The Bangalore income-tax tribunal has held that the credit of tax deduction at source (TDS) under section 199 has nothing to do with the system of accounting. The assessee would be entitled to get refund of the TDS as and when the income is generated by adjusting the loan amount on which such tax has been deducted by the tax deductor.

The assessee in the relevant case that came up before the tribunal had declared loss and claimed credit for TDS. The assessing officer proportionately allowed the claim of the credit for TDS on the ground that the assessee had not declared the entire income corresponding to the TDS.

The tribunal held that the assessees income was shown as mobilisation loan or machinery advance, which was not entirely assessable in the relevant assessment year. Therefore, under section 199, credit for TDS is to be given to the assessee in the assessment year in which income is assessable.

The assessee cannot claim credit of the TDS for the assessment years if the income related to such amount was not declared for that assessment year and was being held as a loan including the TDS amount.

Income deduction and overseas expenditure

The Bangalore Tribunal has held that expenditure incurred outside India in foreign currency in relation to export of software cannot be excluded while computing the deduction under section 10A of the IT- Act.

The assessee was engaged in export of software and had incurred expenses in foreign currency outside India and claimed the same to be included in the total turnover for section 10A benefit. The AO disallowed the same, treating it as services rendered outside India and hence, not includable in the total turnover.

The tribunal observed that the assessee was not providing technical services but was developing software. Computer software can be developed offsite / on-site . The payment to on-site engineer of assessee was for developing software and hence, the assessee had not rendered any technical services which are not eligible for deduction under section 10A.

Hence, the payment was for site development and accordingly, cannot be excluded from the total turnover. The intent of the Legislature is to exclude export of service from section 10A benefit and in case of export of goods and services only that portion which is unrelated to the goods is to be excluded.