ORDER
D. Manmohan, Judicial Member
1. This appeal, filed at the instance of the assessee company, is directed against the order of the CIT (Appeals) IV, Hyderabad, dated 29-3-2000 and it pertains to the asst. year 1995-96.
2. The facts concerning the issue in dispute revolve in a narrow compass. The assessee company received dividend amount of Rs. 15,78,521 from Avon Industries Ltd., which was offered to tax in the assessment year 1994-95 on accrual basis. The dividend was declared on 22-8-1994 and Avon Industries Ltd. issued a TDS certificate for an amount of Rs. 3,90,280. As per the provisions of the Income-tax Act, 1961, the dividend is assessable to tax in the year in which it is declared, distributed or paid. Admittedly, the dividend was declared during the previous year relevant to asst. year 1935-96, but because of the consistent practice followed by the assessee, it was wrongly offered to tax in the asst. year 1994-95 and that was accepted by the Assessing Officer by assessing the same as income of the assessee for asst. year 1994-95. However, the assessee claimed credit for TDS in the asst. year 1995-96: as per Section 199 of the Income-tax Act, 1961, the credit for TDS has to be given in the year in which the dividend income is assessable. The AO as well as the CIT (A) refused to give credit for TDS in asst. year 1995-96 on the ground that the income was not assessed to tax in the year under consideration. Aggrieved, the assessee is in appeal before us.
3. The learned counsel appearing on behalf of the assessee submitted that in terms of Section 8(a) read with Section 199 of the Income-tax Act, 1961, the dividend income is assessable to tax in the year under consideration and once it is assessable in this year, the Assessing Officer is duty-bound to give credit for the TDS in this year. It may be relevant to extract here the relevant provisions of the Act, which read as follows:-
“8. For the purposes of inclusion in the total income of an assessee, –
(a) any dividend declared by a company or distributed or paid by it within the meaning of Sub-clause (a) or Sub-clause (b) or Sub-clause (c) or Sub-clause (d) or Sub-clause (e) of Clause (22) of Section 2 shall be deemed to be the income of the previous year in which it is so declared, distributed or paid, as the case may be;”
“199.(1) Any deduction made in accordance with the provisions of Sections 192 to 194, Section 194A, Section 194B, Section 194BB, Section 194C, Section 194D, Section 194E, Section 194EE, Section 194F, Section 194G, Section 194H, Section 194-I, Section 194J, Section 194K, Section 194L, Section 195, Section 196A, Section 196B, Section 196C and Section 1960 and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made, or of the owner of the security, or depositor or owner of property or of unit-holder or of the shareholder, as the case may be, and credit shall be given to him for the amount so deducted on the production of the certificate furnished under Section 203 in the assessment made under this Act for the assessment year for which such income is assessable:”
[Emphasis supplied]
The learned counsel submitted that under Section 199 of the Act, the year in which the dividend income is actually assessed should not be taken as the criterion for giving credit for TDS amount since the expression ‘assessable’ signifies that the asst. year in which the dividend is assessable to tax should be taken in contradistinction to the year in which the dividend was actually assessable to tax. Merely because the assessee had wrongly offered to tax the dividend income in an earlier year and the AO had wrongly accepted the same as income of that year, it would not alter the legal position regarding assessability to tax of the said income in the asst. year 1995-96. The learned counsel also pointed out that prior to 1-6-1987, the words used in Section 199 were ‘made for the immediately following assessment year under this Act’ which were substituted by the words ‘made under this Act for the assessment year for which such income is assessable’, signifying thereby that after 1-6-1987, the credit has to be given by the AO only in the year in which the dividend income is assessable. The learned counsel thus strongly submitted that the tax authorities were not justified in denying the claim of the assessee.
4. The learned departmental representative, on the other hand, strongly relied upon the orders of the tax authorities. He submitted that the assessee as well as the AO treated the dividend income as assessable in the asst. year 1994-95 and thus the credit for TDS can be given only in the asst. year 1994-95 even by applying the logic that under Section 199 of the Act the year in which the dividend income is assessable has to be considered for the purpose of giving credit for the TDS amount.
5. We have carefully considered rival submissions and perused the record. Section 8(a) of the Act, in no uncertain terms, provides for bringing to tax dividend income only in the year in which the dividend is declared, distributed or paid. In the instant case, it is not in dispute that by applying Section 8(a) of the Act, the dividend income is assessable to tax only in the asst. year 1995-96. Section 199 of the Act provides for giving Credit to the assessee for the amount of tax deducted at source by the company declaring the dividend. The legislature in its wisdom has amended Section 199(1) with effect from 1-6-1987 whereby the expression ‘assessable’ was used to decide the year in which the credit has to be given. The words ‘assessable’ and ‘assessed’ are not synonymous to each other. The word ‘assessable’ speaks of the legal position in which an income has to be brought to tax, whereas the word ‘assessed’ speaks of the factual position in which the income is assessed to tax. Since the legislature has guardedly used the word ‘assessable’, it is the duty of the courts to assign proper meaning to that word, in which event the credit for TDS amount has to be given only in the year in which the dividend income is assessable and not in the year in which the dividend income was actually assessed to tax. In view of the plain language of the sections referred to above, and also on equitable consideration, we are of the firm view that though the dividend income was assessed to tax in the preceding asst. year, going by the legal position with regard to the year of assessability of dividend income, the assessee is entitled to claim credit for the TDS in terms of Section 199 of the Act in the asst. year 1995-96. The AO is directed accordingly.
6. In the result, the appeal of the assessee is allowed.
