM COLLECTED BY THE ASSESSEE ON SALE OF KEROSE NE ON BEHALF OF THE STATE GOVERNMENT CANNOT BE TREATED AS CESS, FE E, DUTY OR TAX OR ANY SUM PAYABLE BY THE ASSESSEE BY WHATEVER NAME C ALLED WITHIN THE MEANING OF SECTION 43B. ALSO THE SAID PROVISION IS NOT A CONTINGENT LIABILI TY, AS THERE IS PRESENT OBLIGATION ON THE PART OF THE ASSESSEE TO M AKE PAYMENT TO BMC OF THE SAID FSI PREMIUM AND THIS OBLIGATION IS ARISING OUT OF PAST EVENT, WHEREIN REASONABLE ESTIMATE HAS BEEN MADE IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) ON THE ABOVE ISSUES AND DELETE THE DISALLOWA NCE MADE BY THE ITA NO. 6391 & 7071/MUM/2014 6 AO OF BALANCE AMOUNT OF RS. 27,04,976/- PROVIDED BY THE ASSESSEE FOR THE FSI PREMIUM. THUS THE ABOVE GROUND OF APPEAL IS ALLOWED. 8. THE GROUNDS OF APPEAL FILED BY THE REVENUE READ AS UNDER: I. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THAT TH E TDS CAN BE ALLOWED AS DEDUCTION ONLY IF IT IS DEDUCTED AND PAID BEFORE THE DUE DATE. II. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THAT SI NCE THE CONTRACTUAL EXPENSES WERE LIABLE TO TDS AND IT WAS DEBITED TO P&L A/C FOR THE A.Y. 2011-12, TDS WAS REQUIRED TO BE MADE ON SUCH PAYMENTS AND WERE TO BE PAID BEFORE TH E DUE DATE OF FILING THE RETURN. III. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THAT TH E ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTI NG AND SINCE LIAISON WORK FEE IS IN THE NATURE OF BUSINESS INCOME, THE SAME WAS LIABLE TO BE ASSESSED ON ACCRUAL BASIS . 9. WE BEGIN WITH THE 1 ST & 2 ND GROUND OF APPEAL FILED BY THE REVENUE AS THEY ADDRESS A COMMON ISSUE. THE AO FOUN D FROM THE DETAILS FILED BY THE ASSESSEE THAT SOME CONTRACTUAL EXPENSES WERE LIABLE TO TDS SINCE DEBITED IN THE P&L A/C FOR THE A.Y. 2011-12. PROVISIONS FOR TDS WERE REQUIRED TO BE MADE ON SUCH PAYMENTS AND TO BE PAID BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME. THE AO DISALLOWED THE EXPENSES WHERE TDS AMOUNT WAS PAID A FTER THE DUE DATE AND ITS COMES TO RS. 43,63,515/-. 10. ON APPEAL, THE LEARNED CIT(A) OBSERVED THAT IN THE PRESENT CASE THE AO HAD NOT DISPUTED THAT THE QUESTIONED AMOUNTS REPRESENTED PROVISION. THEREFORE, THE SAID AMOUNTS COULD NOT HA VE BEEN CREDITED TO ANY INDIVIDUAL PAYEES ACCOUNT NOR COULD HAVE BE EN PAID AS THE ITA NO. 6391 & 7071/MUM/2014 7 CONCERNED PAYEE, TILL THE END OF FINANCIAL YEAR WAS NOT IDENTIFIED AND AN EXACT AMOUNT IN RESPECT OF SUCH PAYEE WAS NOT QU ANTIFIED. IN VIEW OF THE ABOVE, THE LEARNED CIT(A) DELETED THE DISALL OWANCE OF RS. 43,64,515/- MADE BY THE AO U/S 40(A)(IA) OF THE ACT . 