Punjab Water Supply & Sewerage Board, Chandigarh V. Addl. CIT, Chandigarh

ITA 958/CHANDI/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6815 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 08-02-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 01-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI SARANGALCIT
• Assessee Lawyers: ATUL GOEL
• Keywords: Business income; Depreciation
• Section: 143(3); 133(6); 145; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.958/CHD/2016 (ASSESSMENT YEAR : 2008-09) PUNJAB WATER SUPPLY VS. THE ADDL.C.I.T., & SEWERAGE BOARD, RANGE 5, PLOT NO.1-B, SECTOR 27-A, CHANDIGARH. CHANDIGARH. PAN: AAALB0078P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ATUL GOEL RESPONDENT BY : SHRI RAVI SARANGAL,CIT DR DATE OF HEARING : 28.08.2017 DATE OF PRONOUNCEMENT : 28.09.2017 ORDER PER ANNAPURNA GUPTA, A.M. : THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAI NST THE ORDER OF LD. CIT (APPEALS)-2, CHANDIGARH DATED 9.6.2016 RELATING TO ASSESSMENT YEAR 2008-09. 2. THE ONLY ISSUE IN THE PRESENT APPEAL PERTAINS TO ADDITION MADE ON ACCOUNT OF INTEREST ACCRUED DURING THE YEAR AND THE GROUND RAISED BY THE ASSESSEE READS AS UNDER: 1. THAT THE ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 BY THE LD. ASSESSING OFFICER AND PARTIALLY UPH ELD BY THE WORTHY COMMISSIONER OF INCOME TAX (APPEALS)- 2, CHANDIGARH IS BAD IN LAW AND AGAINST THE PROVISIONS OF THE ACT. 2. THAT THE ADDITIONS MADE BY THE LD. ASSESSING OFF ICER & UPHELD BY THE WORTHY COMMISSIONER OF INCOME TAX (APPEALS)-2, CHANDIGARH ON ACCOUNT OF ACCRUED INTER EST 2 AMOUNTING TO RS. 17076225/-, RS. 351323/- & RS. 966 850/- FROM BANKS NOT SHOWN BY THE ASSESSEE IS BAD IN LAW & AGAINST THE PROVISIONS OF THE ACT. 3. THE BRIEF BACKGROUND OF THE CASE LEADING TO THE PRESENT APPEAL IS THAT THE ASSESSEE IS A BOARD OPERATING UN DER THE DEPARTMENT OF LOCAL GOVERNMENT, GOVERNMENT OF PUNJA B AND IS ENGAGED IN THE EXECUTION OF VARIOUS WATER SUPPLY AND SEWERAGE WORKS FOR URBAN LOCAL BODIES. THE MAIN SO URCE OF INCOME OF THE ASSESSEE IS DEPARTMENTAL CHARGES WHIC H ARE CHARGED @ 10% TO 14% OF THE WORK CARRIED OUT BY IT AND THE ASSESSEE ALSO EARNS BANK INTEREST INCOME AND OTHER SUPERVISION CHARGES. DURING THE ASSESSMENT PROCEED INGS FOR THE IMPUGNED YEAR, THE ASSESSING OFFICER FOUND THAT THE INTEREST INCOME EARNED BY THE ASSESSEE FELL SHORT O F THAT REFLECTED IN THE TDS CERTIFICATE AND ALSO DID NOT I NCLUDE INCOME EARNED FROM VARIOUS BANKS, INFORMATION OF WH ICH WAS COLLECTED BY THE ASSESSING OFFICER U/S 133(6) O F THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). THE