INCOME TAX ACT, 1961

Section 198

Tax deduction at source - Difference between tax deduction at source claimed for credit and corresponding income in the return of assessee - -

There was a difference between tax deduction at source claimed for credit and corresponding income in the return of the assessee. Assessee shown TDS of Rs. 83,05,951 and corresponding receipt on which tax is deducted of Rs. 8,31,22,127. However, amount credit to profit and loss account was Rs. 6,75,95,185. The difference was explained by assessee that receipt from M/s. P were shown who was paying commission to assessee and deducted tax thereon. Assessee had taken TDS sum as income but balance sum was stated to have been shown as income in subsequent year. AO rejected explanation of assessee stating that the said commission was being claimed as expenses by M/s. P. AO invoked the provisions of section 198 holding that if assessee was claiming the credit for tax deduction at source, the corresponding income had to be shown in return of income. Therefore, he made addition to income of assessee.Held: Lower authorities had failed to understand that irrespective of the client eventually making full or part payment to builder, could not be a concern for assessee who is a broker. In fact the services are completely rendered by the assessee by identifying the buyer, the complete payment made by buyer to builder and subsequent transfer of the property from the builder to the buyer. Further, it was merely an academic exercise as in the subsequent years assessee had offered income of brokerage in dispute and revenue accepted it and there was no loss to revenue as assessee was a company having identical rate of taxes in both the years. Thus, AO was directed to reduce the income of the subsequent year to the extent of addition.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2011-12

SUBSCRIBE FOR FULL CONTENT