11. BEFORE US, THE LEARNED DR SUPPORTS THAT THE ORDER P ASSED BY THE AO. 12. ON THE OTHER HAND, THE LEARNED COUNSEL OF THE ASSES SEE SUBMITS THAT THE ISSUE IS WHETHER DISALLOWANCE U/S 40(A)(IA ) OF THE ACT IS ATTRACTED ON PROVISIONS MADE IN A.Y. 2011-12, WHERE IN TDS IS DEDUCTED AND DEPOSITED IN THE YEAR OF INCURRING ACT UAL EXPENDITURE I.E. A.Y. 2012-13. IT IS SUBMITTED BY HIM THAT AN A DHOC PROVISION OF RS. 1.15 CRORES WAS MADE ON THE BASIS OF PROBABLE WORK TO BE DONE AS CERTIFIED BY THE ARCHITECT ON 31.03.2011. PAYEE FOR THE SAID EXPENSES WAS NOT DETERMINED AS ON 31.03.2011. PAYEES HAD ISS UED BILLS AND PAYMENTS WERE MADE IN THE A.Y. 2012-13. OUT OF THE SAID RS. 1.15 CRORES, TDS WAS APPLICABLE ON RS. 43,63,515/-. TDS WAS DEDUCTED AND DEPOSITED IN A.Y. 2012-13 AT THE TIME OF INCURRING THE EXPENSES. THE AO HAS MENTIONED THE DETAILS OF DEPOSIT OF THE TDS AT PAGE 5 OF THE ASSESSMENT ORDER. TDS WAS DEPOSITED IN A.Y. 2012-13 AS REPRODUCED BY THE A.O. AT PAGE 5 OF THE ASSESSMENT ORDER. THUS IT IS STATED THAT WHEN PAYEE IS NOT IDENTIFIED AND ALSO THE QUANTUM O F EXPENSE TO BE INCURRED, THEN TDS PROVISIONS WILL NOT BE APPLICABL E IN THE YEAR IN WHICH THE ADHOC PROVISIONS ARE MADE. THEREFORE, IT IS STATED THAT THE LEARNED CIT(A) HAS RIGHTLY DELETED THE DISALLOWANCE OF RS. 43,63,515/- MADE BY THE A.O. U/S 40(A)(IA) OF THE ACT. ITA NO. 6391 & 7071/MUM/2014 8 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. A SIMILAR ISSUE AROSE IN THE CA SE OF APOLLO TYRES LTD. VS. DCIT (2017) 163 ITD 177 (DELHI TRIB.). IN THE ABOVE C ASE, AN ORDER WAS PASSED BY THE AO U/S 201 AND 201(1A) HOLD ING THAT THE ASSESSEE FAILED TO DEDUCT TDS IN RESPECT OF PROVISI ONS MADE UNDER SEVERAL HEADS OF INCOME AMOUNTING TO RS. 15,07,25,6 37/-. ACCORDINGLY, THE DEMAND U/S 201(1) WAS RAISED AT RS . 1,04,02,197/- AND ALSO INTEREST U/S 201(1A) AT RS. 38,48,924/-. A FTER CONSIDERING THE ORDER IN THE CASE OF (I) ABAD BUILDERS (P) LTD. VS. ACIT (2014) 43 TAXMANN.COM 128, (II) DISHNET WIRELESS LTD. VS. DCIT (2015) 154 ITD 827 AND (III ) INDUSTRIAL DEVELOPMENT BANK OF INDIA VS. ITO (2007) 107 ITD 45, THE TRIBUNAL HELD AS UNDER: AFTER CONSIDERING THE SCHEME OF CHAPTER XVII-B WIT H REGARD TO TAX DEDUCTION AT SOURCE, WE AGREE WITH THE VIEWS EXPRES SED BY ITAT MUMBAI BENCH AND ITAT CHENNAI BENCH. AS PER THE SCH EME OF TDS UNDER CHAPTER XVII-B SECTION 199, THE CREDIT FOR TH E TDS IS TO BE GIVEN TO THE DEDUCTEE. THUS, THE IDENTIFICATION OF THE PE RSON FROM WHOSE ACCOUNT INCOME TAX WAS DEDUCTED AT SOURCE IS A PRE- REQUISITE CONDITION SO AS TO MAKE THE PROVISION FOR CHAPTER XVII-B WORK ABLE. TAX DEDUCTED AT SOURCE IS CONSIDERED TO BE TAX PAID ON BEHALF OF THE PERSON FROM WHOSE INCOME THE DEDUCTION WAS MADE AND, THEREFORE, THE CREDIT FOR THE SAME IS TO BE GIVEN TO SUCH PERSON. WHEN THE PAYEE IS NOT IDENTIFIABLE, TO WHOSE ACCOUNT THE CREDIT FOR SUCH TDS IS TO BE G IVEN. SECTION 203(1) LAYS DOWN THAT FOR ALL TAX DEDUCTIONS AT SOURCE, TH E TAX DEDUCTOR HAS TO FURNISH A CERTIFICATE TO THE PERSON TO WHOSE ACCOUN T SUCH CREDIT IS TO BE GIVEN. THEREFORE, WHEN THE TAX DEDUCTOR CANNOT ASCE RTAIN THE PAYEE WHO IS THE BENEFICIARY OF A CREDIT OF TAX DEDUCTION AT SOURCE, THE MECHANISM OF CHAPTER XVII-B