ASS ESSING OFFICER FOUND THAT WHILE TDS CERTIFICATE FILED BY T HE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS SHOWED T HAT THE ASSESSEE HAD RECEIVED BANK INTEREST OF RS.3,33, 80,716/- THE ASSESSEE HAD REFLECTED INTEREST INCOME OF ONLY RS.99,95,545/-, THE BREAK UP OF WHICH WAS AS FOLLOW S: INTEREST RECEIVED FROM BANK = RS.92,40,702/- INTEREST RECEIVED FROM EMPLOYEES RS. 7,54,838/- TOTAL: RS.99,95,545/- 4. ON BEING CONFRONTED WITH THE SAME, THE ASSESSEE EXPLAINED THAT THE INTEREST SHOWN IN THE TDS CERTIF ICATE PERTAINED TO INTEREST EARNED ON FDRS RELATING TO 3 CONTRIBUTORY PF (HEREINAFTER REFERRED TO AS (CPF) O F THE EMPLOYEES OF THE ASSESSEE AND RS.99,95,545/- EARNED ON DEPOSITS WITH OTHER BANKS AND OTHERS WHICH HAD BEEN DULY DISCLOSED IN THE PROFIT & LOSS ACCOUNT FOR THE YEAR . THE ASSESSING OFFICER REJECTED ASSESSEES CONTENTION SI NCE HE FOUND FROM THE ACCOUNTS OF THE ASSESSEE THAT THE IN TEREST EARNED ON CPF DURING THE YEAR AMOUNTED TO ONLY RS.70,63,789/-. HE, THEREFORE, HELD THAT APART FRO M THE AFORESAID INTEREST EARNED ON CPF, THE BALANCE AMOUN TING TO RS.2,63,16,927/- PERTAINED TO INTEREST EARNED BY TH E ASSESSEE ON ITS OWN FUNDS WHICH WAS LIABLE TO TAX D URING THE YEAR AND REDUCING THEREFROM THE INTEREST RETUR NED BY THE ASSESSEE OF RS.92,40,702/- THE ASSESSING OFFICE R MADE ADDITION OF THE BALANCE AMOUNT OF RS.1,70,76,225/- TO THE INCOME OF THE ASSESSEE. FURTHER DURING ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CALLED FOR INFOR MATION U/S 133(6) OF THE ACT FROM VARIOUS BANKS IN WHICH T HE ASSESSEE HAD ACCOUNTS AND FOUND THAT BESIDES THE IN TEREST REFLECTED IN THE TDS CERTIFICATE THE ASSESSEE HAD A LSO EARNED INTEREST ON DEPOSITS IN BANKS WHICH HAD NOT BEEN RE TURNED FOR TAXATION. THE DETAILS OF THE SAME ARE AS UNDER : BANK FROM WHICH AMOUNT TDS DEDUCTED INTEREST EARNED 1) CENTURIAN/HDFC, RS.3,51,323/- RS.39,461/- SECTOR 17,CHANDIGARH 2) CENTURIAN/HDFC, RS.9,66,850/- NIL SECTOR 17,CHANDIGARH 5. THE ADDITION OF THE ABOVE TWO AMOUNTS OF RS.3,51,323/- AND 9,66,850/- ,BEING INTEREST INCOME S WHICH THE ASSESSING OFFICER FOUND HAD NOT BEEN DISCLOSED BY THE 4 ASSESSEE IN HIS RETURN OF INCOME, WAS MADE TO THE R ETURNED INCOME OF THE ASSESSEE. THUS, THE ADDITION ON ACCO UNT OF INTEREST INCOME OF RS.1,70,76,225/-, RS.3,51,323/- AND RS.9,66,850/- WAS MADE TO THE INCOME OF THE ASSESSE E. 6. AGGRIEVED BY THE SAME, THE ASSESSEE FILED APPEAL BEFORE THE LD.CIT(APPEALS). THE ASSESSEE CONTENDED THAT I T HAD SHOWED INTEREST INCOME ON RECEIPT BASIS AND HENCE, THE ADDITION MADE ON ACCOUNT OF ACCRUED INTEREST FROM B ANKS WHICH WAS NOT RECEIVED BY THE ASSESSEE