TDS, advance tax don’t show full income
Ruling in favour of the income tax department in a batch of six cases led by Assistant Commissioner of Income Tax versus M/s AR Enterprises, the Supreme Court held that payment of advance tax by an assessee would not, by itself, amount to disclosure of income. Even mere deduction of tax at source (TDS) could not be taken as disclosure of income, it said while quashing the Madras High Court’s judgment that ruled contrary to its views.
During the course of search at the premises of another concern AR Mercantile Pvt Ltd in 1996, certain books and documents pertaining to the assessee (AR Enterprises) were seized. On scrutiny, the assessing officer found that though the assessee had taxable income for the assessment year 1995-96, no return of income had been filed till the date of search. The assessee, after filing return for the block period (ten years preceding the previous year), which covered assessment years 1993-96, objected to the department’s action under Section 158BD of the Income Tax Act, saying for assessment year 1995-96, advance tax had already been paid and, therefore, income for that period could not be deemed to be undisclosed.
While the department rejected AR Enterprises’ claim, the sectoral tribunal favoured the assessee. On appeal by the Revenue, the Madras High Court also agreed with the assessee. Reversing the HC view, the apex court stated that advance tax and TDS deduction did not amount to disclosure of income. “Since TDS is computed on the estimated income, such deduction cannot result in the disclosure of total income. Subject to the monetary limit of the total income, every person is obligated to file his return of income even after tax is deducted at source,” the judgment said.
Leased vehicles and tax liability
A leasing company can claim benefit of depreciation under Section 32 of the Income Tax Act for vehicles it had leased out to its customers as part of business, the Supreme Court held in a bunch of cases led by ICDS Ltd versus Commissioner of IT.
In the lead case, the public limited non-banking finance company ICDS had claimed depreciation on vehicles bought from manufacturers and had let out them to its customers. The lessees were registered as the owners of the vehicles under the Motor Vehicles Act, 1988. In its return of income for 1991-1992 to 1996-1997, the firm claimed, among other heads, depreciation in