CANNOT BE PUT INTO SERV ICE. IN VIEW OF THE ABOVE, WE, RESPECTFULLY AGREEING WITH THE VIEWS OF ITAT CHENNAI BENCH IN THE CASE OF DISHNET WIRELESS LTD. ( SUPRA ), SET ASIDE THE ORDERS OF AUTHORITIES BELOW ON THIS POINT AND RESTORE THE MAT TER TO THE FILE OF THE ASSESSING OFFICER FOR BOTH THE YEARS UNDER CONSIDER ATION. WE DIRECT THE ASSESSING OFFICER TO VERIFY WHETHER THE PAYEE IS ID ENTIFIABLE AND THE AMOUNT PAYABLE TO HIM IS ASCERTAINABLE. THEN THE AS SESSEE WOULD BE REQUIRED TO DEDUCT TAX AT SOURCE IN RESPECT OF SUCH PROVISION. HOWEVER, IN CASE PAYEE IS NOT IDENTIFIABLE, THE PROVISION OF CHAPTER XVII-B I.E., TAX ITA NO. 6391 & 7071/MUM/2014 9 DEDUCTION AT SOURCE, CANNOT BE PRESSED INTO SERVICE AND, THEREFORE, THE ASSESSEE IS NOT REQUIRED TO DEDUCT TAX AT SOURCE IN SUCH A CASE. THE ASSESSING OFFICER WILL RE-ADJUDICATE THE ISSUE AFRE SH AFTER EXAMINING THE ABOVE FACTS. NEEDLESS TO MENTION THAT HE WILL ALLOW ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE WHILE GI VING EFFECT TO OUR ORDER. 13.1 WE FOLLOW THE ABOVE ORDER OF THE TRIBUNAL AND SET ASIDE THE ORDER OF LEARNED CIT(A) AND RESTORE THE MATTER TO T HE FILE OF THE AO WITH A DIRECTION TO VERIFY WHETHER THE PAYEE IS IDE NTIFIABLE AND THE AMOUNT PAYABLE TO HIM IS ASCERTAINABLE. THEN THE AS SESSEE WOULD BE REQUIRED TO DEDUCT TAX AT SOURCE IN RESPECT OF SUCH PROVISION. HOWEVER, IN CASE PAYEE IS NOT IDENTIFIABLE, THE PRO VISION OF CHAPTER XVII B I.E. TAX DEDUCTION AT SOURCE CANNOT BE PRE SSED INTO SERVICE AND, THEREFORE, THE ASSESSEE IS NOT REQUIRED TO DED UCT TAX AT SOURCE IN SUCH A CASE. THE AO WILL ADJUDICATE THE ISSUE AFRES H AFTER EXAMINING THE ABOVE FACTS. NEEDLESS TO SAY THAT THE AO WILL A LLOW ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE WHILE GI VING EFFECT TO THIS ORDER. THUS THIS GROUND OF APPEAL IS ALLOWED FOR ST ATISTICAL PURPOSES. 14. NOW WE TURN TO 3 RD GROUND OF APPEAL OF THE REVENUE. THE AO FOUND THAT AS PER FORM NO 26AS, THE ASSESSEE HAS BE EN PAID RS. 4,40,000/- ON 31.03.2011 ON WHICH TDS OF RS. 44,000 /- WAS DEDUCTED. THE ASSESSEE HAS NOT SHOWN THE ABOVE AMOU NT OF RS. 4,40,000/- IN HIS COMPUTATION OF INCOME. AS THE ASS ESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING FOR HIS CONSTRUCTIO N BUSINESS, THE AO DID NOT ACCEPT HIS PLEA THAT CASH METHOD OF ACCOUNT ING WAS FOLLOWED FOR LIAISON WORK. SO THE AO DID NOT ACCEPT THE CONT ENTION OF THE ASSESSEE THAT HE HAD NOT RECEIVED RS. 4,40,000/- IN THE A.Y. 2011-12, ITA NO. 6391 & 7071/MUM/2014 10 BUT HAD RECEIVED IN A.Y. 2012-13. THEREFORE, THE AO MADE AN ADDITION OF RS. 4,40,000/- IN THE IMPUGNED ASSESSMENT YEAR. 15. IN APPEAL, THE LEARNED CIT(A) AGREED WITH THE C ONTENTION OF THE ASSESSEE THAT HE WAS FOLLOWING CASH SYSTEM OF ACCOU NTING IN RESPECT OF HIS PROFESSIONAL INCOME FROM LIAISONING SERVICES CONSISTENTLY YEAR AFTER YEAR. THE LEARNED CIT(A) ALSO OBSERVED THAT T HE ASSESSEE