DURING THE Y EAR UNDER CONSIDERATION WAS NOT MAINTAINABLE. THE LD.CIT(APPEALS) REJECTED THE CONTENTION OF THE ASSE SSEE WITH RESPECT TO ALL THE THREE ADDITIONS MADE. VIS--VIS THE ADDITION MADE OF INTEREST INCOME OF RS.1,70,76,225/ -, THE LD.CIT(APPEALS) REJECTED THE ASSESSEES CONTENTION SINCE HE FOUND THAT THE ASSESSEE HAD NOT BEEN ABLE TO CONTRO VERT THE FINDINGS OF THE ASSESSING OFFICER IN THIS REGARD. THE RELEVANT FINDING OF THE LD.CIT(APPEALS) AT PARA 6.3 OF THE ORDER IS AS UNDER: 6.3 SUBMISSION OF THE APPELLANT HAVE BEEN CONSIDER ED. AO HAS NOTED IN THE ASSESSMENT ORDER THAT IN SCHEDUL E 3 OF THE BALANCE SHEET THE INTEREST ON CPF BALANCE THERE IS NET INCREASE OF RS.70,63,789/- AS ON 31.03.2008 AS COMPA RED TO 31.03.2007. THEREFORE, THE BALANCE AMOUNT OF INT EREST IS ASSESSEE'S INTEREST INCOME FROM OWN FUNDS. DURING AP PEAL PROCEEDINGS THE APPELLANT HAS NOT BROUGHT ANY MATERIA L ON RECORD TO CONTROVERT THIS POSITION HENCE THE ADDITION OF INTEREST INCOME OF RS.1,70,76,225- IS UPHELD. GROUND OF APPEAL NO . 2 IS DISMISSED. 7. VIS--VIS THE ADDITION MADE OF RS.3,51,323/- AND RS.9,66,850/- THE LD.CIT(APPEALS) REJECTED ASSESSEE S CONTENTION FOR THE REASON THAT IT WAS CLAIMING CRED IT OF TDS DEDUCTED ON THESE INCOMES DURING THE YEAR. THE REL EVANT 5 FINDING OF THE LD.CIT(APPEALS) AT PARA 8.3 OF THE O RDER IS AS UNDER: 8.3 THE SUBMISSION OF THE APPELLANT HAVE BEEN CONSIDERED. AS THE ASSESSEE IS CLAIMING CREDIT OF TH E TDS ON THE INTEREST ACCRUED TO IT, IN THE RELEVANT Y EAR THE INTEREST INCOME HAS TO BE TAXED IN THE RELEVANT YEA R ALSO. THE APPELLANT HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF THE ASSESSING OFFICER AND THEREFORE, THE ADDITION MADE OF RS.3,51,323/- AN D 9,66,850/- ARE CONFIRMED. GROUNDS OF APPEAL NO.4 AN D 5 ARE DISMISSED. 8. AGGRIEVED BY THE SAME, THE ASSESSEE HAS FILED TH E PRESENT APPEAL BEFORE US. DURING THE COURSE OF HEA RING BEFORE US, THE LD. COUNSEL FOR ASSESSEE REITERATED HIS CONTENTIONS MADE BEFORE THE LD.CIT(APPEALS) AND STA TED THAT IT HAD BEEN ACCOUNTING INTEREST INCOME ON CASH BASIS AND NOT ACCRUAL BASIS AND, THEREFORE, THE AFORESAID INCOMES WERE NOT LIABLE TO BE TAXED IN THE IMPUGNED YEAR S INCE THEY HAD NOT BEEN RECEIVED IN THE YEAR ITSELF. THE LD. COUNSEL FOR ASSESSEE DREW OUR ATTENTION TO THE RETURN FILED FOR THE IMPUGNED YEAR AND POINTED OUT TO THE DISCLOSURE REG ARDING THE METHOD OF ACCOUNTING EMPLOYED BY THE ASSESSEE D URING THE YEAR BEING CASH AS REFLECTED IN THE REPORT AT P AGE 6. THE LD. COUNSEL FOR ASSESSEE STATED THAT SECTION 14 5 SUB- SECTION (1) OF THE ACT GRANTED THE ASSESSEE THE OPT ION TO ADOPT EITHER CASH OR MERCANTILE SYSTEM OF ACCOUNTIN G FOR INCOMES FROM BUSINESS AND PROFESSION AND OTHER SOUR CES AND SINCE THE AFORESAID INTEREST INCOME HAD BEEN RE TURNED AND ASSESSED UNDER THE HEAD BUSINESS INCOME FROM AN D PROFESSION, THE ASSESSEE HAD ADOPTED THE CASH SYSTE M OF ACCOUNTING AS PROVIDED U/S 145(1) OF THE ACT. THE LD. COUNSEL FOR ASSESSEE ALSO STATED THAT IN THE SUCCEE DING YEAR 6 THE ASSESSMENT U/S 143(3) OF THE ACT HAD BEEN FRAME D AND NO ADDITION ON ACCOUNT OF INTEREST ACCRUED HAD BEEN MADE TO THE INCOME OF THE ASSESSEE. 9. THE LD. DR, ON THE OTHER HAND, DREW OUR ATTENTIO N TO THE FINDINGS OF THE ASSESSING OFFICER AT PARA 7 OF THE ORDER THAT THE ASSESSEE WAS MAINTAINING ITS BOOKS ON MERC ANTILE BASIS WHILE INTEREST INCOME WAS BEING ACCOUNTED FOR ON CASH BASIS. THE LD. DR POINTED OUT THAT THE ASSESSEE IS NOT ALLOWED TO FOLLOW HYBRID SYSTEM OF ACCOUNTING U/S 1 45 SUB- SECTION(1). TO THIS THE LD. COUNSEL FOR ASSESSEE S TATED THAT THIS FINDING OF THE ASSESSING OFFICER WAS INCORRECT SINCE THE ASSESSEE HAS ADOPTED ONLY CASH SYSTEM OF ACCOUNTING AS DISCLOSED IN HIS RETURN OF INCOME ALSO. 10. WE HAVE HEARD THE RIVAL CONTENTIONS. THE ISSU E BEFORE US PERTAINS TO TAXATION OF INTEREST INCOME W HICH AS PER THE REVENUE IS TAXABLE ON ACCRUAL BASIS WHILE T HE ASSESSEE CONTENDS THAT THE SAME IS TAXABLE ON RECEI PT BASIS SINCE IT FOLLOWS THE CASH SYSTEM OF ACCOUNTING. TH E FACTS WHICH ARE RELEVANT FOR ADJUDICATION OF THE ISSUE BE FORE US AND WHICH EMERGED FROM THE DOCUMENTS FILED BEFORE U S ARE THAT THE ASSESSEE HAS RETURNED/REFLECTED INTEREST I NCOME EARNED BY IT DURING THE YEAR UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION. THE SAME IS EVIDENT FROM THE COPY OF INCOME TAX RETURN FILED BY THE ASSESSEE. I T IS ALSO NOT DISPUTED THAT THE INTEREST AMOUNTING TO RS.1,70,76,225/-, RS.3,51,323/- AND RS.9,66,850/- H AD ACCRUED TO THE ASSESSEE DURING THE YEAR ON ACCOUNT OF 7 VARIOUS BANK DEPOSITS MADE BUT HAD NOT BEEN RETURNE D IN THE INCOME OF THE ASSESSEE FOR TAXATION. THE ASSES SEE HAS TAKEN SHELTER OF THE PROVISIONS OF SECTION 145(1) O F THE ACT WHICH PRESCRIBES THE METHOD OF ACCOUNTING TO BE FOL LOWED BY THE ASSESSEE FOR THE PURPOSE OF COMPUTING ITS INCOM E UNDER VARIOUS HEADS AND HAS STATED THAT IT HAS FOLLOWED T HE CASH SYSTEM OF ACCOUNTING FOR INTEREST INCOME. AT THIS JUNCTURE, IT IS RELEVANT TO REPRODUCE THE SAID SECTION WHICH STATES AS UNDER: SECTION 145 (1) INCOME CHARGEABLE UNDER THE HEAD' PROFITS AND GAI NS OF BUSINESS OR PROFESSION' OR' INCOME FROM OTHER SOURCES' S HALL BE COMPUTED IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE: PROVIDED THAT