Dr. O.K. Narayanan, A.M.: This is appeal filed by assessee for asst. yr. 1999-2000. appeal is directed against order passed by CIT(A) at Mumbai on 7th March, 2002 and arises out of assessment completed under s. 143(3) of IT Act, 1961. assessee is company engaged in business of providing technical services and executing construction of projects mainly in area of fertilizers, petrochemicals, gas and petroleum, synthetic fibres, pharmaceuticals, cement, captive power generation, etc. assessee-company filed its return of income on 29th Dec., 1999 declaring total income of Rs. 12,45,04,801. In course of assessment proceedings, AO has sought further details on method of accounting employed by assessee in reporting its income/loss. assessee-company has stated before assessing authority that it was following project completion method for recognizing income/loss. assessee-company recognized its income on basis of percentage of completion as certified by competent personnel of assessee-company, in respect of technical services rendered. Where contract was for technical services along with cost guarantee and work execution, profit is accounted in year of completion of project. expenses incurred by assessee- company for carrying on work would be carried forward as work-in-progress till completion of project. Under both methods, assessee- company used to make provisions for losses already incurred/recognized in course of completion of contract. On basis of above method of accounting regularly employed by assessee-company, AO examined TDS credit amount claimed by assessee in finalizing its liability towards payment of tax. While examining such T D S accounts, AO noticed that many of projects like Haldia Petrochemicals, Chambal Fertilizers & Chemicals, MRPL, etc. had completed only in financial year 1999-2000, accountable for asst. yr. 2000-01 and not for impugned asst. yr. 1999-2000. AO has listed out 7 such cases involving TDS amount of Rs. 2,28,37,491. AO found that said amount of TDS has been claimed as credit by assessee-company for impugned assessment year even though corresponding contracts were completed only during previous year relevant to asst. yr. 2000-01 and income accrued only for said assessment year. Therefore, AO sought explanation of assessee-company on how credit for TDS amount of Rs. 2,28,37,491 could be given when income corresponding to those projects vis-a-vis TDS have not become assessable and income not recognized. explanation was sought by AO in light of provision contained in s. 199 of IT Act, 1961. assessee explained that assessee-company has been offering its income in consistent method in terms of provisions contained in s. 145 of IT Act, 1961 and, therefore, credit for TDS amount from year-to-year need to be given continuously for those assessment years and requested assessing authority to grant credit for TDS accordingly. But AO did not accept explanation of assessee on ground that corresponding income was not assessable during impugned assessment year. He relied on provisions of s. 199 where it has been provided that credit for TDS shall be given in assessment made under this Act for assessment year for which such income is assessable. Accordingly, assessing authority denied benefit of credit of TDS to extent of Rs. 2,28,37,491. He further held that credit for TDS could be availed by assessee in those assessment years when corresponding income would be assessed to tax. In course of assessment, AO has also noticed that assessee- company has debited amount of Rs. 24,23,000 relating to prior period expenses. assessee-company explained that prior period expenses are of routine nature in business carried on by assessee and payments were delayed because of procedural delay and due to various administrative reasons. AO did not accept above explanation. He held that in mercantile system of accounting, income as well as expenditure need to be recognised on accrual/due basis and, therefore, expenses relating to earlier assessment year could not be allowed in impugned assessment years. Accordingly, said amount of Rs. 24,23,000 has been added back to income of assessee. income of assessee. Both issues were taken in first appeal before CIT(A). CIT(A) confirmed both issues against assessee holding that assessee was n o t entitled for credit of TDS to extent of Rs. 2,28,37,491 for impugned assessment year as well as assessee was not entitled for claiming deduction for prior period expenses amounting to Rs. 24,23,000. It is against above that assessee-company has come in second appeal before us. Following are grounds raised by assessee in this appeal: "1. CIT(A) erred in confirming withdrawal of credit of TDS (of) Rs. 2,28,37,491. CIT(A), erred in confirming disallowance of prior-period expenses of Rs. 24,23,000." Shri Phiroze Andhyarujina, learned senior counsel appearing for assessee-company argued case at length. Regarding issue of TDS credit, contentions of learned senior counsel are as follows: assessee-company is carrying on business of rendering technical services and project execution services. assessee-company is maintaining its books of account on accrual system. profits on contracts entered into by t h e assessee-company have been recognized on completion or partial completion of assignment and offered for taxation accordingly. It does not mean that income from project is earned only at completion of project. Income is earned by assessee-company simultaneously with progress in project execution in contemporaneous manner. That is why assessee- company is accounting investments and expenditure in work-in-progress account and being carried forward from assessment year to assessment year till completion of project. That is why assessee-company is crediting value of work-in-progress in credit side of its P&L a/c. work-in-progress reflected in accounts of assessee-company is impregnated with cost and expenditure of project plus amount of income earned out of project till such stage. income is, therefore, earned from year-to-year even though income is recognized as profits only on completion of project and, thereafter offered for assessment. AO has made conceptual error in not appreciating fine distinction between "income" and "profits". What is offered by assessee for assessment is profits and gains of business carried on by it on basis of project completion method. But then, ultimate end result of business is made up of income accrued to assessee during intervening period of implementation or construction period of projects. Therefore, learned senior counsel contended that there is no conflict between claim for credit of TDS made by assessee-company and provisions of law contained in s. 199 of IT Act, 1961. He invited our attention to provisions of s. 199 where it has been provided that credit for TDS shall be given to assessee for amount so deducted on production of certificate furnished under s. 203 in assessment made in Act in assessment year in which such income is assessable. learned counsel submitted that such income is impregnated in value of work-in-progress and is always assessable in those assessment years of intervening period even though ultimate profit is recognized on completion of project. Therefore, it is his case that assessee-company has earned income for impugned assessment year and that amount of income has already been impregnated in work-in-progress value reflected in its accounts and, therefore, claim for credit of TDS was rightfully made by assessee- company. learned counsel contended that assessee has complied with all conditions laid down in s. 199 of Act. TDS has been made at time of payment. Such tax deduction has been paid over to credit of Central Government. Those deductions have been treated as tax. Certificates of deductions provided under s. 203 have been produced before AO. Income accrued during relevant previous year has been subject-matter of assessment as income was impregnate in value of work-in-progress credited in accounts. Therefore, as assessee has complied with all conditions laid down for claiming TDS credit as provided in s. 199 of Act, action of lower authorities are against law. learned senior counsel further contended that tax has been deducted learned senior counsel further contended that tax has been deducted at source from every payments received by assessee-company irrespective of consideration whether such receipts amounted to income or not. Even in case of advances given to assessee-company, tax has been deducted at source. income for purpose of assessment would be computed only at time of completion of project and, therefore, TDS does not have any exclusive nexus with element of income as such. In order to explain this proposition, learned counsel relied on decision of Supreme Court in case of Transmission Corporation of AP Ltd. & Anr. vs. CIT (1999) 155 CTR (SC) 489: (1999) 239 ITR 587 (SC) at p. 593. learned senior counsel also relied on decision of Supreme Court in case of Bhagwan Dass Jain vs. Union of India & Ors. (1981) 21 CTR (SC) 339: (1981) 128 ITR 315 (SC) where Court has held that in its ordinary economic sense, expression "income" includes not merely what is received or what comes in by exploiting use of property but also what one saves using it oneself. Court held that which can be converted into income can be reasonably regarded as giving rise to income. Therefore, learned counsel submitted that work-in-progress of t h e assessee-company consisted element of income which rotates from assessment year to assessment year. He also relied on decision of Supreme Court in case of CIT vs. G.R. Karthikeyan (1993) 112 CTR (SC) 302: (1993) 201 ITR 866 (SC) at p. 874 where Court has held that word "income" is of widest amplitude and it must be given its natural and grammatical meaning. Shri G.R. Reddy, learned Departmental Representative appearing for Revenue contended that "income" for purpose of assessment should be considered in light of law contained in s. 2(24) and income means assessable income and nothing else. In present case, assessee- company is following project completion method and income is recognized only on completion of project and, therefore, income arising out of project would be assessable only in year of completion and demand for credit of TDS made by assessee-company was premature and, therefore, AO was justified in not giving such credit in light of provisions of law contained in s. 199 of IT Act, 1961. We considered matter in detail. As held by Hon ble Supreme Court i n case of Bhagwan Dass Jain vs. Union of India & Ors. (supra) expression "income" includes not merely what is received or what comes in by exploiting use of property but also what one saves by using it by oneself and also which can be converted into income. Likewise, nexus between deduction of tax at source and assessable income is not apparent in every assessment year as held by Supreme Court in case of Transmission Corporation of AP Ltd. & Anr. (supra) which is evident from fact that every amount from which TDS is made does not constitute income. As held by Supreme Court in case of CIT vs. G.R. Karthikeyan (supra), word income is of widest amplitude and it must be given its natural and grammatical meaning. When facts of present case are considered in light of above principles laid down in judicial pronouncements, we find that arguments of learned senior counsel are substantive and convincing. First of all it is to be seen that tax is deducted at source from every piecemeal payment even though every such piecemeal payment did not reflect income as such. Earning of income is continuous, indivisible process embedded in business dynamics. income is recognized for particular period, statutorily for one year on basis of method employed by assessee. income or loss o f assessee is cumulative result of working carried on by assessee and reasonably measured for that particular assessment year. Therefore, there is no immediate nexus between income as such and TDS made out of particular payment. Tax deduction at source is basically machinery provision for collecting tax on potential income of assessee. There is no such conclusive presumption that tax is invariably deducted always out of income; that is why expression "tax deducted at source" has been used in Act, rather than "tax deducted from income". pith and substance of above discussion is that it may not be possible all time to correlate specific amount of TDS with specific amount of income earned by assessee in particular assessment year. If at all such nexus is required, such nexus is rather notional or conceptual, rather than specific or immediate. When law has used words in s. 199 of IT Act that "credit shall be given to TDS on production of certificate for assessment year for which such income is assessable; it implied that nexus between TDS and corresponding income element would remain rather notional/conceptual. When present issue is viewed in right perspective, we are bound to accept contention of learned senior counsel that work-in-progress credited by assessee-company every year in its books of account is impregnated with element of income which would finally culminate into summation of profits on completion of projects which would be offered for assessment. Therefore, one is bound to take note of expression "income" and expression "profits" in its contextual perspective as explained by learned senior counsel. execution of project is continuing process. income/loss arising therefrom also generates contemporaneously/ simultaneously; even though such income/loss is finally measured as profit/loss only at end of project for reason that assessee is following project completion method for recognition of profit/loss. In this context, it is always useful to remember that Courts have held that income also includes loss. set off of TDS would arise only when income results in profits. Therefore, it is all more clear that income whether profit or loss impregnated in value of working in progress is finally summed up to be profit/loss of contract which is answerable to assessment to be made on assessee. Therefore, we have to accept proposition that in every assessment year, even though final result is ascertained only on completion of project, element of income is latent in yearly working result. distinction between above conceptual profit and ultimate de facto assessment of profit is because of fine distinction existing between "income" and "profits". Therefore, in facts and circumstances of case, we are of considered opinion that provisions of law contained in s. 199 do not stand in way of claim made by assessee-company for credits in respect of TDS made during relevant previous year. As such, it is our finding that AO should give credit for TDS amounting to Rs. 2,28,37,491. This issue is, therefore, decided in favour of assessee. Next we will consider disallowance of Rs. 24,23,000 made by assessing authority for reason of prior-period expenses. first item included in above amount is various routine office expenses incurred by assessee and relating to head office and various sites located at different parts of India, which totalled to Rs. 12,37,485.91. These expenses include travel bills, hotel bills, motor hire and repairs, payments towards maintenance contract, arrears of telephone bills, electricity bills, water charges, property dues, arrears of lease rental, insurance premium, etc. etc. Many of expenditure classified under above heads were, in fact, incurred by various site offices of assessee-company situated in different parts of India. Therefore, final communication of incurring of those expenses are transmitted to head office quite belatedly after assessee consolidated those expenditure at head office level. This is not phenomena of impugned assessment year alone. This is consistent practice followed by assessee-company. Even though previous year is directly cut off on 31st March of every year, actual carrying on of business which is live process, cannot be cut off as exactly especially in organization like that of assessee where activities are carried out through various site offices. Therefore, it is quite natural that there would be amount of overflow of information after close of accounting year. Therefore, to certain extent, claim of assessee that details of such expenditure were received only after close of accounting year, could be accepted. It is continuous process to incur expenditure and to account (for) in books of account. Therefore, even though they are treated technically as prior period expenses, it relates to continuous flow of expenditure. Therefore, there is no justification in disallowing above expenditure, otherwise normally eligible for deduction. Therefore, assessing authority is directed to examine details of expenses amounting to Rs. 12,37,485.91 and allow same wherever applicable on satisfaction of genuineness of expenditure. second item of expenditure included in disallowance is final settlement of payments made to staff amounting to Rs. 57,234. As payments made to staff could be finalized only on settlement, claim of assessee is in order and same has to be allowed as deduction. Another amount included in above disallowance is Rs. 5,94,337 relating to sub-contractors claims. amount was paid during relevant relating to sub-contractors claims. amount was paid during relevant previous year as claim was finalized and crystallized during relevant previous year. As final liability itself was ascertained in relevant previous year, corresponding payment should also be allowed as expenditure. Another amount included in disallowance is Rs. 2,75,296 relating to T D S payments/penalties relating to salaries and perks. learned counsel appearing for assessee-company himself fairly conceded that assessee- company should not have claimed deduction of said amount of Rs. 2,75,295. said disallowance is confirmed. Another amount included in said disallowance is Rs. 2,61,693.44 which related to interest payment made overseas. bank advices relating to such debiting of interest were received belatedly and only because of that delay assessee could not provide for such expenditure in concerned assessment year. Therefore, it is to be seen that such expenses really crystallized in hands of assessee during relevant previous year. Therefore, claim for deduction is in order and same has to be allowed. As seen from above discussion, disallowance of Rs. 24,23,000 has been considered by us and claim has been partly allowed. In result, this appeal filed by assessee is partly allowed. *** TOYO ENGG. INDIA LTD. v. JOINT COMMISSIONER OF INCOME TAX