HAD ACCOUNTED FOR THIS RECEIPT TOWARDS LIAISON SERVICES OF RS. 4,40,000/- IN THE PERIOD CORRESPONDING TO THE A.Y. 2012-13 WHICH WAS AS PER HIS REGULAR METHOD OF ACCOUNTING I.E. CASH SYSTEM OF AC COUNTING. THEREFORE, THE LEARNED CIT(A) DELETED THE ADDITION OF RS. 4,40,000/- MADE BY THE AO IN THE IMPUGNED ASSESSMENT YEAR. 16. BEFORE US, THE LEARNED DR SUBMITS THAT AS THE A SSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING FOR HIS C ONSTRUCTION BUSINESS, THE AO HAS RIGHTLY REJECTED HIS PLEA OF M AINTAINING ACCOUNTS FOR LIAISON WORK ON CASH METHOD AND MADE AN ADDITIO N OF RS. 4,40,000/- IN THE IMPUGNED ASSESSMENT YEAR. 17. ON THE OTHER HAND, THE LEARNED DR SUBMITS THAT THE ASSESSEE IS ENGAGED IN THE DUAL BUSINESS OF CONSTRUCTION OF BUI LDING AS DEVELOPER / BUILDER AND PROVIDING SERVICES OF BUILDING PROPOS AL LIAISON WITH REGULATORY AUTHORITIES. IN RELATION TO PROVIDING SE RVICES OF BUILDING PROPOSAL LIAISON, THE ASSESSEE FOLLOWS CASH SYSTEM OF ACCOUNTING AND IN RELATION TO BUSINESS OF CONSTRUCTION, MERCANTILE SYSTEM OF ACCOUNTING. IT IS THUS SUBMITTED THAT THE ASSESSEE FOLLOWS CASH SYSTEM OF ACCOUNTING AND HENCE INCOME AND TDS BE CONSIDERE D IN THE YEAR OF RECEIPT OF INCOME I.E. A.Y. 2012-13 AND NOT IN A.Y. 2011-12. ITA NO. 6391 & 7071/MUM/2014 11 18. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IN THE CASE OF CIT VS. TANJORE PERMANENT BANK LTD . (1984) 149 ITR 788 (MAD), IT IS HELD THAT IT IS WE LL ESTABLISHED THAT A TAX CREDIT CAN BE GIVEN ONLY IN CASES WHERE THE TAX IS PAID ON THE INCOME IN RESPECT OF WHICH DEDUCTION HAS BEEN MADE AT SOURCE. IN CIT VS. H. KRISHNA VIJOY ARORA (2012) 20 TAXMANN.COM 655 (KER), IT IS HELD THAT CREDIT OF TAX BASED ON TDS CERTIFICATES ISSUED BY BANK IN RESPECT OF INTEREST INCOME, WHICH HAS NOT B EEN ASSESSED IN ASSESSMENT OF ASSESSEE, SHOULD BE ALLOWED IN YEAR I N WHICH SUBJECT MATTER OF DEDUCTION OF TAX IS ASSESSED. IN CIT VS. SMT. PUSHPA VIJOY (2012) 19 TAXMANN.COM 157 (KER), IT IS HELD THAT THE ASSESSEE IS ENTITLED TO CREDIT OF TAX BASED ON TDS CERTIFICATE ONLY IN ASSESSMENT YEARS IN WHICH INCOM E FROM WHICH TAX IS DEDUCTED IS ASSESSED. AS REFLECTED IN FORM 26AS, THE ASSESSEE HAS BEEN P AID RS. 4,40,000/- ON 31.03.2011 ON WHICH TDS OF RS. 44,000 /- WAS DEDUCTED. THE AO HAS RIGHTLY BROUGHT TO TAX RS. 4,4 0,000/- DURING THE IMPUGNED ASSESSMENT YEAR. IN VIEW OF THE RATIO LAID DOWN IN THE DECISIONS MENTIONED HERE-IN-ABOVE, WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND RESTORE THE ORDER OF THE AO. 19. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED WHEREAS THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. ITA NO. 6391 & 7071/MUM/2014 12 ORDER PRONOUNCED IN THE OPEN COURT ON 11/04/2017 SD/- SD/- (SAKTIJIT DEY) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBE R MUMBAI; DATED: 11/04/2017 BISWAJIT, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI