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2017 (10) TMI 1565 - AT - Income TaxTDS u/s 194A - default u/s. 201(1) and 201(1A) - efault u/s. 40(a)(i) and 40(a)(ia) - whether the assessee can be considered as an assessee in default for not deducting TDS in respect of those provisions which were reversed? - HELD THAT:- It is commonsensical to expect that the appellant's creation of the provision for the services received in order to obtain a correct view of its profit at year end was not based on any arbitrary or whimsical estimate. It is clear from the provisioned expenses that the estimate has followed from pre-existing contracts with known parties for identified services and, hence, the accounting of amounts liable to be paid to these parties for services availed as per known terms of transaction is a specific exercise which carries with it the statutory responsibility for deducting tax at source also. The appellant cannot wriggle out of this responsibility by holding that the provisions were made without any basis towards unidentified parties for unascertained transactions. Appellant argument that the AO erred in treating reversal of provision for expenditure and unutilized amount of provision as liable to deduction of tax at source unable to be agreed since the AO has not discussed liability for tax deduction on the 'reversal of provision' but on the 'creation of provision' itself before the end of FY 2011-12. This, as has been held in the paras above, was a point at which the IT Act, the Tax Auditor as well as the appellant itself had clearly agreed with the liability for tax deduction. This ground, therefore, fails. Where the provisioned amount was higher than the invoice amount, the balance has clearly not suffered tax. Since it has been held supra that the liability for tax deduction existed on the company at the time of making the provision, the default for non-deduction of tax at source is to be limited only to the surplus over and above the invoice amount. As the assessee has made disallowance u/s. 40a(ia) and it means that the assessee has admitted its default u/s. 40(a)(ia) and therefore, in the proceedings u/s. 201 and 201(1A), the assessee cannot argue that there was no liability under chapter XVII-B. Since none of the judgments cited by ld. AR of assessee is rendering any help to the assessee in the present case and the tribunal order cited by ld. DR of revenue is helping the case of revenue, we find no reason to interfere in the order of CIT(A). - Decided against assessee.
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