Tax credit to be granted in the year in which income is assessed

Last updated: 17 March 2020

Court :
ITA No. 1288/PUN/2017

Brief :
Many a times, we come across cases where the invoice has been raised close to the cut-off date, i.e. closer to the end of a financial year and the customer has accounted for and paid the invoice amount, as well as deducted and deposited the tax at applicable rates in the subsequent financial year. More often than not, a conservative stand is adopted, to get the benefit of tax credit in the subsequent year, though the invoice forms part of the turnover for the preceding year, so as to avoid disallowance during regular assessment/scrutiny by the Assessing Officer. However, this causes undue hardship to the taxpayer, by blocking of working capital due to the disallowance of credit in the preceding year, resulting in higher payment of tax in cash.

Citation :
M/s. Mahesh Software Systems Pvt. Ltd., v. Assistant Commissioner of Income Tax, Pune