IN ANY CASE WHERE THE ACCOUNTS ARE CORRECT AND COMPLETE TO THE SATISFACTION OF THE ASSESSING] OFFICER BUT THE METHOD EMPLOYED IS SUCH THAT, IN THE OPINION OF THE ASSESSING] OFFICER, THE INCOME CANNOT PROPERLY BE DEDUCED THEREFROM, THEN THE COMPUTATION SHALL BE MADE UPON SUCH BASIS AND IN SUCH MANNER AS THE ASSESSING] OFFICER MAY DETERMINE: PROVIDED FURTHER THAT WHERE NO METHOD OF ACCOUNTING IS REGUL ARLY EMPLOYED BY THE ASSESSEE, ANY INCOME BY WAY OF INTERE ST ON SECURITIES SHALL BE CHARGEABLE TO TAX AS THE INCOME O F THE PREVIOUS YEAR IN WHICH SUCH INTEREST IS DUE TO THE A SSESSEE:] PROVIDED ALSO THAT NOTHING CONTAINED IN THIS SUB- SEC TION SHALL PRECLUDE AN ASSESSEE FROM BEING CHARGED TO INCOME- T AX IN RESPECT OF ANY INTEREST ON SECURITIES RECEIVED BY H IM IN A PREVIOUS YEAR IF SUCH INTEREST HAD NOT BEEN CHARGED TO INCOME- TAX FOR ANY EARLIER PREVIOUS YEAR.] 11. A BARE PERUSAL OF THE ABOVE WOULD REVEAL THAT F OR INCOME CHARGEABLE UNDER THE HEAD PROFITS & GAINS O F BUSINESS OF PROFESSION OR INCOME FROM OTHER SOURC ES, THE ASSESSEE CAN FOLLOW EITHER THE CASH SYSTEM OF MERCA NTILE SYSTEM OF ACCOUNTING FOR COMPUTING ITS INCOME BUT THE SAME HAS TO BE REGULARLY FOLLOWED BY THE ASSESSEE. IN THE PRESENT CASE, IT HAS BEEN DEMONSTRATED BEFORE US THAT THE INTEREST INCOM E IN DISPUTE HAS BEEN RETURNED UNDER THE HEAD INCOME FR OM 8 BUSINESS AND PROFESSION BUT THE FACT THAT THE ASSE SSEE HAS BEEN FOLLOWING CASH SYSTEM OF ACCOUNTING REGULARLY, HAS NOT BEEN FAIRLY BROUGHT OUT. THE LD. COUNSEL FOR ASSES SEE HAS ONLY PRODUCED BEFORE US THE COPY OF RETURN OF INCOM E FOR THE IMPUGNED YEAR WHEREIN IT WAS STATED THAT THE ASSESS EE HAD FOLLOWED CASH SYSTEM OF ACCOUNTING. THIS EVIDENTLY IS NOT ENOUGH TO ESTABLISH REGULAR METHOD OF ACCOUNTING FO LLOWED BY THE ASSESSEE FOR ITS BUSINESS INCOME. MORE OVER , THE ASSESSING OFFICER, WE FIND, HAD POINTED OUT THAT TH E ASSESSEE WAS FOLLOWING MIXED SYSTEM OF ACCOUNTING. IT IS EVIDENT, THEREFORE, THAT THERE ARE CONTRADICTORY FA CTS ON RECORD WHICH HAVE NOT BEEN CLARIFIED BEFORE US.THE RELEVANT FACTS PERTAINING TO THE ISSUE WHICH ARE NECESSARY F OR ADJUDICATING THE SAME ARE NOT CLEAR. WE ALSO FIND T HAT THOUGH THE ASSESSEE HAD RAISED THIS CONTENTION BEFO RE THE CIT(A) ,THE SAME WAS NOT ADJUDICATED BY HIM. THERE FORE, WE CONSIDER IT FIT TO RESTORE THE MATTER TO THE LD.CIT (APPEALS) TO DETERMINE THE FACTS OF THE CASE AND ADJUDICATE T HE ISSUE THEREAFTER IN ACCORDANCE WITH LAW. 12. THE LD. DR HAD ALSO CONTENDED BEFORE US THAT SI NCE THE ASSESSEE HAD CLAIMED CREDIT OF THE ENTIRE TDS D EDUCTED ON ITS INTEREST INCOME, IT WAS LIABLE TO RETURN THE