Income tax

gopal dutt vyas (Querist) 12 March 2012 This query is : Resolved
A PROFESSIONAL RECEIVES A CHEQUE FROM HIS CLIENT ON 5 APRIL. THE CHEQUE WAS ISSUED ON 29 MARCH AND TDS WAS DEDUCTED . IN WHICH YEAR THE INCOME WILL BE COUNTED --- THE YEAR IN WHICH TDS WAS DEDUCTED ?OR THE YEAR IN WHICH PROFESSIONAL GOT THE INCOME ?

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Guest (Expert) 12 March 2012
Since the cheque has been issued on 29th March, it denotes accrued income for the previous year (up to 31st march) only, irrespective of the date on which the cheque is received.

C. P. CHUGH (Expert) 12 March 2012
It would depend what method of accounting is being followed by such professional. In case he is following mercantile method then entire amount of cheque is his income for the year in which the TDS has been deducted and in case he is following cash basis of accounting then only TDS amount would be his income for the year in which TDS has been deducted and balance amount of cheque would be his income in the year in which he receives cheques irrespective of the fact that the same cheque has been issued in an earlier year.

Raj Kumar Makkad (Expert) 12 March 2012
I endorse the views of CP Chugh.

Deepak Nair (Expert) 12 March 2012
Dear Mr.Chugh,
Thanks a lot for this update.

V R SHROFF (Expert) 12 March 2012
Shri Chugh,
Thanks for interesting information.

A V Vishal (Expert) 13 March 2012
In my view, the income must be treated in the year for which TDS was deducted and paid by the deductor else benefit of tax cannot be claimed.

C. P. CHUGH (Expert) 13 March 2012
Hi Vishal, You probably are afraid of application of section 199 which allows credit of tax in the year in which income is offered for taxation. Going by this provision you are rightly afraid, but there are number of CBDT circulars and instructions which allows credit of TDS in earlier or succeeding years irrespective of income being offered in diffrent year.

Section 145 allows an assessee adopt a particular method of accounting, but the same should be consistently followed from year to year.

Guest (Expert) 13 March 2012
I endorse the views of Shri Vishal.

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