TDS deposited before filing ITR allowable u/s 43B despite following cash method of accounting

TDS deposited before filing ITR is allowable u/s 43B despite assessee following cash method of accounting

ABCAUS Case Law Citation:
ABCAUS 3249 (2020) (02) ITAT

Important case law relied upon by the parties:
Associated Law Advisers Vs. ACIT
Commissioner of Income Tax XIII Vs. Naresh Kumar
Commissioner of Income Tax Vs. Rajinder Kumar

In the instant case, appeal had been preferred by the assessee against the order of the Commissioner of Income Tax (Appeals) in inter alia confirming the addition of statutory liability on account of TDS deducted U/s 194J, payable for the month of March, which was deposited IN April next year.

The appellant assessee was a partnership Firm of Advocates deriving income from business or profession and income from other sources.

The Assessing Officer (AO) inter alia made an addition by way of disallowance of Tax Deducted at Source (TDS) on the ground that the same should have been paid during the financial years by the Assessee as it had been following cash system of accounting.

Assessee carried the matter before CIT(A) by way of filing the appeal who confirmed the addition by partly allowing the appeal. Feeling aggrieved the Assessee had approached the Tribunal by way of second appeal.

The assessee contended that the tax deducted at source by the assessee u/s 194J for the Month of March had been duly paid in Aprili.e. much before the due date or before the due date specified in Sub. section 1 of Section 139 of the Income Tax Act (the Act), and as such there was no delay in deposit of the TDS deduction.

It was further contended by the assessee that u/s 43B the assessee in order to claim the deduction of TDS payable is required to deposit the TDS deducted in the last month of previous year, on or before the due date specified in Section139(1) of the Act.

The Tribunal noted that undisputedly the TDS deducted by the assessee u/s 194J for the month of March had been duly paid in April next year which was well before the due date specified in Section139(1) of the Act.

The Tribunal opined that when the assessee had duly deposited the TDS before filing the return of income for the year under assessment, the same was allowable u/s 43B of the Act.

TDS deposited before filing ITR is allowable u/s 43B despite cash method of accounting

The Tribunal clarified that no doubt, the assessee was following the cash method of accounting and had made cash payment to various parties after deducting TDS, the portion of which had been allowed by the AO as deductible expenditures, u/s 198 of the Act tax deducted at source by the assessee as per Income Tax Act is deemed to be income received by the recipient of the said income and as such TDS deducted by the assessee is deemed to have been received by the recipient of the income and as such it could not be held that the assessee had not paid the amount of tax deductible at source on or before the due date.  Therefore, it could not be held that the aforesaid amount of TDS has not been paid by the assessee while following the cash system of accounting.

The Tribunal observed that the Hon’ble Delhi High Court had held that if the statutory liability of depositing the TDS has been fulfilled before the due date of filing of the return u/s 139(1) of the Act, the same are allowable expenses in the year to which it relates. This is also mandate of Section 43B of the Act.

It was further noted that identical issue had been decided by the revenue itself in favour of the assessee in its own case in previously, therefore Revenue has to follow rule of consistency opined the Tribunal.

Further it was noted that the Co-ordinate Bench of Tribunal had decided the identical issue in favour of the assessee.

The Tribunal held that AO as well as CIT(A) had erred in making disallowance on account of TDS, hence, ordered it to be deleted.

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