INTEREST INCOME ALSO DURING THE IMPUGNED ASSESSMENT YEAR AS PER THE PROVISIONS OF SECTION 199 OF THE ACT. TO THIS, THE LD. COUNSEL FOR ASSESSEE COUNTERED BY STATING THAT SECT ION 199 OF THE ACT SINCE THEN HAS UNDERGONE CHANGE AND AS P ER THE CHANGED SECTION CREDIT OF THE ENTIRE TDS DEDUCTED I S ALLOWED IRRESPECTIVE OF THE FACT WHETHER THE INCOME 9 PERTAINING TO THE SAME AS DISCLOSED IN THE RETURN O F INCOME OR NOT. THE LD. COUNSEL FOR ASSESSEE DREW OUR ATTE NTION TO THE ORDER OF THE COORDINATE BENCH OF THE I.T.A.T. I N THE CASE OF ACIT, CIRCLE 2(1), VIJAYAWADA VS. PEDDU SRINIVAS A RAO VIJAYAWADA, DATED 3.3.2011, WHEREIN THIS CHANGE IN THE SECTION IS RECOGNIZED BY THE TRIBUNAL. WE HAVE GON E THROUGH THE ORDER OF THE I.T.A.T. AND FIND MERIT IN THE CONTENTION OF THE LD. COUNSEL FOR ASSESSEE. THE I. T.A.T. HAS CLEARLY RECOGNIZED THIS CHANGE IN SECTION AT PARA 8 -10 OF ITS ORDER AS UNDER: WE HAVE CAREFULLY PERUSED THE PROVISIONS OF SECTION 1 99 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 Y EAR FOR WHICH SUCH INCOME IS ASSESSABLE. BUT IN THE AMENDED PROVISIONS THE WORDS 'FOR THE ASSESSMENT YEAR FOR W HICH SUCH INCOME IS ASSESSABLE' HAS BEEN OMITTED. MEANING THERE BY, THAT THE LEGISLATURE WAS QUITE CONSCIOUS ABOUT THE FA CTS 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 SE CTION 199, IN SUB-SECTION 1, IT HAS BEEN STATED THAT ANY DED UCTIONS MADE IN ACCORDANCE WITH THE FOREGOING PROVISIONS OF THIS CHAPTER AND PAID TO THE CENTRAL GOVERNMENT SHALL BE TR EATED AS A PAYMENT OF TAX ON BEHALF OF THE PERSON FROM WH OSE INCOME THE DEDUCTION WAS MADE. THEREFORE, AS PER THE AMENDED PROVISIONS, ONCE THE TDS WAS DEDUCTED, A CRE DIT OF THE SAME TO BE GIVEN TO THE ASSESSEES, IRRESPECTIVE OF THE YEAR TO WHICH IT RELATES. THE PREAMENDED AND THE AMENDED PROVISIONS OF SECTION 199 ARE EXTRACTED HEREUNDER: ''SECTION 199: CREDIT FOR TAX DEDUCTED - (1) ANYDEDUCT ION MADE IN ACCORDANCE WITH THE FOREGOING PROVISIONS OF THIS C HAPTER AND PAID TO THE CENTRAL GOVERNMENT SHALL BE TREATED AS A PAYMENT OF TAX ON BEHALF OF THE PERSON FROM WHOSE I NCOME THE DEDUCTION WAS MADE, OR OF THE OWNER OF THE SECURITY, OR DEPOSITOR OR OWNER OF PROPERTY OR OF UNIT-HOLDER OR O F THE SHAREHOLDER, AS THE CASE MAY BE, AND CREDIT SHALL BE G IVEN TO HIM FOR THE AMOUNT SO DEDUCTED ON THE PRODUCTION OF THE 10 CERTIFICATE FURNISHED UNDER SECTION 203 IN THE ASSE SSMENT MADE UNDER THIS ACT FOR THE ASSESSMENT YEAR FOR WHI CH SUCH INCOME IS ASSESSABLE: (3) THE BOARD MAY, FOR THE PURPOSES OF GIVING CREDIT I N RESPECT OF TAX DEDUCTED OR TAX PAID IN TERMS OF THE PROVISI ONS OF THIS CHAPTER, MAKE SUCH RULES AS MAY BE NECESSARY, INCLUDING THE RULES FOR THE PURPOSES OF GIVING CREDIT TO A PERSON O THER THAN THOSE REFERRED TO IN SUB-SECTION (1) AND SUB-SECTION (2 ) AND ALSO THE ASSESSMENT YEAR FOR WHICH SUCH CREDIT MAY BE G IVEN. SECTION 199.(1) ANY DEDUCTION MADE IN ACCORDANCE WITH THE FOREGOING PROVISIONS OF THIS CHAPTER AND PAID TO TH E CENTRAL GOVERNMENT SHALL BE TREATED AS A PAYMENT OF TAX ON BE HALF 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 IN COME SUCH PAYMENT OF TAX HAS BEEN MADE.' 9. IN THE LIGHT OF THESE AMENDMENTS, WE HAVE ALSO EXAM INED THE JUDGEMENT OF THIS HYDERABAD TRIBUNAL IN THE CASE OF PROGRESSIVE CONSTRUCTIONS LIMITED VS. JCIT ITA 482 AND 557/HYD/2001 AND THE ORDER OF THE TRIBUNAL OF CHENNA I BENCH IN THE CASE OF SUPREME RENEWABLE ENERGY LIMITED VS. ITO 32 DTR 140 AND TOYO ENGINEERING LIMITED 5 SOT 616 IN WHICH THE TRIBUNAL HAS TAKEN A CONSISTENT VIEW THAT THE CREDIT OF TDS SHOULD BE GIVEN IN THE YEAR OF RECEIPT. THE FA CTS OF THE CASE OF M/S. PROGRESSIVE CONSTRUCTIONS LTD. (SUPRA) AN D TOYO ENGINEERING INDIA LIMITED (SUPRA) ARE ALMOST SIMILAR TO THAT OF THE PRESENT CASE. IN THE CASE OF SUPREME RENEWABLE EN ERGY LIMITED (SUPRA), THE TRIBUNAL HAS HELD THAT WHEN THE INTE REST INCOME IS INCIDENTAL TO THE ACQUISITION AND INSTALLAT ION OF AN ASSET AND IS NOT DIRECTLY LIABLE FOR TAX, ASSESSEE IS ENTITLED FOR THE CREDIT OF TDS FROM THE INTEREST INCOME WHICH HAS BEEN DULY RECEIVED BY THE GOVERNMENT. THE RELEVANT OBSERVA TION OF THE TRIBUNAL ARE EXTRACTED HEREUNDER: 'THE DEPOSIT ON WHICH INTEREST WAS EARNED BY THE ASSESSEE IS MANDATORY AS PER STATUTORY REQUIREMENT. THEREFORE, THE INTEREST INCOME EARNED ON THE DEPOSIT IS NOT OUT OF SURPLUS FUND OF THE ASSESSEE BUT DUE TO T HE STATUTORY REQUIREMENT UNDER WHICH THE DEPOSIT WAS MADE FOR AVAILING THE CREDIT FACILITY OF INSTALLATION OF MACHINERY. WHEN THE INTEREST INCOME IS IN THE NATURE OF CAPITAL THEN THE ASSESSEE HAS RIGHTLY DEDUCTED THE SAME FROM THE COST OF THE ASSETS AND WHILE DOING SO THE 11 ASSESSEE HAS OFFERED THE SAID INCOME THOUGH CAPITALIZED FOR ASSESSMENT. WHEN THE INTEREST INCOME IS NOT DIRECTLY LIABLE FOR TAX AS THE SAME IS INCIDENTAL I N THE ACQUISITION AND INSTALLATION OF THE ASSET THEN THE TA X DEDUCTED AT SOURCE FROM THE INTEREST INCOME WHICH W AS DULY RECEIVED BY THE GOVERNMENT SHALL BE REFUNDED TO THE ASSESSEE OR THE ASSESSEE IS ENTITLED FOR THE CRED IT OF THE SAME. THE GOVERNMENT CANNOT BENEFIT ITSELF BY TAKING ADVANTAGE OF LEGAL TECHNICALITIES. EVEN OTHERWISE, ONCE THE INCOME RECEIPT HAS BEEN DEDUCTED FROM THE COST OF MACHINERY TO BE INSTALLED THE ASSESSEE HAS INDIREC TLY OFFERED THE SAME FOR ASSESSMENT AND TAXATION BECAUS E DUE TO THE REDUCTION OF COST OF THE MACHINERY AND DEPRECIATION ON THE SAID MACHINERY WOULD BE LESSER AN D THE NET RESULT OF THIS WOULD BE OFFERING THE SAME IN COME OTHERWISE. WHEN A PARTICULAR INCOME IS RECEIVED BY T HE ASSESSEE AFTER DEDUCTION OF TAX AT SOURCE AND THE S AID TDS HAS BEEN DULY DEPOSITED WITH THE GOVERNMENT AND THE ASSESSEE HAS RECEIVED THE REQUISITE CERTIFICATE TO THIS EFFECT, THEN ON PRODUCTION OF THE SAID CERTIFICATE T HE ASSESSEE BECOMES ENTITLED FOR THE CREDIT OF TDS EVEN I F THE ASSESSEE HAS NOT DIRECTLY OFFERED THE SAID INCOME FO R TAX AS THE ASSESSEE CONSIDERED THE SAME WAS NOT LIAB LE TO TAX. WHEN THE ASSESSEE HAS EARNED INTEREST ON DEPOSIT MANDATORY FOR ACQUISITION ON INSTALLATION OF MACHINERY THEN THE INTEREST WAS EARNED BY THE ASSESSEE AND IS DIRECTLY INCIDENTAL TO THE ACQUISITIO N IN RESPECT OF MACHINERY AND THEREFORE THE SAME HAS BEE N RIGHTLY REDUCED FROM THE COST OF THE MACHINERY. IN T HIS WAY THE ASSESSEE HAS INDIRECTLY DISCLOSED INCOME AND HAS OFFERED FOR ASSESSMENT. EVEN IF THE INCOME EARNE D BY THE ASSESSEE HAS NOT BEEN OFFERED FOR TAX BEING NOT LIABLE FOR TAX, THE ASSESSEE IS ENTITLED FOR CREDIT OF TDS MADE IN RESPECT OF THAT INCOME. ACCORDINGLY, ASSESSEE IS ENTITLED FOR CREDIT OF TDS RELATING TO INTEREST INCOME.' 10. FROM A CAREFUL PERUSAL OF THE LEGAL PROPOSITIONS LA ID DOWN THROUGH THE AFORESAID ORDERS BY THE TRIBUNAL AND THE RELEVANT PROVISIONS OF THE ACT, WE ARE OF THE VIEW THAT ONCE THE TDS WAS DEDUCTED AND PAID TO THE CENTRAL GOVERNMENT, A C REDIT OF THE SAME SHOULD BE GIVEN TO THE ASSESSEES IN ORDER T O AVOID ALL SORTS OF COMPLICATIONS IN THE YEAR OF DEDUCTION O F THE TDS. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) WHO HAS RIGHTLY DIRECTED THE A.O. TO ALLOW THE CREDIT OF TH E TDS IN THE IMPUGNED ASSESSMENT YEAR. ACCORDINGLY, THE ORDER OF THE CIT(A) IS CONFIRMED. 13. IN VIEW OF THE ABOVE, WE FIND NO MERIT IN THE C ONTENTION OF THE LD. DR. THAT SINCE THE ASSESSEE HAS TAKEN BE NEFIT OF THE ENTIRE TDS DEDUCTED, THE INTEREST PERTAINING TO THE SAME ALSO NEEDS TO BE ADDED TO THE INCOME OF THE ASSESSE E. 12 IN VIEW OF THE ABOVE, WE HOLD THAT THE ISSUE OF TH E TAXATION OF ACCRUED INTEREST OF RS.1,70,76,225/-, RS.3,51,32 3/- AND RS.9,66,850/- BE RESTORED TO THE FILE OF THE LD.CIT (APPEALS) TO BE DECIDED AFRESH IN ACCORDANCE WITH LAW AFTER A FFORDING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. 14. IN EFFECT, THE APPEAL OF THE ASSESSEE STANDS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 28 TH SEPTEMBER, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH S